CANADA’S MAGAZINE FOR THE FINANCIAL PROFESSIONAL • … · 2019-10-04 · percentage of independent brokers (as defined by IFBC) who are members of CAIFA. Even London Life has

DISABILITYINSURANCE:Which contract is right for your clients?

FIXED ALTERNATIVES:Balanced funds versus bonds

Dan Richards: exclusivecolumn, page 46

WHAT YOU LEARNEDABOUT INVESTOR BEHAVIOUR

DURING RISING MARKETS

ADVISOR’SCANADA’S MAGAZINE FOR THE FINANCIAL PROFESSIONAL • JUNE 2001 D G EE

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WHAT YOU LEARNEDABOUT INVESTOR BEHAVIOUR

DURING RISING MARKETS

PLUS

Bullishinsights

DISABILITYINSURANCE:Which contract is right for your clients?

FIXED ALTERNATIVES:Balanced funds versus bonds

Dan Richards: exclusivecolumn, page 46

50 GETTING TOUGH

41 LEARNING CURVE

30 DISABILITY WOESINSIDE EDGE

7 Rapture of the Bull What lessons have you learned from the bull market?

LETTERS

8 Discrediting Distinction A reader defines and distinguishes between CAIFA and IFBC.

TOOLBOX

15 Portfolio HybridsYou may be able to offer your clients a mixture of mutual funds and wrap accounts and save them money.

KNOW YOUR CLIENT

18 Set SailTrying to meet new high-net-worth clients can be a difficult task.Why not brave the waves by taking up sailing?

COVER STORY / INVESTOR BEHAVIOUR

20 BULLISH INSIGHTSRising markets steered your clients towards volatile investments. Did you give into their demands? Advisors reflect on lessons learned.By Peter Boisseau

INSURANCE

30 PRECAUTIONARY MEASURESA serious accident could render your clients unable to work. Long-termdisability insurance can protect a client’s standard of living.By David Wm. Brown

INVESTMENTS

34 FIXED ALTERNATIVESFalling interest rates are causing some clients to consider investmentstrategies beyond fixed income. By Geoff Kirbyson

TECHNOLOGY

39 HOME SCHOOLINGRBC Investments advisors are only a click away from learning the toolsof the trade, thanks to a new online university. By Rosalind Stefanac

YOUR BUSINESS

43 Test in FluxThe financial planning rule is seeing its share of turmoil.

45 Mutual Watch with Scott MackenzieLook beyond fund ratings when helping clients choose mutual funds.

46 Marketing Frontlines with Dan RichardsThe right letter can be a good tool to ask for referrals.

47 Value of Advice with Sandra FosterWhen market conditions are tough, clients need your guidance most.

48 Managing with Harvey SchachterBreak the norm with the way you hold meetings.Try standing up.

49 Quest for Excellence with Nick MurrayInvest in yourself first. Here are three tips to get you started.

NEWSMAKER

50 Joe OliverOliver, president of the Investment Dealers Association,gets tough with the brokerage firms.

JUNE 20015

June 2001 Volume 4, Number 6

It seems a distant memory now—that juggernaut bull market of the late1990s, which sputtered and then ranout of steam last year. But as Advisor’sEdge contributing editor Peter Boisseaupoints out in this month’s cover story,the lessons learned from that experi-ence remain fresh in the minds of manyadvisors.

Boisseau examines the challengesfaced and the mistakes made by severaladvisors who now want to move for-ward better prepared to handle the nextbull market. You might ask: “What’sthe big deal? What’s so bad aboutmarkets that keep going up?”

The answer to that, of course, is asobvious as it is easy to forget. Somehave referred to it as “the rapture of thedeep”—a description of how diverscan get caught up in the beauty of acoral reef teeming with colourful fish,oblivious to their dwindling oxygensupply or circling sharks. When clientsget too wrapped up in the moment,you are there to put their focus back onthe long term—unless you too arecaught up in the distractions.

Many advisors seem to have an eas-ier time dealing with client fear thanthey do with client euphoria. But as

Nick Murray has pointed out in pastcolumns, the two are simply differentsides of the same emotional coin. It’sall a matter of managing client expec-tations—however they are skewed.

The advisors quoted in Boisseau’sreport seem to have the right idea.They’ve taken a hard look at how theyperformed, acknowledged where theywent wrong, and now are ready to dobetter next time.

If you’ve gone through the same sortof self-assessment, you know the timeto start “doing better next time” isright now. Trying to inoculate clientsagainst the ravages of their own greedis a near impossible task once a bullmarket is in full swing.

So take heed of the lessons offeredstarting on page 20. More lessonsfrom other advisors are available onAdvisor.ca, along with an interviewwith Ena Garmaise, a behaviouralfinance expert who profiles clients soadvisors can better understand whatmotivates their investment behaviour.

This issue marks the debut of DanRichards’ contributions to Advisor’sEdge. He’ll be a regular columnist withthe magazine and can now also be

found on Advisor.ca answering yourquestions about managing and mar-keting your practice and dealing withclients. For more than a decade, Danhas been supplying advisors withinsight and advice on how to betterrun their practices and stay one stepahead of the competition in a con-stantly changing industry.

Dan’s involvement is part of a dealannounced last month in which RogersMedia Inc., the parent company ofAdvisor’s Edge, acquired the assets ofMarketing Solutions—the firm Danfounded in 1989.

The Advisor Forum and the Top Per-formers Conferences are the main prop-erties that Rogers obtained in the trans-action. The four individuals responsiblefor the marketing and coordinating ofthese conferences are joining us in orderto provide you with even better service.On behalf of all the Advisor Proper-ties—Advisor’s Edge, Advisor.ca andObjectif Conseiller—I welcome theAdvisor Forum team to the fold.

DARIN DIEHLCONTENT DIRECTOR

ADVISOR [email protected]

JUNE 20017

INSIDEEDGETHE RAPTUREOF THE BULLOnce a bull market is in full swing,it’s nearly impossible to tame client greed.

DISCREDITINGDISTINCTION

It was disappointing to readthe interview with John Whaley (News-maker, February 2001, page 66).Whaley’s response to the question:“Aren’t independent brokers already get-ting support from other organizationslike the Canadian Association of Insur-ance and Financial Advisors (CAIFA)?”was not surprising.

To suggest that the distinctionbetween Independent Financial Brokersof Canada (IFBC) and CAIFA is thattheir members must have the ability tooffer the products of two or moreinsurance or mutual fund companies,disregards the very reality we all live andwork in.

Historically, when IFBC and its pred-ecessor (The Independent Life Insur-ance Brokers of Canada) did not evenexist, large insurers with captive salesforces dominated the insurance indus-try. The independent broker was rare.Today, however, you would be hard-pressed to find a captive sales force. The

industry has evolved and so has CAIFA.It would be interesting to research thepercentage of independent brokers (asdefined by IFBC) who are members ofCAIFA. Even London Life has openedits doors to multiple suppliers to givechoice to their agents. Now that is news!

Defining one’s own associationshould not require discrediting anotherwhich serves virtually the same groupof people. About 2,000 insurance pro-fessionals have joined IFBC becausethey perceive value in the organization.

IFBC’s focus should be the deliveryof support and services for the inde-pendent financial advisor. As forwhether CAIFA does or doesn’t do agood job of addressing the needs ofbrokers, time will tell.

Greg Jimejian, CFP, CLU, CH.F.C.Estate and Insurance AdvisorBMO Nesbitt Burns Financial Services Inc. Toronto

QUESTIONABLEOBJECTIVES

I thought the piece dealing withfinancial education and group advisoryservices (“Group Planning,” March

2001, page 18) was very good and is asubject that should be taken seriouslyby corporate Canada. However, theassumption that certain companiescited in the article are “objective” (freefrom any product bias and affiliation)is perhaps a bit of a stretch. If oneknows and considers T.E. Financial’sownership structure, for example, onemay draw a different conclusion thanthe message conveyed in the article.

Given Sun Life Assurance’s roughlyone-third ownership of T.E. Financial,I can’t help but wonder about the state-ment made by David Gordon of StateFarm: “We wanted a provider that waseducational and not affiliated withproduct.”

I think that any company consider-ing the possible offerings of any finan-cial education or advisory program forits employees would do well to asksome tough questions of potentialproviders, not the least of which shouldbe: “By the way, who owns yourcompany?”

Greg Gogan, CFPManaging Partner The Gogan Group Inc. Toronto

LETTERS

Deanne N. Gage Managing Editor(416) 596-5991 ([email protected])

Jennifer McLaughlin Assistant Editor(416) 596-5971 ([email protected])

Sheila Avari Assistant Editor(416) 596-5273 ([email protected])David J. Heath Art Director(416) 596-5059 ([email protected])

Contributing Editors: Harvey Schachter, PeterBoisseau and Bert Vandermoer

Darin Diehl Content Director(416) 642-4837 Advisor Properties

([email protected])Paul Williams Executive Publisher

(416) 642-4848 ([email protected])

Kori Kobzina Associate Publisher(416) 596-2662 ([email protected])Garth Thomas Account Manager

(416) 596-5564 ([email protected])Maryse Gauthier Montreal Account Manager

(514) 843-2126 ([email protected])Marie Atkins Executive Assistant

(416) 596-5070 ([email protected])Adrian Valks Production Manager

(416) 596-5035 ([email protected])Denise Brearley Director of Circulation and

(416) 596-3470 Marketing ResearchNancy Matheson Marketing Manager

(416) 642-4943 ([email protected])Clodagh Rohan Promotions Manager

(416) 596-5937 ([email protected])Katisha Rasheed Promotions Coordinator

(416) 596-5043 ([email protected])

Editorial Advisory BoardElaine Andrew Investors GroupJohn De Goey Assante Capital Management

Robert Fleischacker CAIFASandra Foster CaratConnect

Catherine Hurlburt CAFP, IFC Planning GroupGlenn Lightfoot RBC Life Insurance

Ian Niven BMO Harris InvestmentManagement Inc.

