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ADVISORCANADA’S MAGAZINE FOR THE FINANCIAL PROFESSIONAL • JANUARY 2001 S E D G E

Global Fortunes Where in the world should you invest your clients’ assets?

Success stories from 12 outstanding advisors How to find some prosperous prospects PLUS Seven technology mistakes you can’t afford to make Canadian Publications Mail Product Sales Agreement #1280341, Sales Agreement Product Mail Publications Canadian Inc., Media Rogers 777 Bay St. Toronto, Ont. M5W 1A7 CONTENTSVolume 4, Number 1 January 2001 Features 19 Advisors of the Year Wondering what it takes to be an award-winning advisor? Check out the profiles of the winners and finalists of the Advisor of the Year Awards. By Harvey Schachter, Deanne N. Gage and Lisa Machado

38 Mining for Prospects Prospecting for clients is only as successful as your strategies.These three steps will open the door to new business. By Duncan MacPherson

43 Global Fortunes From paranormal predictions to portfolio manager musings, the experts take a look at what the future holds for global investing. By Lisa Machado Cover photography by Greg Holman Departments 7 INSIDE EDGE KNOW YOUR CLIENT 53 Web Designs 61 Quest for Excellence Why advice will never A Web site is a great with Nick Murray become a commodity. 16 Holiday Hangover way to attract prospects, As the new year begins, How do you help your but be sure to build it it’s the perfect time to 9 LETTERS clients when holiday right. renew your commitment Another solution to shopping leads to credit to adding value to your special-needs planning. card madness? 56 Ask Julie with clients. Julie Littlechild 11 THE PLAN PORTFOLIO Understanding your 62 NEWSMAKER Les Wiens uses inter- clients’ wants and needs John Kenneth Galbraith generational planning 47 Mutual Watch is as simple as an annual shares his thoughts to help his clients with Scott Mackenzie survey. on globalization, maximize their estates Today’s market volatility economic growth and while they’re alive. has the bear waiting in 56 The Value of Advice greedy nations. the wings. Have you with Sandra Foster prepared your clients? When the market drops, do you call your clients, CHANGING GEARS 49 Tax Break or do you leave them 58 with Gena Katz to listen to the media’s There’s tax relief ahead “advice”? for Canadian resident shareholders who receive 58 My Edge shares from a foreign Being a great advisor is spin-off. like mountain biking, says Mike Andrews (right). YOUR BUSINESS You’re always pushing yourself to do better. 51 Seven Deadly Mistakes Hoping to use the 59 Managing Internet as a successful with Harvey Schachter business tool? There Managers generally oper- are seven critical ate according to two mistakes that you theories, but only one DEBT MADNESS 16 can’t afford to make. inspires empowerment.

JANUARY 2001 5 INSIDEEDGE Human touch You are the reason advice will never become a commodity.