Dan Richards Consultant Jim Rogers The Rogers Group

Financial Advisors Ltd.Ralph Sommerfeld Raymond James Ltd.

Thane Stenner Merrill Lynch Canada Inc.Dan Thompson National Bank of Canada

Lynne Triffon T.E. FinancialShirley Webster Bank of Montreal

ADVISOR’S EDGE is published by Healthcare & FinancialPublishing, a division of Rogers Media Inc.

Rogers Media Inc.Anthony P. Viner President and CEO

PublishingBrian Segal President and CEO

Terry L. Malden Chief Operating Officer, Executive Vice-President

Healthcare & Financial PublishingJames O. Hall President, Medical

PublishingJohn Milne Senior Vice-President

Published in Canada by Rogers Media Inc. since June 1998. RogersMedia Inc., 777 Bay St., Toronto, Canada M5W 1A7, (416) 596-5000, fax (416) 596-5940. Offices: 1001 de Maisonneuve West,Montreal H3A 3E1, (514) 845-5141; Ste. 900, 1130 West PenderSt., Vancouver V6E 4A4, (604) 683-8254.Full subscription price: Canada $62 per year, 2 years: $102, 3 years:$132.00, USA/Foreign: $127.00 (one year only). Single copy: $15.Published 12 times a year. G.S.T. #137813424RT.ADVISOR’S EDGE is indexed by the Canadian Magazine Index byMicromedia Limited, and the Canadian Periodical Index. Canadianback copies are available in microform from Micromedia Limited, 20Victoria Street, Toronto, Ontario M5C 2N8. Indexed by the CanadianBusiness Index and available online in the Canadian Business & CurrentAffairs Database. Publications Mail Agreement Number 749990.Canada Post: Please return undeliverable address blocks to RogersMedia, 777 Bay St., Toronto, ON, M5W 1A7. ISSN 0703-7732.Copyright © 2001 Rogers Media Inc.

June 2001, Volume 4, Number 6

FEEDBACK

Advisor’s Edge and Advisor.ca welcome your comments, story ideas and

inquiries. For Advisor’s Edge contact Deanne Gage at (416) 596-5991 or

e-mail [email protected]. For Advisor.ca, contact Jim MacDonald

at [email protected]. Letters to the editor can be sent to

[email protected] or faxed to (416) 596-5940.

FRENCH CONTENT

Objectif Conseiller, a sister publication of Advisor’s Edge, serves

financial planners in the Quebec market. For editorial inquiries, contact

Yves Bonneau at (514) 843-2142 or e-mail [email protected].

DAILY NEWS

Advisor.ca offers daily A.M. and P.M. e-mail bulletins that feature news as it pertains to

you.To register, e-mail [email protected] or contact Philip Kahn at (416) 596-5779.

CONTENT FOR CLIENTS

Want to show your clients articles on specific investment strategies? Articles that

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Any Advisor.ca article can be e-mailed to your clients by clicking on the icon that

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ADVISOR OF THE YEAR AWARDSThe Advisor of the Year Awards Program was started in 1999 to

showcase outstanding advisors who serve their clients’ needs. Online

entry forms are available at:

http://www.advisor.ca/images/other/Advisoroftheyearentry.pdf

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ADVISOR’S EDGE12

BUILD YOUR BUSINESS

JUNE 200115

In spite of ongoing product devel-opment, there has been insufficientproduct improvement in Canada’sfinancial services industry. Truthfully,I don’t believe the financial servicesindustry has been able to meet theneeds of today’s marketplace.

Mutual funds offer professional man-agement and diversification, but not feedeductibility, genuine personal customiza-tion or pure asset classes. On the otherhand, wrap accounts offer these benefits,but generally cost more than traditionalmutual funds. Why can’t we have both?

Consumers want wrap account fea-tures with mutual fund costs. In justover half a decade, I have taken myclients through both phases of theindustry’s thinking… and neither of ushas been particularly satisfied with theavailable options. How can we reconcilethese choices?

Let’s consider the dominant thinkingin the industry. In the early to mid-1990s, investors tended to use mutualfunds and were generally satisfied withthe products. Indeed, “fund picking”was the dominant paradigm of anindustry in rapid expansion. As timewore on and more wrap accounts cameon stream in Canada, clients wereencouraged to migrate to these newer,more sophisticated products.

The work spearheaded by investmentauthority Gary Brinson, which firstappeared in the Financial Analyst’s Journal

in 1986, forcefully demonstrated thecritical importance of strategic assetallocation—thereby consigning activesecurity selection to the margins as anexplanatory variable for portfolio per-formance. Over time, the realization setin that this new paradigm had its ownproblems—superior portfolio designand management generally meant highercosts—even for well-heeled clients.This undermined the aforementionedbenefits.

Given that people were being asked tochoose between a moderate-cost/mod-erate-benefit option and a high-cost/high-benefit option, I began to lookfor a way to break the impasse. This

conundrum struck me as anobvious situation where the coreof a portfolio could be indexedin order to lower cost whileactive management could stillbe used to provide greater cus-tomization—especially in thoseareas where active managementhas a track record of addingvalue after fees. When I went tovarious financial product man-ufacturers with this concept, Iwas politely listened to, but ulti-mately ignored. I understandtheir collective position—thereis no real money in it for them.

There is substantial evi-dence that shows it is rare foractive managers to beat their

benchmarks after fees in the long runin efficient markets. For instance, only18% of all active managers beat theTSE300 over the five years ending in1999, and only 9% of U.S. managerswere able to beat the S&P500 over thesame time frame, according to TedCadsby’s The Ten Biggest Investment MistakesCanadians Make: And How to Avoid Them(Stoddart). What’s more, the handfulof active managers that did beat theirbenchmarks could not be accuratelyidentified beforehand.

By using a “core and satellite”approach, portfolio costs can be drivendown to the point where they are as low

TOOLBOXBy John De Goey

Clients don’t necessarily have to choose between mutual funds and wrap accounts.

PORTFOLIO HYBRIDS

Continued on page 17

Illustration by Mélanie B

aillairgé

as or lower than if one used mutualfunds—and would be substantiallycheaper than wrap programs. This is trueeven after adding on direct, scalable andpotentially deductible fees based onassets under management. Since themajority of the portfolio (let’s say 70%)is in passive products (exchange-tradedfunds and index funds), the underlyinginvestments are relatively pure.

Since consumers wanted this kind ofarrangement, but manufacturers areloath to deliver it, what was a client-centred advisor to do? Ultimately, I feltI had no option but to cobble togethera program that brought together themost positive attributes of the twodominant approaches to portfolio man-agement mentioned earlier. I gave somethought to the problem and developeda program where all of the salientattributes listed above can be utilized.

After showing it to clients, theresponse has been tremendous. Mutualfund clients liked the added rigour andpotential fee deductibility. Wrapaccount clients were grateful that I hadfound a way to maintain rigour whilelowering their costs.

Furthermore, by giving clients a per-sonal questionnaire regarding circum-stances and attitudes, a written Invest-ment Policy Statement can be producedto ensure the ultimate portfolio designis consistent with reasonable expecta-tions and the principles of ModernPortfolio Theory (maximizing returnsfor a given level of risk tolerance). Theend result is a hybrid portfolio thatoffers the best of both worlds—wrapaccount attributes with costs lower thanmutual funds. Never underestimate thepersuasiveness of a phrase such as “Ican lower your costs substantially.”

Here’s an example of the sort of dis-

cussion I would have. I met with a cou-ple in late February to discuss a switch.They had been to a presentation whereI explained the features and benefits ofmy approach and broadly understoodwhat I was proposing, but relied on meto guide their decision-making. Iexplained that their asset allocationwould remain essentially unchanged, sothere would be no appreciable changein either the long-term expected returnor the short-term expected volatility as

a result of this switch. Their next question was critical…

“If there is no change in risk and nochange in return, why should we payover $4,000 in deferred service charge(DSC) penalties to switch?” they asked.My answer was simple: “Because youcan save about $2,500 a year in costs.”The question you have to ask yourselfis “Is it worth paying $4,000 in penal-ties in 2001 in order to save over$2,500 a year in annual costs for therest of your life?” It was no contest—the response was a resounding yes.

This model offers considerable flex-ibility for clients and is sound, based onthe principles set out in the CapitalAsset Pricing Model and Modern Port-folio Theory. It is tax-effective (to thepoint where one could use sector funds

for customization of non-reg-istered assets) and tax-efficient (throughlower portfolio turnover). Furthermore,it is intuitively easy to understand.

But perhaps more importantly, it putsclients first. The first Canon of the Cana-dian Association of Financial Planners’code of Professional Ethics states that“members shall act in the best interest oftheir clients and shall place the interestsof their clients above their own.” Clientswant this sort of service and it is our obli-gation to give it to them. It is a valueproposition that is hard to refute. Overthe past few months, the number of peo-ple who have chosen to switch to thismodel has overwhelmed me.

I will be spending the next year activelyencouraging clients to consider thisoption. For some people, it just doesn’tmake sense. People may have large capi-tal gains in their non-registered accounts,high DSC penalties, or may simply bepartial to their current investments forsome emotional reason. Obviously, thiskind of switch should only be undertakenif it makes sense to the client.