reminding me that I had agreed to a 65-year-old small business owner guest appearance as author of this builds a $1 million business. The month’s Inside Edge—the page you problem? His partner is his brother. are now holding. They don’t get along, they don’t trust My credentials are that I used to each other and, as a result, cannot write a magazine column. For many agree on a succession plan. years I wrote about the dog, the kids, A 64-year-old university professor the weather, Leo, my favourite barber, marries a 45-year-old colleague. It is and occasionally I stuck to the sub- the second marriage for both ject, which was mainly investments partners. The husband is planning to and economics. retire in a year. But there are a host of But that was another millennium. financial problems relating to the Leo turned in his clippers and went previous marriages. on to a career as a mutual fund sales- These are just two of the winning man. My oldest daughter moved out case studies in this year’s Advisor of the The financial advisor to her own apartment, taking the TV Year Awards featured on page 19. and most of the contents of the How were these challenges dealt community is the freezer with her. The dog sleeps all with? Our award winners have in most scolded body of day. common determination, resourceful- Today time is money. Or more ness, and the ability to work with professionals in the than money. Today we have conver- others on behalf of their clients. gence. Or consolidation. Today finan- They leave no stone unturned. They “country, with the cial advice is in danger of becoming are dogged, pay attention to detail a commodity. Kind of like wheat, or and are exhaustive in pursuing exception of the maybe beer. We have derivative prod- solutions. They are passionate. Montréal Canadiens. ucts, tools, and functionality. And Larry Short, Sheila Munch, Brian today we have relationship managers. Mallard and Brant Taylor received It all sounds so daunting. So dry. their awards at a lavish gala dinner at t is morning—early morn- It’s not really fodder for columnists. Toronto’s Royal Ontario Museum. It ing—in a Calgary hotel I mean, you try writing 500 words on was a fitting venue. Just as the relics I room. The phone is ring- convergence. and antiquities on display at the ing. It is 5 a.m. Must” be the wake-up I suppose I could hector you. But ROM endure, so do the human call. I’ve decided the financial advisor qualities of the Advisor of the Year Award “Hello?” community is the most lectured and winners. “Good morning, Paul. You asked scolded body of professionals in the Financial advice in danger of me to remind you that your column country, with the possible exception becoming a commodity? Get real. is due.” of the Montréal Canadiens. I will not It is not the wake-up call. It is harangue you. I will praise you, PAUL WILLIAMS Deanne Gage, the indomitable however. Or some of you. EXECUTIVE PUBLISHER managing editor of Advisor’s Edge Consider these challenges. A [email protected]

JANUARY 2001 7 LETTERS

Special needs The Preferred Beneficiary Election is also very important when advising clients with special needs read with interest the article on financial planning children. for clients who have children with special needs This strategy allows for the set-up of an inter vivos I (“Special needs,” November 2000, page 22). trust in which the funds earning investment income are It is true that a person with disabilities can receive an taxed at the beneficiary’s tax rate, not the high marginal inheritance or insurance settlement up to $100,000 (in inter vivos tax rate, even if the beneficiary doesn’t Ontario) without impacting government benefits. This is withdraw the funds. (This is only applicable for persons known as a Disability Expenses Trust. with disabilities.) You use the example of parents who have $1 million that they wish to leave to their two disabled children. The Paul Cuddy, financial advisor advice is to leave $100,000 to each child and set up a Great Pacific Management Co. Ltd. discretionary trust with eight other beneficiaries. Burlington, Ont. But a simpler and safer solution, and one which would be far less expensive to execute, is to set up a Henson Trust Letters wanted (insofar as Ontario is concerned), which is an absolute discretionary trust in which an unlimited amount of We would love to hear from you! Send your ideas, questions and letters to the editor money can be set aside for the beneficiary without having to [email protected]. an impact on the government benefits.