The marriage of improved portfo-lio design and reduced portfolio costis one that resonates with the investingpublic. You may have to modify theirbusiness models dramatically. That’sbecause clients are now waking up tothe sea of change that is about to hitthe industry. As they come to realizethat the tools now exist where they canhave their cake and eat it too, they willdemand this kind of portfolio design.You will have little choice but to givethem the options they rightfullydeserve—even if the mutual fundcompanies won’t help.

John J. De Goey, MPA, CFP, RFP, CIM,FCSI, is a senior financial advisor with AssanteCapital Management Ltd. in Toronto.

TOOLBOXContinued from page 15

A hybrid portfolio

offers the best of

both worlds—

wrap account attributes

with costs lower than

mutual funds. [[

JUNE 200117

ADVISOR’S EDGE18

BY JENNIFER MCLAUGHLIN

If you’ve never considered brav-ing the waves and taking up boating orsailing as a recreational activity, con-sider this: It is the second most pop-ular recreational activity among high-net-worth Canadians.

The 2000 Canadian Millionaire Surveyresults show that 42% of those sur-veyed listed sailing as a recreationalactivity and 34% listed boating.Toronto-based Taddingstone Con-sulting Group Inc. interviewed 219high-net-worth Canadians. The only

more popular recreational activityamong the high net worth was golf,which 54% of respondents said theyparticipated in.

Taddingstone’s survey also showsthat 70% of those sailors and boatershad household net worths between$1 and $5 million. Another 11% hadhousehold net worths between$5 million and $10 million.

As the affluent set sail this summer,you too could consider the open wateras your destination. Despite the

affluent’s interest in the sport, it is notexclusive.

“Generally, it is a sport that is veryreceptive to new people coming alongand you can participate at the club leveleasily,” says Barbara Yates, coordinatorof marketing and communications atthe Canadian Yachting Association inKingston, Ont. “It’s a very social sport.Usually people get together for a mealor at least a drink after an event.”

As a member of a yacht or sailingclub, you would also have the opportu-

Illustration by Marcos C

hinTrends, statistics and demographicsKNOW YOUR

SET SAILWant to rub elbows

with the high net worth?

Think open water.

CLIENT

34% of Canadians aged 15 years or

older participate in amateur sports.

32% are involved in amateur sports

as spectators.Source: Statistics Canada, Most Popular Sports, 1998

DID YOU KNOW?

nity to compete in races and meet othersailors. Some races require more thanone crew member on board, whichmeans you can interact with other peo-ple on the boat. For races with one-person crews there are opportunities tomeet and interact with other skippers.And, as you become even more involvedwith the sport, there are opportunitiesto travel and be more competitive.

With 10 provincial associations,and about 360 member clubs, sail-ing and boating is a national sportthat people in most geographic areascan take up. To get started you haveseveral options. Yates suggests goingto a local yacht or sailing club, intro-ducing yourself and asking if thereare skippers looking for crew personsor if there are lessons. “A lot of peo-ple get started by taking lessons,”she adds.

Most clubs run lessons and if they

don’t, they will refer you to one thatdoes. Yates admits that it is a sportthat requires a certain degree ofeducation and proficiency, which iswhy there are a number of coursesavailable. “But you can be up andsteering a sailboat very quickly,” shesays. “It may take some time toperfect, but you can learn the intro-ductory skills in no time.”

Annual dues vary considerably fromclub to club, but you do not have tospend hundreds of dollars to be amember of some clubs. Often itdepends on the variety of services theclub offers. In fact, Yates says theprices can be comparable to belong-ing to a golf club in terms of dues andequipment.

There is a difference, however.Golfers need not spend thousands ofdollars on a boat. But if your pocketbook cannot afford a new boat pur-

chase, there are other ways to get onthe water. “There are very goodsecondhand boats that people canget a hold of,” says Yates. “Someclubs also have boats for charter, soyou can experience boating withoutany kind of investment.” She addsthat clubs do like you to show someproficiency before you charter a boat.In some cases, clubs will assignpeople to take you out the firstcouple of times.

Whether you become a competitiveracer or simply enjoy cruising aroundthe marina, your involvement in sail-ing and boating can give you an edgewith your high-net-worth clients,or may even introduce you to somenew ones.

Jennifer McLaughlin is assistant editor ofAdvisor’s Edge. [email protected]

JUNE 200119

CHOOSING ANEW ADVISOR

Unique offerings

don’t attract

affluent clients,

according to the

2000 Canadian

Millionaire

Survey.

Percentage of Percentage ofBoater/Sailors Entire Survey

Investment performance 51% 46%

Expertise 50% 46%

Experience 47% 39%

Reputation from firm and advisor 45% 44%

Personal relationship or referral 40% 40%

Unique offering 2% 3%Source:Taddingstone Consulting Group Inc.

2000 Canadian Millionaire survey.

By Peter Boisseau • Photography by Dan Paul

ADVISOR’S EDGE20

What lessons have you learned aboutdealing with clients during a bull market?

hile financial advisors took different approaches

to the tech-fuelled bull market that plummeted to

earth last year, few escaped some hard lessons.

But with an eye to another predicted boom on the

horizon, they’re arming themselves with their hard-

won insights and vowing to do better next time.

Still fresh are memories of mild-mannered investors-turned-riverboat-

gamblers by the market frenzy, and the challenges that emerged as their

advisors tried to manage a heady mix of euphoria and fear. Continued on page 22

W

Bullishinsights

JUNE 200121

hInvestor Behaviour

For Paul McMillan, the lasting imageof the bull market frenzy is probablythe 80-year-old client who wanted tostart a dot-com company. “This clientwas well into retirement and living com-fortably, but he was afraid he was miss-ing out,” says McMillan, an investmentexecutive with ScotiaMcLeod in WhiteRock, B.C.

McMillan and his two broker part-ners managed to talk the would-beoctogenarian Internet mogul out of hisschemes. No matter what clients saidabout being willing to gamble on a bigreturn, many lost their nerve when themarkets took a dive. “As much as clientstell you what they can handle, in thefuture I’d rather err on the conservativeside even more so,” McMillan says. “I’drather a client get mad at me for notmaking them enough money than forlosing them money.”

Another thing McMillan will do in the

future is “keep more aware of the dailyactivity clients are doing in their portfo-lios, and give them a call and let themknow the risk if they keep loading up onthese [volatile investments].”

The biggest change McMillan hasseen after five years in the business ishow investors, bombarded by Internetand media information, have becomeshort-term thinkers. Already the mar-ket mania that swept through the late1990s and into 2000 is distorted bytime and hindsight.

But painful consequences linger.Michael Wolfond, CEO of Partners inPlanning Financial Services Ltd., sayssome of his top-performing clients gotweighed down in tech, seeing theirincomes cut in half and millions vanishfrom their asset base. “The lesson is[advisors] can’t bend to the client, theyhave to stick to their guns,” saysWolfond.

Like many advisors, Wolfond had

clients who insisted on radical changesto their portfolio in a quest to cash inon the boom. “It was ‘Do it or else we’lldo it on our own,’ ” he says. “But theclient who did wrong by trying to pushyou into [risky investments] should notbe brought before you now and beratedfor their choice. It’s an opportunity tore-establish your position with yourclient and say ‘Okay, we just wentthrough a rough time and some of thechoices we made were erroneous at thetime, but it doesn’t change our long-term philosophy.”

Rob Klenk is also reinforcing thatlong-term philosophy with his clients.Six of his biggest clients—all high techworkers—saw their multimillion-dollar portfolios fall by half. But Klenkis still adding to his own portfolio oftech stocks. He’s urging clients not togive up on the technology sector, solong as they diversify.

Does your reputationreflect your abilities?

Enhance your standing by entering the 3rd Annual Advisor of the Year Awards!

Get the recognition you deserve—enter today! Entry deadline is June 22.Read the details on page 44, or visit www.advisor.ca.

ADVISOR’S EDGE22

Continued from page 20


Photography by C

hris Schram

eck

“”

I’d rather a client get mad at me for not makingthem enough money than for losing them money.Paul McMillan, investment executive,ScotiaMcLeod, White Rock, B.C.

The other day I received a letterfrom clients of mine, informing methey had decided to change advisors.Hardly the best way to start my day.

The reasons were sound. The clientshad moved to a different city and foundit difficult to maintain the level of serv-ice they had become accustomed to.But even with this rationalization, I didnot feel any better.

Clients leave us because theirexpectations are not met. Thoseexpectations can be broken down intotwo areas: investment performanceand service. If you promise superiorinvestment performance to yourclients, they will ultimately leave. Thereason is simple: no matter how goodthe performance, sooner or later itwill disappoint.

You can help clients understandinvestments by providing them with anunderstanding of the variability ofreturns, how investment style affectsreturns, the advantages of asset alloca-tion and the long-term strategy of stay-ing the course. Get them to changetheir expectations from external tointernal. This means establishing a rateof return that allows them to meet their

financial objectives. This is not an exter-nal index or their brother-in-law’sinflated return; it is one that they acceptas theirs. You then have to explain theamount of variance they can expectfrom their return.

Smarter ServiceMany advisors define service as con-tacting clients with information aboutproducts, potential services and mar-ket conditions. Advisors will investtheir time producing newsletters,developing e-mail contact lists and“prospecting” their existing clients formore clients. These services will helpadvisors to grow their practices. How-ever, these things are not seen as serv-ices for the client. From their per-spective, it’s seen as a negative salesand marketing experience.

What kind of service do clientswant? For starters, they expect phonecalls to be returned in a timely man-ner. They expect their questions to beanswered. They want financial plansto address their cash flow issues. Plan-ning should not be an excuse to sella product. Basically, they want therelationship to be about their issuesand they want the ongoing service toreflect that. If you want to keepclients for the long term, here arethree standard operating proceduresthat should always be followed.• Return phone calls within 24 hours. • If you have voice mail, change

the message daily so clients will

know you check it regularly. • If an administrative error occurs,

communicate it immediately.Explain what happened, what youare doing about it, how soon it willbe fixed and who is responsible forthe costs, if any.None of these procedures should

be dependent on the size of theaccount. They are reasonable clientexpectations. When you limit aclient’s access to service based on thesize of the account, it will lead to dis-appointment and they will look foranother advisor. They will also tellother potential clients about theirnegative experience. Always remem-ber, word of mouth is the most effec-tive form of advertising and you willhave to work many times harder toovercome a negative comment from aformer client.

But in spite of your providingexcellent service, clients will still leave.Their reasons are seldom communi-cated and are often difficult to under-stand. Try reviewing your relationshipswith clients to see if there is somethingthat you could have done differently.One positive thing about losing a clientis it provides us with an opportunity tolearn and improve.

Brian Mallard, CFP, RFP, CLU, CH.F.C.,is the president of Saskatoon-based BrianMallard & Associates. He won the Advisor ofthe Year Award for the Prairie Region(presented last November).

ADVISOR’S EDGE26

Standard operating procedures Confused about why a client has left you?

Try looking at your definition of service.

By Brian MallardV

IEW

PO

INT

tolerance. “I think I have learned morein the last year than in my 15 previousyears as an advisor,” says Gagné, whohas about 750 clients.

Roy Maiero cut his teeth on the Octo-ber 1987 market crash as a rookie advi-sor and learned the hard way not to getoverzealous in good times. “But as muchas I want to stick to that, of course we getinfluenced by some clients to move awayfrom that philosophy, in fear of losingthe client,” says Maiero, president ofLime Ridge Financial in Hamilton.

Clients were clamouring to get intothe action “because the anxiety that wascreated from the fear of losing out onan opportunity was greater than the fearof losing money,” says Maiero. “We asan industry have been forced in someway to meet those client needs, whowant us to be a facilitator for them,largely because of the Internet. But

that’s a problem for a planner’s practice,because if I’m not going to be able toprovide the advice, all I’m going to beis the conduit for the transaction, andthat conduit exists elsewhere.”

Some advisors have turned growingpressures from discount brokers, onlinetrading and saturated media coverage ofthe financial world to their advantage.Industry veteran Jim Rogers has helpedsome clients set up online accounts withdiscount brokers and use a small por-tion of their portfolio to play the mar-kets. He has his own such account, tosatisfy the urge to occasionally “roll thedice” without getting badly hurt.

“I understand the need to be able tobe the hero at the cocktail party andimpress your friends, and I understandthat in my clients too,” says Rogers,president of the Rogers Group Finan-cial Advisors Ltd. in Vancouver. “But Itell them if they’re serious about their

long-term goals, they can’t bet the farmon that kind of stuff, and I won’t betheir advisor if they do.”

Although the market frenzy has fadedas investors lick their wounds and take abreather, it may not be long before Rogersand others are facing another bout ofmarket mania. Several indicators suggestwe’re already approaching the bottom ofthis slowing economy, and may be on theverge of “an extremely powerful” stockmarket upswing, according to HistoryLessons, an April 2001 report from CIfund manager Bill Sterling.

Just in time, it seems, advisors mayhave learned their lessons.

Peter Boisseau is contributing editor ofAdvisor’s Edge. [email protected]

JUNE 200129


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Fear of losing out on an opportunity wasgreater than the fear of losing money.Roy Maiero, president,Lime Ridge Financial, Hamilton

ADVISOR’S EDGE30

PrecautionarymeasuresAre your clients prepared

in the event of a disability?By David Wm. Brown • Illustration by Lisa Adams

Insurance

My first long-term disabilityinsurance client was my friend Julian. He was also my firstlong-term disability claim, and I was by his side when hebecame disabled.We were racing towards his car after attending a friend’s

wedding reception. Julian tripped, fell on his arm and fractured his radial head bone in his elbow. As a salespersonfor an industrial chemical company, he was required todemonstrate products several times a day. In a split second he became unable to perform the duties of his occupation.

JUNE 200131

The next morning I asked my manager to telephone theinsurance company to report the claim and to give notice andtime to “raise” the funds that would be required to pay theclaim of $550 monthly. I waited nervously, but after only twoweeks, the company sent Julian a cheque for $550 as anadvance against his first payment. I was relieved—thecontract actually worked.

As advisors, we spend countless hours with our clientsassisting them in investing and accumulating assets. We deviseand implement plans to shelter these assets from taxes dur-ing our clients’ lifetime and after their deaths. We encourageour clients to insure what is perceived to be their greatestassets: their homes and their cars. But how many of us encour-age our clients to protect their most valuable asset—their abil-ity to work and earn an income?

There is a false belief among Canadians that if disabilitystrikes, there are other sources of income. These could includesavings, a bank loan, spousal income or other assets. Unfor-tunately none of these sources are adequate to protect againsta long-term disability. In fact, if a client saved 5% of his orher annual income for 10 years it would take only six monthsto wipe out the savings.

Disability income insurance is designed to replace incomein the event of a disability resulting from an accident or injury.Earned income, unearned income, net worth and othersources of income replacement are all considered in deter-mining the amount of coverage that can be offered. The intentof the insurance is to replace the income needed to cover thenecessities of life when disability occurs (see “Non-taxablelimits,” on page 32). However, it is undesirable to allow somuch coverage that the insured is better off on claim than atwork. All insurance companies have established income

replacement levels designed to encourage disabled individu-als to return to active work.

Contracts to ConsiderFive key factors should be taken into account when recom-mending and designing a disability income contract. They areoccupation, age, sex, income and health. Each of these fac-tors affect the cost and provisions of the disability plan anddetermine the amount of coverage available, the type of con-tract, the benefits available and the premiums charged.

One of the critical determining factors will be occupation.The occupational ratings with reference to disability insuranceare constantly changing. Insurance companies group occupa-tions into different classifications and provide certain contractdesigns and benefits accordingly. Some occupations will be clas-sified as more hazardous and more prone to accidents. Anotherdeterminant of occupational classification is the effect that aminor disability may have on the ability to perform the dutiesof the occupation. An executive, for example, may be able towork with a broken arm while a dentist would not be able towork with the same injury.

Other factors that may affect occupational ratings includemoral hazards associated with an occupation, instability in anindustry, claims experience and seasonality. Some newer occu-pations, which are a result of developing technology orthe change in work habits, will also affect the occupationalclassifications.

Typically, disability contracts are issued between the agesof 18 and 60, but older clients may have limited access toplan design and benefits. Some plans may be renewed onan annual basis to accommodate clients who remain in the


workforce past age 65 or 70. Although the mortality tables indi-cate that females will live longer than males, the morbidity tablesalso show that females may become disabled more often or maycontract more diseases. Rates for disability insurance were ini-tially gender-specific with rates for females higher than males.In the 1980s, there was a movetowards unisex pricing, but inrecent years most companies havereturned to sex-distinct rates.

As is the case for most insur-ance contracts, the health of theapplicant is a significant factorin determining the rates andplan design. If an individual’shealth does not meet the med-ical standards of the insurancecompany, the contract may notbe issued.

Note that disability insur-ance medical underwriting dif-fers from life insurance under-writing. A back strain or anervous disorder may not sig-nificantly affect an underwriter’sdecision for a life insurancecontract, but a disability insur-ance underwriter would be con-cerned about either of thesemedical situations.

If a disability underwritercannot provide a standard policy there are several alternativesthat may be offered.❶ Extra premium rating—where the premium is increased by a

percentage or dollar amount to compensate for additional risk.❷ Qualified condition exclusion rider—where a clause is added

to the policy that excludes a condition from coverage. ❸ Limited coverage exclusion rider—when the insurance com-

pany believes the applicant may be prone to a disability as aresult of a pre-existing condition, it may limit coverage.

❹ Longer elimination period—the company may reduce itsexposure by offering an elimination period that is longer

than the one requested on theapplication. ❺ Shorter benefit period—thecompany may offer only a two-year or five-year benefit periodin order to reduce risk. ❻ Denial of some benefits—additional benefits requestedmay not be granted if the insur-ance company believes it wouldbe exposed to additional risk. ❼ Any combination of the above.

In addition to medical history,the insurance company will alsoconsider other factors such asdriving records and drug or alco-hol problems. Each of theseexamples may be considered anundesirable risk. Individuals whohave hobbies such as private fly-ing, motor vehicle racing, skydiv-ing and scuba diving may also beissued a contract with an addi-tional rating, rider or exclusion.

Contract Design Disability contracts can be designed to meet the specific needs,goals, and budget of each individual client. Elimination peri-ods (the period before benefits commence after the onset ofa disability) can range from 30, 60, 90, 120, 180, 365 and

ADVISOR’S EDGE32


Non-taxable limitsDisability insurance is intended to replace the incomeneeded for necessities.