Deanne N. Gage Managing Editor (416) 596-5991 (dgage@) Lisa Machado Associate Editor (416) 596-3564 (lmachado@) David J. Heath Art Director January 2001, Volume 4, Number 1 (416) 596-5059 (dheath@) Editorial Advisory Board Contributing Editors: Harvey Schachter, Peter Robert Fleischacker CAIFA Boisseau and Bert Vandermoer Sandra Foster CaratConnect ADVISOR’S EDGE HOTLINES Glenn Lightfoot RBC Life Insurance Paul Williams Editorial (416) 596-5991 Executive Publisher Ian Niven BMO Harris Investment (416) 596-5959 Financial Services Group Management Inc. Subscriptions (416) 596-5248 (pwilliams@) Scott Mackenzie Morningstar Canada Advertising (416) 596-2662 Kori Kobzina Associate Publisher Stephen Clarke AIC Fax (416) 596-5940 (416) 596-2662 (kkobzina@) Dan Thompson National Bank of Canada Garth Thomas Account Manager Thane Stenner Merrill Lynch Canada Inc. Reprints (416) 596-5856 (416) 596-5564 (gthomas@) Jim Rogers The Rogers Group Maryse Gauthier [email protected] Montreal Account Manager Financial Advisors Ltd. (514) 843-2126 ([email protected]) Lynne Triffon CAFP (B.C.), R.M. Paterson Change of address e-mails to Debbie Walsh: Marie Atkins [email protected] Executive Assistant & Associates Ltd. (416) 596-5070 ([email protected]) Rémy Richard Rémy Richard & Adrian Valks Production Manager Associates Ltd. Published in Canada by Rogers Media Inc. since June (416) 596-5035 (avalks@) Shirley Webster Bank of Montreal Denise Brearley Director of Circulation and 1998. Rogers Media Inc., 777 Bay St., Toronto, Canada Ralph Sommerfeld Goepel McDermid Securities M5W 1A7, (416) 596-5000, fax (416) 596-5940. (416) 596-3470 Marketing Research Catherine Hurlburt CAFP, IFC Planning Group Offices: 1001 de Maisonneuve West, Montreal H3A Clodagh Rohan Promotions Manager 3E1, (514) 845-5141; Ste. 900, 1130 West Pender St., @ (416) 596-5937 (crohan ) ADVISOR’S EDGE is published by Healthcare & Financial Vancouver V6E 4A4, (604) 683-8254. Katisha Rasheed Promotions Coordinator Publishing, a division of Rogers Media Inc. Full subscription price: Canada $60 per year, 2 years: $98, (416) 596-5043 (krasheed@) 3 years: $128.75, USA/Foreign: $123.60 (one year only). Rogers Media Inc. Single copy: $25. Published 12 times a year. G.S.T. Objectif Conseiller #137813424RT. Anthony P.Viner President and CEO Yves Bonneau Rédacteur en chef (Editor) ADVISOR’SEDGEis indexed by the Canadian Magazine Index by Micromedia Limited, and the Canadian Periodical Index. (514) 843-2142 ([email protected]) Publishing Canadian back copies are available in microform from Brian Segal President and CEO Micromedia Limited, 20 Victoria Street, Toronto, Ontario Advisor.ca Terry L. Malden Chief Operating Officer, M5C 2N8. Indexed by the Canadian Business Index and Dwayne Desaulniers General Manager Executive Vice-President available online in the Canadian Business & Current Affairs (416) 642-4939 ([email protected]) Database. Canadian Publications Sales Agreement 1280341. Ari Aronson Sales Manager Healthcare & Financial Publishing ISSN 0703-7732. (416) 642-4838 (ari@) James O. Hall President, Medical Copyright © 2001 Rogers Media Inc. Help Desk (service@) Publishing John Milne Senior Vice-President

JANUARY 2001 9 Photography by Gerry Kopelow Y N ASI THE IN EARS F alive. his mid-40s,benefit from herestatewhile sheis way tohelpherson,John (alsoaclient), who isin Smith (notherreal name).She was seekinga inheritance. providing theadultchild withanadvance ontheir for theirbeneficiaries while theyare alive by theirestate for hisclients tomaximizethevalue of assets. insurance andjointownership of ME OF UMBER W THE INANCIAL A I This wasThis atoppriority for Wiens’s client, Isabelle Weins’s istofocus ontax-effective strategy ways NVESTORS L DVISOR By SandraFoster beforeestate theydie. oftheir thevalue maximize Les Wiens helpshisclients Passing iton ES W IENS C C P osbyn h sa ol flife goes beyond theusualtoolsof tional planningfor families, Les Wiens hen itcomestoproviding intergenera- LIENTS B ONSULTANT ROFILE G USINESS , ROUP CFP 500 : : :7 PLAN JANUARY 200 11 though theonly debt theyhadwas a$ and minimalinvestments outsidetheirRRSP. Even over $ John andhisspouse hadatotalannualincomeof needs by more than$ also receiving pensionincomethatexceeded her investments yieldinga6%pre-tax income.Shewas $400,000, was heavily weighted infixed income situation. Herinvestment portfolio, over worth to review Isabelle’s estateplanningandfinancial consultant for Winnipeg-based Investors Group, was Wiens alsoreviewed John’s financial situation. firstThe challenge for Wiens, afinancial 1 1 40,000, aswell ascompany pension plans 1 ,000 permonth. Continued on page13 1 20,000 THEPLAN