Actual Net Monthly Non-taxableEarned Income Benefit Limits$30,000 to $32,999 . . . . . . . . . . . . . . . . . . $1,775

$33,000 to $35,999 . . . . . . . . . . . . . . . . . . $1,900

$36,000 to $37,999 . . . . . . . . . . . . . . . . . . . $2,025

$38,000 to $39,999 . . . . . . . . . . . . . . . . . . . $2,125

$40,000 to $43,999 . . . . . . . . . . . . . . . . . . $2,250

$44,000 to $47,999 . . . . . . . . . . . . . . . . . . $2,400

$48,000 to $51,999 . . . . . . . . . . . . . . . . . . $2,600

$52,000 to $55,999 . . . . . . . . . . . . . . . . . . $2,825

$56,000 to $59,999 . . . . . . . . . . . . . . . . . . $3,025

$60,000 to $64,999 . . . . . . . . . . . . . . . . . . $3,250

$65,000 to $69,999 . . . . . . . . . . . . . . . . . . $3,425

$70,000 to $74,999 . . . . . . . . . . . . . . . . . . $3,600

$75,000 to $79,999 . . . . . . . . . . . . . . . . . . $3,750

$80,000 to $89,999 . . . . . . . . . . . . . . . . . . $3,925

$90,000 to $99,999 . . . . . . . . . . . . . . . . . . $4,150

$100,000 to 109,999 . . . . . . . . . . . . . . . . . $4,425

SOURCE: Income Replacement Tables,

Provident Life and Insurance Company

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730 days. In general, the longer the elimination period, thelower the premium costs. Benefit periods can range from twoyears, five years and to age 65. The shorter the benefit period,the lower the premium.

Every disability policy outlines the provisions and termsof the contract. The most secure and expensive contracts arethose that are non-cancellable, guaranteed renewable and con-tinue to age 65. Traditionally, these contracts set a premiumrate at issue, which is guaranteed not to change. As long asthe premiums are paid, the company cannot change the pol-icy or alter the premium until age 65. After age 65, there isusually an option to renew as long as theinsured is engaged in gainful employment.

There are variations on the themes ofrenewable and cancellable contracts. Asoccupational risks increase, the contractstend to have fewer guarantees. Some con-tracts are conditionally renewable. Thesevariations provide the companies varyingdegrees of latitude in setting premiumrates or in renewing contracts. However,a company cannot single out an individ-ual policyholder, raise only his or her pre-mium or cancel that contract alone. Mostcompanies provide that these types ofactions can only be implemented for anentire class or classes of policyholders.

Individual disability contracts havethree major exclusions. They do not coverany disabilities as a result of an act oraccident of war, normal pregnancy orchildbirth (but they will cover complica-tions of pregnancy or childbirth) or a dis-ability that occurred while incarcerated.

Newer benefits and options are con-stantly being added to disability contracts.

Health maintenance benefits, return to work assistance bene-fits, healthcare professional riders, long-term care benefits andcritical illness benefits are among those benefits that haverecently been added to some disability contracts.

My friend Julian was very fortunate. After surgery and reha-bilitation, he was able to return to work in less than a year. Butwithout disability insurance, his standard of living would havedropped substantially during those difficult months.

David Wm. Brown, CFP, CLU, CH.FC, RHU, is a partner atAl G. Brown & Associates in Toronto.

Unforeseen hazardNo one plans to be disabled, but younger clients should consider the risk. Your Age Chances of Being Disabled (past 90 days) Average Duration of Disability (past 90 days)25 58% 1.2 years30 54% 2.5 years35 50% 2.8 years40 45% 3.1 years45 40% 3.2 years50 30% 3.1 years55 25% 2.6 years60 14% 1.6 years

SOURCE: Commissioner’s IDA Morbidity and Commissioner’s SO Mortality Tables, Society of Actuaries

Greg Cameron had a predicament not unlike those of other advisors. His conservativeclients were concerned with the way their GICs and bonds, which made up the bulk of their portfolios, wereperforming. “For many clients, earning 5% on a term deposit simply isn’t acceptable,” says Cameron, acertified financial planner and a partner with Chartwell Financial Inc. in Vancouver.

When you consider that inflation is between 2% and 3% across the country, not tomention that energy costs are threatening to take a bigger chunk out of investors’ dis-posable income, a 5% return can evaporate pretty quickly once taxes are factoredin, adds Cameron. And as interest rates continue to fall, many investors have triedto get both capital preservation and portfolio appreciation through vehicles with

both bond and stock characteristics. The challenge to the financial services community is bring-

ing investors’ expectations back to earth after last year’s endto the 20-year bull market, says Chris Kresic, vice-president of

investments at Toronto-based Mackenzie Financial Corp.“We’ve just been through an extraordinary period,” he says.

“Whether that will happen again is questionable. The Dow returned9.6% since 1920 but from 1981 to 2000 it returned almost

Investments

alternativesThanks to falling interest rates, some clientsare favouring different investment strategiesover fixed income. By Geoff Kirbyson

Fixed

ADVISOR’S EDGE34

Illustration by Am

anda Duffy

double, 17.7%. A more normal returnenvironment is single digits. They’re notnegative returns, it’s just an adjustment ofreturn expectations.”

Balanced Perspective Cameron says most of his retired clientswant to replace at least the 7% per yearthey are required to withdraw fromtheir RRIFs. For that reason, they havesteered clear of GICs and bonds in favourof balanced funds and conservative equityinvestments as they attempt to findreturns in the 7% to 9% range, Cameronsays. “If you’re 65 and you only need tomake 5% to live your life the way youwant, then you can afford to go into termdeposits. But if you want 8%, you’relooking at more of a balanced compo-nent, an equity component or a mix ofthe two,” he says.

Indeed, balanced funds have sparkedinvestors’ interest, according to a recentreport from Toronto-based investmentresearch firm Investor Economics. The2001 Household Balance Sheet Reportshowed that from 1995 to 2000, thegrowth rates of Canadian balancedfunds in investors’ portfolios increasedby 26.5%, international balanced fundsrose by 28%, and real estate funds (amember of the investment trust unit[ITU] family) increased by 35%. Dur-ing the same period, Canada SavingsBonds declined in popularity by 4%and provincial savings bonds increasedby just 6%.

One area in which Kresic feelsinvestors may be able to outperform iswith high-yield bonds. He says theyshow less volatility than stocks orinvestment grade bonds. “You get one-third less volatility of stocks and com-parable returns. They’re a good invest-ment diversification tool because theyhave low correlation to stocks andinvestment grade bonds,” he says.

They can be a particularly attractivevehicle when the economy is coming

out of a recession, he adds. During thefirst three years after the last two reces-sions in the early 1980s and early1990s, the absolute return of the U.S.high-yield index averaged 23% whilethe S&P averaged 16%.

Lou Caci, an investment advisor atBMO Nesbitt Burns in Winnipeg,agrees that GICs and government bondsare no longer the tickets to help clientsachieve their investment goals. Caci rec-ommends that clients looking to addsome balance to their growth-heavyportfolios put 10% into ITUs, whichinvest in sectors such as real estate,energy and utilities, and pay out incomeback to unitholders. ITUs are consid-ered equity investments and in someways are similar to bonds as they reactto interest rates. However, their per-formance is not guaranteed and is alsodependent on the management of thecompany. “If the company is making

money, the ITU will continue to payout an income. When interest rates arefalling, ITUs become more attractive,”Caci says.

For clients who have become a littleskittish with the downturn of NorthAmerican equity markets, AdrienneSimmons, an investment executive atQueensbury Securities Inc. in Toronto,recommends balanced funds. Simmonssays most of her clients are youngerthan 40, have longer-term horizonsand aren’t interested in making fixedincome vehicles a large part of theirportfolios.

But for the 20% of her book that isnearing or at retirement age and is look-ing for capital preservation, she advisesinvesting in royalty trusts and dividend-paying blue chip stocks. Simmons saysroyalty trusts represent the best of bothworlds for some clients because they have


characteristics of both equities and fixedincome. They also allow for capital gainsand tax-preferred dividends. “My clientswho work in the oil and gas industrieslike royalty trusts, but they’re hard toexplain to the average investor,” she says.However, Simmons adds that royaltytrusts weren’t very profitable two years agoand still haven’t come all the way back towhat they were in the mid-1990s.

Simmons notes she uses bond fundsrarely and doesn’t sell many, if any, indi-vidual bonds. “I try to stay away fromthem, I think clients can make more else-where,” she says, adding that for thosewith shorter investing time horizons, sheprefers to use a money market fund.

The Truth About Bonds However, there are 247 mutual fundscurrently investing in Canadian bondfunds. Stephen Burnie, director ofresearch and analytics for Toronto-based research firm MorningstarCanada, says there were only 70 suchfunds in 1990—and that this is anindication that bond funds are grow-ing in popularity.

The total assets in the class haverisen to approximately $30 billion, justbelow the all-time high of $31 billionin early 1999, and represent about 7%of the market. Burnie notes the cumu-lative return of the median Canadianbond fund has been 6.67% per yearfor the last five years (for the periodending February 2001), twice thereturn of the median foreign bondfund. But Canadian bond funds under-performed against the Scotia CapitalMarkets (SCM) Universe benchmark,which returned an average of 8.4% peryear and theTSE300, which returned anaverage of 12.1%.

“Of course, the extra return on equi-ties came with some hair-raising risk.Five-year volatility of TSE300 monthlyreturns was almost 20%, nearly five

times that of the SCM Universe or themedian Canadian bond fund,” he says.

He lays much of the blame on thehigh management expense ratios forbond funds, where the median expenseratio is 1.93% per year, or 10% overfive years. “Over the long term, it hasproven impossible for mutual fundinvestors to keep up with the marketwhen paying this much for bond fundmanagement,” he says.

Devin Toth, a fixed income analyst atScotiaMcLeod in Toronto, says as thedemand for bonds continues toincrease, interest rates decline. With theU.S. Federal Reserve having already cutits overnight rate by 200 basis points sofar this year, Toth questions how far therate can continue to drop. “I’ve beentelling people there are dangers in hold-ing longer-term bonds if the economymoves into recession because we couldsee more government borrowing,” hesays. “That would put pressure on

longer-term interest rates. We’ve beenadvising people to stay away from any-thing longer than 10 years out,” he says.For those who want the extra yieldadvantage of a longer bond, Toth sayshe would recommend the one- to five-year portion of the yield curve. But fornow, he prefers instruments with lessthan a year’s term because of the poten-tial for rising interest rates.

Toth says he doesn’t want to dis-courage investors with a longer timehorizon, but he’s concerned the bondmarket may have run out of steam.“Yields have probably moved to a lowin this cycle. I think investors should bevery careful and maybe start thinkingabout taking profits on some of thoseinstruments and holding cash for thetime being,” he says. “That will givethem the opportunity to jump in if theequity markets turn around.”

Geoff Kirbyson is a writer based in Winnipeg.


JUNE 200139

T MAY BE HARD TO BELIEVE,but Ben Benedetto just completed an

11-week intensive training program for newfinancial advisors without entering a classroom

or even opening up a textbook. In fact, he never wentfarther than his own computer.

What Benedetto did do is log on to RBCInvestments University to complete the Rookie Invest-ment Advisor Program. Since the Internet-based learn-ing centre went live in January, about 3,500 of RBCInvestments’ 11,000 employees started Internet-based courses. Over the last year the company haslooked at its paper-based materials and built theminto an online version. The new online courses areattracting advisors who want to hone their skills andadvance their education without the restrictions ofmore traditional learning environments.

“I really liked it because I could go at my own paceand if I fell behind one week I could always catchup the next,” says Edmonton-based Benedetto.Although his program requires him to spend anotherthree weeks of training in Toronto, he says the onlineportion has been extremely useful. “I’ve studied somany varied subjects online already, starting with anoverview of compliance in business and going rightthrough to the products I’d use in different situations.”

The key is to enhance, not replace, face-to-face

training, stresses Paul Higgins, vice-president anddirector of training and development for RBCInvestments. “We’ve changed the value of [advisors’]time when they’re in Toronto,” he says. “Rather thanlearning 30 different products while they’re here, theycome to review these products and, more impor-tantly, see how they’re going to use them to providesolutions to clients.”

Rookies aren’t the only ones logging on to thisonline university. Managers are opting for cyberspaceto fulfil mandatory continuing education require-ments or additional courses to round out their skills.“I did the Conduct and Practices Handbook examonline, hit the ‘submit’ button and got my test resultsright away with the answers to the questions that Igot wrong—you can’t get much better than that,”says Jason Baba, RBC branch manager at EdmontonCommerce Place.

Baba figures he saved at least three hours doingthe exam online rather than driving to a school orcollege to write it manually. “I find this very appeal-ing to people in our industry because we’re very busyat certain times and not so busy at others,” he says.“Online we can work at our leisure.”

Equipped with a user ID and password, RBCemployees can log on at work, home or anywhere

Technology

SCHOOLING

RBC Investments’ online university

educates employees, remains constantly

up-to-date and cuts costs.

HOMEBy Rosalind Stefanac

I


they can access the Internet, to view theirpersonal profiles. Here, in addition tovital statistics such as name, e-mail, posi-tion, work location and start date,employees can quickly scan the coursesthey are registered for, as well as a list oftheir completed courses eligible for cer-tification. Employees can apply for certi-fication online, but these courses won’tofficially appear on their records until anauthorized supervisor has reviewed andapproved them.

“My Progress Report” details indi-vidual test results as well as an employee’sreal-time progress on any given course.The learning material itself is supple-mented with online multiple choicetests, case studies and word prob-lems to keep students engaged.Nonetheless, Baba admits thata certain level of discipline isneeded to stay on top ofweekly course loads. He addsthat to be successful with thiskind of learning you have to bevery independent and keepyourself motivated.

The site’s developers wenta step further to facilitatemotivation by givingmanagers and super-visors access tothe “Class ProgressReport,” which pro-vides information onthe status of any employ-ees they oversee who are regis-tered in an online program. Here, man-agers can view how much of a course anemployee has completed, the test scores ofindividual students and the average for theentire class. “We’ve structured the trainingand culture of our firm around mentor-ship and coaching, and now we’ve givenmanagers a tool to actually do that,” saysHiggins.

Managers are encouraged to offerguidance to students facing difficulties

with particular aspects of the course andto encourage employees to stay on top oftheir learning modules. They can alsomonitor for cheating, although it isexpected that employees work accordingto the code of ethics. Also if the major-ity of a group is struggling with a partic-ular exam question, system administratorswill be alerted so that they can go to thesite to improve the clarity of the informa-tion. Subject matter experts are also avail-able to answer questions about specific

course material via e-mail. Higgins says the program

has been successful not only inattracting users, but in saving signifi-

cant dollars for the company. “We wereincurring huge expenses around the pro-duction of binders for the courses andthere was always the issue of the timelinessof the information,”he says, referring par-ticularly to the geographical challengesinherent in communicating with employ-ees halfway around the world. “Shippinga binder to the Caribbean was not onlyexpensive, it could take a couple of days.”

With the online method, operating

costs are nominal and timeliness is nolonger an issue because the informationcan be updated quickly through the Website administrators, adds Laurie Miller,project manager, training and develop-ment for RBC Investments and the offi-cial gatekeeper for the online university.“Since the templates are online already,every new program can now be put infaster and faster,” she says.

With more than a dozen people main-taining the site, Miller says the creationand uploading of a brand-new program(including the accompanying tests and casestudies) takes about four to six weeks.

The intent is to continue populatingthe site with new courses and to

extend educational materials tothe company’s other business

partners.Although the learning

modules were designedto run on the most stan-dard of computer sys-tems (a 56K modemwill suffice), Miller says

the capability for moresophisticated computing is

indeed an option for thefuture. “Eventually we can

open it up to include Webcasting,as well as videoconferencing and

audio,” she says.But despite all the obvious benefits,

online learning isn’t for everyone. “Thechallenge is re-educating how peoplelearn and some people just can’t or won’tlearn this way,” says Higgins.

Still, he’s hopeful even older-genera-tion learners will catch the Internet waveeventually. “Our industry is ideal for thistype of learning because it is rife withconstant change,” he says. “We also havea large infrastructure to communicate thischange to so it’s a natural progression forus to move this way.”

Rosalind Stefanac is a Toronto-based editor andwriter.

JUNE 200141

“I did the exam

online, hit the ‘submit’

button and got my test

results right away.”

—Jason Baba,

RBC branch manager,

Edmonton Commerce

Place

Photography by K

LIX


Let the waiting gamecontinue. Expect the unex-pected. These two mottosseem to be severely tattooedinto the Canadian SecuritiesAdministrators’ (CSA) fin-ancial planning rule.

Financial planners-to-bewon’t likely be writing thefinancial planning profi-ciency exam (FPPE) earlierthan October, since the

Ontario Ministry of Finance sentthe rule back to the Ontario Securi-ties Commission (OSC) for revi-sions in April.

This surprise move has sparkedmany theories—namely that theFinancial Planners StandardsCouncil’s Certified Financial Plan-ner designation may become thesole requirement for financialplanners.

However, that’s not going to hap-pen, says Julia Dublin, chair of theCSA’s financial planning committee.She says the required revisions arejust a matter of “fine-tuning” therule. According to the OSC’s pub-lished response about the rule need-ing revisions, there’s a need to meetwith industry groups “regarding theclarity and scope of title and servicedescription ‘word pools’ and the

two-year experience requirement.”Joe Oliver, president of the

Investment Dealers Association inToronto, agrees there was a concernthat the rule had a broader reach thanintended. “It was never intended thatall investment advisors be captured bythe rule,” he explains. “It was onlyintended that those who were holdingthemselves out as providing financialplanning advice would be covered. Butthe OSC has said they will deal withthis specific issue.”

OSC spokesperson Frank Switzersays the OSC expects to have revi-sions back to the ministry by thismonth. Despite the delay, Switzerbelieves the official date of the rule(when financial planning restrictions,titles and service descriptions mustcomply with the regulators) will stillgo into effect. (That’s assuming theMinistry approves the rule, ofcourse.) So mark this date on yourcalendar: Feb. 15, 2002.

Hopefully, for wannabe advisors,it’s the one date that will stick.

Deanne N. Gage is managing editor ofAdvisor’s Edge.

Illustration by Mark Tellok

Wealth and practice management strategiesYOUR

Parallel selection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45

Writing the right letter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46

Tough guidance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47

Upcoming events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47

Meeting on time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48

Nick Murray . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49

TEST IN FLUXProblems concerning the financial planning rule strike again.

By Deanne N. Gage

JUNE 200143

BUSINESS

For ongoing coverage on the financial planning rule, visit the Web 1st Newszone at www.advisor.ca.

Does yourreputationreflect yourabilities?

Brant’s does!—Brant Taylor, 2000 Advisor of the Year Award winner

The Advisor of the Year Awards honours

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Enter now.Deadline is June 22, 2001.

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THE JUDGES ARE: Carl Abbott, Abbott Financial Services; Elaine Andrew, Investors Group; Christian Boucher, Delta Cabinet

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David Salloum, RBC Dominion Securities; Ralph Sommerfeld, Raymond James; Thane Stenner, Merrill Lynch; Robert Taylor,

Assante; Brant Taylor, Strategic Wealth Management

JUNE 200145

BUSINESSYOUR

MUTUAL WATCH

It is with immeasurable reluc-tance that I now begin the tiresomesearch for a replacement for the fam-ily’s ailing second car. Whether I buynew or used, there is so much toconsider before taking on anotherrapidly depreciating asset.