the investment loan, John in turn gifted Isabelle an The rules amount equal to the tax refund. Since she didn’t need the There are five rules to successful inter vivos multi- money, she returned it to John to use to contribute to generational planning, says advisor Les Wiens. RESPs for the grandchildren. John was also concerned about his mother’s financial ❶ The parent and adult child must have a security, so with the guidance of the family lawyer, he functional relationship to ensure the gifts signed a contract that would allow his mother to tap into are defined as gifts under the Income Tax Act, his investment portfolio should she need any additional not earned income. capital. The lawyer also updated Isabelle’s will to document ❷ All generations must share a common desire to the $120,000 as an advance on John’s inheritance, so that grow their net worth. his two siblings, who were not able to take advantage of the strategy at the same time, would not be shortchanged ❸ All generations must be able to maintain the in the future. ability to financially benefit from the strategy. While this style of intergenerational planning is an effective way for Isabelle to provide financial benefit to ❹ The parent must not gift the entire estate and her son and his family while she is alive, there are key con- must retain enough net worth in reserve funds. siderations that advisors must be aware of, says Wiens. He notes that the strategy took a great deal of time and ❺ The gift to the adult child is an advance on his effort, with no significant new assets as a result. “In this or her inheritance and is not meant to reduce kind of multigenerational planning, it’s important that the size of the estate available to other siblings. the client has a functional family because there are significant attribution issues when the children are Continued from page 11 married,” he says. “They need to have healthy mortgage on their $200,000 home, there was still little left relationships. Remember, if their marriage dissolves, over for investing. without a legal contract, the inheritance must be divided Isabelle decided to gift John $120,000—a portion of between them.” the estate he would ultimately receive. Then, John used that money to pay off the mortgage and refinanced $150,000 Disclaimer: The author has not commented on the appropriateness of on his home to build a leveraged investment portfolio. any of the strategies used by advisors featured in this column. Since his time horizon and risk tolerance were more aggressive, Wiens helped him build a portfolio weighted If you are interested in being interviewed for The Plan, in equities. send an e-mail to [email protected]. Rather than keeping the tax refund from the interest on KNOW YOUR CLIENT Trends, statistics and demographics

ome of your clients are about to experience Holiday hangover the ultimate holiday hangover—credit card Massive debt will more than S debt. They don’t understand how it happened likely hit your clients after the holidays. and are struggling to climb out of the hole. January is the busiest time for the Credit Counselling By Deanne N. Gage Services of Alberta, an organization that specializes in helping debt-ridden consumers. According to Fran Smith, the organization’s Calgary-based executive direc- tor, there are two kinds of people who find themselves in debt: those who normally make payments year-round but rack up hefty credit card bills in December; and those who struggle already, yet continue to add on more debt. “The latter folks could take years to get things under control,” Smith says, noting that she gets several referrals from financial planners to help get their clients’ finances back in shape. It’s a myth that only disadvantaged people experience problems with money. Michael Floyd, director of finan- cial planning services for Scotiabank in Toronto, says he sees individuals from “all walks of life” who experience problems with debt. “The rule of thumb should be, if you can’t afford it, it’s too much debt,”Floyd says. Unfor- tunately, with credit cards and their far-reaching credit limit, almost anything is affordable, in theory, until the bill comes. Part of the problem is most people don’t have a bud- get and therefore have no concept where their miscella- neous money is going. They know how much their mort- gage, gas, utilities and groceries cost but haven’t figured Illustration by Lino out an appropriate amount to spend on extras each month. “It’s not uncommon to see people having debt payments exceeding 35% of their monthly income

Number of Canadians employed by financial and insurance companies:

ADVISOR’S EDGE 16 before taxes,”says Smith. “That’s the first sign of running WHERE YOUR CLIENTS into trouble.” ARE SURFING How can consumers cut back on their expenses? Smith www.oiadvisor.com offers personalized financial suggests people ask themselves some questions. “Do you planning services.The Toronto-based site features need a mortgage as high as it is? Do you need two cars? If an online wizard that guides investors through you like buying CDs and books, could you buy less, or questions to obtain a financial profile of their assets, buy them used or borrow them from the library? Are your liabilities and goals.The profile is then processed gifts too extravagant?” She adds that for some people and a detailed analysis is presented, advising the deeply in debt, they may require a drastic change in investor how much assets they’ll need to achieve lifestyle, which isn’t easy. their goals and what additional resources they Encourage your clients to stop doing their shopping at might need. Finally, advice is given regarding the the last minute or when they’re tired. If they do, they’re goals and the appropriate strategy.Their accounts more likely to make purchases impulsively. Smith also sug- are regularly managed to ensure the investor’s gests that people don’t indulge in expensive gifts unless goals are being met. they can afford it. Be more creative by knitting a sweater, baking cookies or offering to baby-sit. While the true spirit of the holiday season may be giving, no one said anything about running the financial well dry.

Deanne N. Gage ([email protected]) is managing editor of Advisor’s Edge.

DID YOU PC pride KNOW? Canadians own more computers than Americans. he United States aren’t ahead some without modems,” says Jed Kolko, Online investors of us in everything. Take a Forrester analyst based in Cambridge, in North America T personal computers. PC own- Mass. “Meanwhile, the economic boom have a median ership is actually higher in Canada than in the U.S. has translated into consumer in the U.S., according to a recent report spending on electronics. But in the near income of entitled Canada’s Digital Future from con- future, we’re expecting Canadians to start US$83,000. sultant Forrester Research Inc. replacing their PCs.” Forrester surveyed 9,000 Canadian Of those who are online, Canucks SOURCE: Forrester Research households and 80,000 U.S. households were more likely to do online financial to analyze technology ownership and transactions (25%) than Americans Half of usage. About 57% of Canadians sur- (15%). Americans in turn were more Canadian veyed owned a PC, versus 50% of Amer- likely to shop online. A whopping 47% households icans surveyed. surveyed said they enjoyed that pastime, However, Internet usage is higher while only 23% of Canadians agreed will be online south of the border. Forty-six per cent with that statement. in 2002. of Americans surveyed are online, versus For more details of the report, visit 37% of Canadians. What gives? www.forrester.com. SOURCE: Forrester Research “Canadians tend to have older PCs, —D.G.

CA NUN NWT YT BC PR ON PQ ATL 138,959 28 160 198 20,834 23,398 53,628 33,340 6,373

SOURCE: Business Register Division, Statistics Canada, 2000 JANUARY 2001 17 SPECIAL REPORT

OF THE YEAR

WHAT DOES IT TAKE TO BE AN OUTSTANDING ADVISOR? October 18, 2000. At the event, one winner was Look no further than the winners and finalists of selected from each region. our second annual Advisor of the Year Awards. In celebration of this excellence, we have profiled The Advisor of the Year Awards program was each winner and finalist beginning on page 20, started by our magazine to showcase excellence and taking a personal look at the paths their careers professionalism in the advisor community. have taken and the secrets of their success. Advisors were asked to submit one case study Michael Berton, CFP,RFP,of Vancouver-based that best demonstrated how they helped a IFC Planning Group Inc. will take an in-depth single client. look at all 12 case studies on Each case study was blinded and then www.advisor.ca. rated by our panel of industry judges based Additional case study profiles will be featured Photography by Brian Summers on these five criteria: how well the entry met the this month in MoneySense and Canadian Business client’s needs and objectives; the level of magazines which, along with Advisor’s Edge, are difficulty of challenges posed; the creativity/ published by Rogers Media Inc. originality of solutions; the execution of the plan; Do you have a case study that’s a winner? Watch and the results achieved. for this year’s Advisor of the Year Awards entry form Twelve advisors—three from each region—were in an upcoming issue. We look forward to seeing your chosen and flown to Toronto for the awards gala on name in these pages next year.