Getting value for my dollar whileavoiding disappointment is a prior-ity. So, I have armed myself with thelatest editions of new and used carresearch and ratings publications.

I cannot help but draw parallelsbetween these publications and someof the mutual fund rating servicesoffered in our industry. Perhaps thebiggest difference between fund andcar ownership is the expectation thata fund investment will appreciate overtime. A car, on the other hand, isprobably better described as a front-loaded expense than it is an asset, letalone an appreciating asset. Theapproach of providing research infor-mation and ratings to prospective buy-ers, however, is remarkably similar.

As with fund ratings, used car rat-ings serve as convenient shorthandfor past relative performance, but failto tell the whole picture. I would notbuy a car based solely on a used carrating any sooner than I would buya five-star mutual fund withoutlooking under its investment hood.

You’re better off to understandthe nature of the securities that themutual fund invests in, and how they

relate to your client’s overall port-folio. Does the fund invest in com-plementary securities? Is the invest-ment style of the fund managersimilar or dissimilar to others in theportfolio? Is there an over-concen-tration in a particular sector or(worse) security? In short—notwithstanding any rating—is thisan appropriate fund for your client?

Of course, this is where stan-dardized fund categories come inand help match the general invest-ment goals with those of your client.Ratings that embrace these cate-gories provide a convenient, first fil-ter for fund selection.

A mutual fund rating typically willnot alert you or your client to thetypes of investments to which thefund is currently exposed. Thus, a rat-ing will not guard against inappropri-ate asset allocation and other risk fac-tors. In fact, the apparent simplicityand convenience of fund ratings areprobably their biggest drawbacks.

Yet fund ratings are not withoutvalue. They provide a succinct eval-uation of a fund’s performance rel-ative to others like it. All otherthings being equal, why not focus onfund managers that outperform—on some basis—their peers?

But while the performance rank-ing capability of fund ratings is use-ful, they pale in comparison toobjective, comprehensive and accu-

rate fund research. Fortunately, thereare a number of sources of researchinformation for mutual funds. Mostof the major fund companies haveWeb sites that provide the latestinformation and commentary ontheir offerings. There are also third-party mutual fund informationproviders including Southam’s FundProfiler, Globe Information Ser-vices’ HySales and Morningstar’sPALTrak/BellCharts services.

All of these third-party servicesprovide mutual fund ratings whosemethodologies are more similar thanthey are dissimilar to each other.

None should be used as the solecriterion to select a fund for a client.Instead, think of them as a first fil-ter or a recent report card on thefund manager.

Ensuring that the desired assetallocation and level of diversificationis present in each client account ismore important than ever these days.Ratings might be a nice first cut, butit is the use of accurate and compre-hensive research that will differenti-ate the valued advisors from the rest.

I’m about halfway through myused-car rating and research books,and have yet to make a decision.Maybe I’ll bypass the ratings andtake the bus.

Scott Mackenzie is the president ofMorningstar Canada in Toronto.

Searching for a new car is not that different frompicking the best mutual funds. By Scott Mackenzie

PARALLEL SELECTION

BUSINESSYOUR

MARKETING FRONTLINES

I recently had similar conversa-tions with two financial advisors.

Both advisors are highly success-ful, with books well in excess of$150 million. Both have conservativeinvestment philosophies, with astrong bias towards a value style.

But a year ago, some of theirclients had severe doubts about theirabilities and their competence. Theseclients compared their 10% to 20%annual returns to what their friendswere getting with other advisors andwondered what was wrong. Today,these clients have 12-month returnsof 0% to 5% and they see their“conservative” advisors as their ownpersonal versions of Warren Buffett.

One of these advisors asked

whether it might make sense, in lightof how well his clients have done, tosend a letter asking for referrals. Theletter I suggested he send went some-thing like this:

Dear Sally,I am writing to ask for your help.As I’m sure you’re aware, the past year

has seen considerable turmoil in the stock mar-kets. A number of clients have recentlyexpressed gratitude for my insistence thatthey stay in conservative investments. Theseinvestments have performed very well incomparison to the dot-com carnage of the past12 months.

In the coming year, I hope to add newclients who share my prudent philosophy andwho have either tried (and failed) to managetheir own portfolios or are dissatisfied withthe advice that they’ve received from theirfinancial advisor. Which brings me to myrequest:

If you are happy with the job that I’vedone, I would ask you to consider introduc-ing friends who are unhappy with their invest-ment performance to the work I do.

The last thing I want is for either you oryour friends to feel any pressure or discom-fort. Therefore, I have three suggestions.

First, if you’ve been talking to someonewho you think I should contact, give me a calland I’d be delighted to get in touch with them.

Second, I have taken the liberty of attach-ing one of my business cards. Should theopportunity present itself, I’d be most gratefulif you’d pass it along to a friend or colleague

who might be interested in a complimentarysecond opinion on his or her portfolio.

Third, I would be delighted to add peopleyou know to the mailing list for my newslet-ter, so they can get a better sense of the approachthat I take to investing; simply fax or mailback the attached page with theirparticulars.

Thank you in advance for putting me intouch with people who I can help in the samefashion in which I’ve helped you. In the mean-time, if you have any questions about yourinvestments, as always, please don’thesitate to give me a call.

Something to remember aboutasking for referrals: Sending any let-ter, even one such as this one, is nevera substitute for talking to clientsabout referrals face to face. And,remember to have low expectationsfor any mass request—especially inthe short term.

That being said, periodicallyplanting the referral seed in clients’minds can only help, provided that itis periodic and the way you ask does-n’t undermine your position as a pro-fessional. Think about how youwould respond to the letter if youwere this advisor’s client. Thenthink about whether you have theopportunity to make a similarappeal to your clients.

Dan Richards is a well-known consultantand speaker to the investment industry.

The right letter can be an effective wayto ask for referrals. By Dan Richards

PEN TO PAPER

ADVISOR’S EDGE46

AppointmentPaul Williams, ExecutivePublisher, Advisor Properties, is pleased toannounce the appointmentof Sheila Avari to the position of Assistant Editor of Advisor’s Edge. Ms. Avari has one year of financial journalismexperience and is a recentgraduate from RyersonUniversity. Sheila will workwith the managing editorto maintain the award-winning standards ofAdvisor’s Edge.

Sheila Avari

BUSINESSYOUR

VALUE OF ADVICE

Even though most clients arehanging in during these tough mar-kets, many advisors are telling methat the business isn’t as much fun asit used to be. Just a few months agoinvestors were willing to buy “on thedips.” But today, putting new moneyinto anything but the most conser-vative investment is tough.

These market conditions arewhen your clients need you the most,even if you find yourself offering thesame counsel over and over again.Your clients are looking for guidanceand need to hear it from you, even ifyou don’t feel you can offer a strongendorsement of the markets in theshort term.

Clients want to know that youand your firm are monitoring themarket and how it affects them.Some advisors are stepping up theirlevel of communication by issuingweekly market comments to inter-ested clients by e-mail or faxbulletins. But don’t be tempted touse technology to replace traditionalcommunication methods such asphoning or meeting clients face toface. You can help your clients (andyourself) get through these marketsby increasing the level of service youprovide.

Other advisors are holding clientinformation nights, which evaluatewhat is going on in the markets, howit is affecting certain sectors and

companies, and what this means toCanadians. They are taking theirclients “back to basics” by lookingat what drives both stock value andstock prices, as well as investorbehaviour. The key to making theseevents successful is to have a credi-ble speaker. Bringing out a speakerwho just a few months ago was tout-ing a rosy outlook could have yourclients booing from the audience,rather than producing the results youwant from the evening.

When revenues from your busi-ness are soft, it’s tempting to cutback on expenditures. While thismay help protect your short-termprofitability, I believe that thesemarkets offer opportunities forfinancial advisors who want to standup and be heard.

When the markets are hot, clientsare generally satisfied with their advi-sors. When performance is down,the average client’s overall satisfac-tion with their advisor also falters.Clients, and their assets, are lookingfor help—even those who thoughtthey could do it themselves.

But be careful what you wish for.Today’s clients are more experiencedand gun-shy. They want the straightgoods from a qualified advisor—nota good sales story. Selling on per-formance doesn’t work when thereisn’t any.

So what can you offer in today’s

markets? If you’ve been focusing oninvestment selection and manage-ment (or dare I say, order-taking), Ibelieve the time has come to providedeeper, well-rounded financial adviceto clients. While clients have no con-trol over the stock market, you canoffer them ways to direct their finan-cial future by putting their goals intoa financial planning context.Although financial planning hasbeen used as a sales tool by some,I believe a modular or comprehen-sive financial plan can be an invalu-able tool for retaining client assetsand protecting the value of yourbusiness.

Sandra Foster, CFP, FCSI, is the author ofWho’s Minding Your Money?Financial Intelligence for CanadianInvestors (John Wiley & Sons). [email protected]

Slow markets offer you the opportunityto stand up and be heard. By Sandra Foster

TOUGH GUIDANCE

June 14 to 15Investment Management ConsultantsAssociation’s 2001 Canadian Consultants ConferenceToronto For details, call (416) 869-9030 or go to the IMCA’s Web site atwww.imca.org.

June 17 to 19Investment Dealers Association ofCanada (IDA) Annual Meeting and Conference 2001 Pointe-au-Pic, QuebecTo register, go to www.ida.ca or call(800) 465-9670 ext. 503.

Mark your calendar

JUNE 200147

ADVISOR’S EDGE48

BUSINESSYOUR

MANAGING

The first step to spicing upyour meetings is probably learningto start them on time. If a meetingroutinely begins with some staffmembers sitting around in sus-pended animation, waiting for col-leagues, they will grow to resent theintrusion on their normal work thatthe meeting creates and view themeeting as unproductive. This is par-ticularly crucial for short meetingssince it’s hard to make up the losttime: Start a 15-minute session fiveminutes late and you invariably havea 20-minute event on your hands,one-third longer than planned. Startit 10 minutes late and it has nowmushroomed into a 25-minutemeeting.

The best route is to highlight theproblem and turn it back to thegroup for solutions. That can be del-icate if one person is perenniallylate—a bigger problem if it’s hold-ing up your team—but generallystaff will come up with level-headedsolutions. Sometimes the agendaorder has to be changed, so thosepresent can continue in the absenceof latecomers. Sometimes a systemof fines can be levied on latecomers,for the coffee fund or birthdaycakes. Sometimes the perpetual late-comer can be assigned to round upeverybody else when he or she isfinally ready.

Next, consider holding some

short, stand-up meetings. Adherentssay that you can reduce meeting timeby 40% to 50% simply by not sit-ting down. That probably works bestif you pick a meeting spot wherechairs aren’t present and ifit’s a new meeting rather than anattempt to recast an existing session.It will feel foolish initially, but mayprove worthwhile in the long run.(One of my colleagues used to holdstand-up meetings in the receptionarea, which didn’t feel like a normalmeeting space so it contributed tothe speed. It also allowed the recep-tionists, who couldn’t leave theirposts, to take part.)

To get more staff members actu-ally contributing their thoughts inmeetings, I’m a big fan of go-rounds: Get in the habit of goingaround the room and asking every-body their opinion on tricky issues.More often than not it will save timebecause rather than thrashing about,hearing the same two or three peo-ple restating arguments, you get aquick sense of where everybody isinclined to head (or a sign of howdivided they actually are, which isalso important to recognize quickly).Repeated use of go-rounds alsobrings people together.

In long meetings, it’s vital to makesure action items are discussed early,when everybody is fresh. That meansif you later run short of time and

have to rush through some matters,they will be the routine informa-tional items, not the big decisions.

In The Complete Handbook of BusinessMeetings (Amacom), Vancouver con-sultant Eli Mina recommends a hostof other ideas for rejuvenating meet-ings. Here are some:• For longer, routine meetings,

invite a guest speaker or staffmember to make a presentation orlook for a case study to discuss.

• Try breaking a complex task intoseveral sub-tasks and then assigneach to a smaller discussion group,which reports back on its findings(perhaps in 10 minutes’ time).

• Provide different refreshments orcelebrate a member’s birthdaywith a cake.

• Hold meetings at different loca-tions.

• Change the sequence of items onthe agenda.

• Rotate the chair, so a differentperson organizes and chairs thesession.The biggest hurdle to overcome is

that these ideas can seem artificial orhighly unusual, breaking with theoffice culture and routine. But it’sprecisely because you must breakwith the routine that these ideasshould be considered.

Harvey Schachter is a contributing editor ofAdvisor’s Edge.

Get feedback from employees to determine how to getmeetings started on time. By Harvey Schachter

A TIMELY MEETING

JUNE 200149

BUSINESSYOUR

QUEST FOR EXCELLENCE

The remainder of these piecesabout prospecting—building orrebuilding your book by consistentlyputting yourself in front of newpeople—will set forth 20 ideas/actions/principles/suggestions bywhich you may gradually pullyourself back up from the end ofyour rope.

This is not a system; it’s more inthe nature of a menu. Try it on pieceby piece, and have enough faith inyour own judgment to believe thatyou will, in time, weave together theparticular ideas which are most help-ful to you. (In that way, of course,the result will become a system—onethat is authentically your own.)

Before commencing the count-down, let me complete a thoughtthat I began in the first of this seriesof columns: that what we call “rejec-tion” isn’t rejection at all, but some-thing else. To wit: it’s great informa-tion, and you can almost alwayslearn from it.

As we’ll see in the next issue’s col-umn, each of us only needs about250 families/households of suffi-cient financial potential, in order forus to build a great career and even ameaningful life. Prospecting, then,becomes the act of interviewingpeople to see if they qualify to jointhat small, select group.

When a person disqualifies himselfby saying “no,” for whatever reason(s),you may elect to feel “rejected”—Ican’t stop you—or you may feel thatyou’ve just gained excellent informa-

tion: this person is unsuitable, and younever have to waste time on him again.(Moreover, you can usually learnsomething about human nature fromevery face-to-face interview, if youkeep an open mind.)

Edison tried to produce incan-descence in about 10,000 materials;only one worked. I don’t believe hesaw the other 9,999 experiments as“failures”; like the intuitive scientisthe was, he experienced each as apiece of good information: onemore thing he never had to try again,one step closer to the material thatwould incandesce.

(Incidentally, Edison had aboutfour months of formal schooling,and was, from adolescence on, vir-tually deaf. I submit with respectthat if you hear reasonably well,went to school for more than fourmonths, and have a closing ratioeven slightly better than one in10,000, you may already have a hugeleg up on the man who invented thetwentieth century.)

I said last month that I was goingto ask you to invest about $500 inyour business, and as we tickthrough the 20 ideas that follow,you’ll see where the money’s goingto go. (I also said—and now sayagain—if you haven’t got the $500,borrow it. You’re making a leveragedinvestment in yourself... aren’t you?And that investment is going to yieldhundreds of thousands—if not mil-lions—of dollars in income and networth to you over the balance of

your career... isn’t it?) Here, then, in no particular order,

are the 20 suggestions. ❶ Spend one hour with a good

therapist. If you think you mightbe depressed—that the difficul-ties you’re dealing with may havegone beyond the narrow issue ofprospecting—it’d be worth thetime and the money to find out.Get the truth; don’t assume yourstress is narrowly work-related, oreven that you understand exactlywhat’s bothering you. (Sunday isMonday, the psychologists say.)Particularly if you find yourselftaking your business problemshome, it could be time to talk toa professional.

❷ Invest in Aaron Hemsley’s “The

Psychology of Maximum Sales

Performance” tape program.

Aaron has applied the principlesof behavioural psychology to ourprofession and its unique stresses;his work has been extremely help-ful to me, personally and profes-sionally. (801-356-0830 orwww.aaronhemsley.com; $125US plus shipping.)

❸Get up an hour earlier; start a pro-

gram of moderate aerobic exercise.

The exercise oxygenates yourbody; the consistent disciplinegives you a renewed sense of self-control and self-worth. Three down, 17 to go…

© 2001 Nick Murray. All rights reserved.Visit www.nickmurray.com.

By Nick Murray

CRUEL NECESSITY,PART FOUR

What brought on the new bylaw that makes

it mandatory for brokerage firms to inform

the IDA about client complaints?

It’s important to be more proactive andtransparent in our approach to clientcomplaints and investigations. We wantto make the enforcement system moreefficient and responsive, so we felt it wasan important initiative to require firms tofile quarterly information on all com-plaints and settlements. The settlementsshould have sufficient particulars to iden-tify the complainant, the registered repand the nature of the allegations.

What is the IDA doing to make it easier

for consumers to file complaints?

We will deal with complaints morequickly. Our target is to deal with all

complaints within 75 days. There aretimes when it’s going to take longer butthat should only be the exception, notthe rule. Some complaints take moretime because the information we receiveis not complete so we can’t makea determination as to whether thecomplaint is valid.

To help with this, we developed astandard complaint form, which willassist investors in filing complaintsand it will be posted on the IDAWeb site.

As well, we’re going to be installinga national 1-800 complaints line,which clients can use to contact usdirectly. We’re also going to makenotice of hearings, statements of alle-gations and settlement agreements

public on the Web site via newsreleases.

How long did it previously take to deal

with client complaints?

Last year we dealt with two-thirds ofthe complaints within 90 days andmost of the rest within a year.

How many complaints do you receive over

a given year?

In 2000, we received 1,100 complaints,and the year before we received about 900.

Why has there been an increase in

complaints?

There’s been an increased number ofpeople in the marketplace and incredi-ble volatility in the marketplace. There’sa greater focus on investors, given thehigher bar that regulators are puttingon investor protection. So the fact thatthe number of complaints has increasedis not surprising.

Do you have any thoughts on the recent

insider trading allegations at some

brokerage houses?

Insider trading is a very serious matterbecause it’s unfair, illegal and under-mines investor confidence with theintegrity of the marketplace. I believethese are exceptional cases but they haveto be dealt with seriously. I wish theydidn’t happen, obviously, but the key ishow the regulatory process deals withthe problem. If it deals with them in aserious way, it can restore consumerconfidence.

It hasn’t been an easy couple of months for the IDA. The self-regulatoryorganization was criticized in two reports for its less-than-stellar enforcement ofits members. But now the IDA has vowed to get tougher. Brokerage firms mustnow inform the IDA about all client complaints.

NEWSMAKERBy Deanne N. Gage

JOE OLIVERThe president of the Investment Dealers Association (IDA) gets tough with the brokerage firms.

ADVISOR’S EDGE50

Photography by John H

ryniuk

To read the full interview withJoe Oliver, go to www.advisor.ca.

Documents

CANADA’S MAGAZINE FOR THE FINANCIAL PROFESSIONAL • … · 2019-10-04 · percentage of independent brokers (as defined by IFBC) who are members of CAIFA. Even London Life has