Back row from left: Brant Taylor, Cam McIntosh, Marc Britney, Jonathan Flawn, Larry Short. Front row from left:Tim Paziuk, John Davies,Terry Oehler, Sheila Munch, Barry McNulty, Akeela Davis, Brian Mallard.

The Advisor of the Year Awards celebrates professionalism and excellence in the financial planning industry.

JANUARY 2001 19 EASTERN CANADA REGION

LARRY SHORT CFP,CGA, CIM, FSCI, vice-president, RBC Dominion Securities, St. John’s, Nfld.

Larry Short began his careerWINNER working for Newfoundland Telephone, which put him exactly where he didn’t want to work: in accounting, the subject area where he had his lowest marks at Memorial University. By that principle, he loves to say, Wayne Gretzky would be a pretty fair swimmer. Short is more than a pretty fair advisor. He studied to become a certified general accountant and then decided to move from utilities to securities. He wandered into RBC Dominion Securities in St. John’s to get a brochure when a branch manager spotted him, asked if he was interested in the field, and after a chat offered him a job. His accounting courses proved to be a big but to work for them,” Short says. advantage, since they included the under- Every staff member has a specific task. A pinnings of much of what he was to learn in service assistant, for example, only deals with later securities and planning courses: “Forty incoming calls. The assistant never makes an per cent of my discussions with clients are outgoing call, so that she can be available accounting or tax. If I hadn’t taken the CGA when clients call in. Similarly, the system course, I would be dead.” determines that every month letters go out In 1997 he was the Atlantic Region final- to clients, focusing on financial planning ist in the IDA Award of Distinction pro- issues that are many months away. In Octo- gram. But when he returned from the awards ber, for example, letters begin discussion on ceremony, pleased with himself, a client RRSPs; in November, the focus is taxes. brought him back to reality, noting that they Among his many special initiatives for had not talked in seven months. “I realized clients is that he arranges and pays for lunch that was unacceptable,” he says. for every widowed client on her birthday— He bought the franchise rights for Amer- actually, lunch for her and three friends— ican consultant BGM Client Management since that’s a tough day for them. Inevitably, System and began implementing that care- they’ll tell their friends who is picking up the fully structured system. Now, every contact tab, and he’ll have some new clients, in what with a client is monitored and the system has become a strong niche market for him. generates reports of anybody nearing Short’s award-winning case involved two 90 days without contact—the maximum recently remarried university professors who allowed. “It makes sure we don’t miss a client had a host of family problems to deal with. and prompts us for meetings,” he says. The husband was also planning to retire in a And contact is very precise: a human being year. Short prepared extensive financial and talking to a human being. That has led to lots estate plans and also developed an investment of calls for no other purpose than to check plan that met their needs. “We looked at every on how a client is doing. “We get more refer- single aspect of their financial life and opti- rals from that than any single action. The mized everything,” he says. clients feel you are calling not to sell anything —Harvey Schachter

ADVISOR’S EDGE 20 EASTERN CANADA REGION FINALISTS

n 1996, Marc Britney had decided to ohn Davies says his clients are the biggest Imake a career change. Then a correctional Jthrill of his job. officer, Britney chose to follow his interest in “It’s great to be that person who they rely finance and begin studying to become a on to keep them on track, to keep their life financial advisor. Five years later, Britney says simple,” he explains. there’s no doubt he made the right choice. Davies, who has been in the finance busi- Marc Britney, CFP “There’s nothing like sitting down with a ness for 36 years, started his career as a financial planner client, discussing their situation and com- banker and manager of a trust company Assante Financial ing up with some creative solutions,”he says, before joining Investors Group. It was an Management pointing out that all clients can invest online experience that he says provided the oppor- Wolfville, N.S. or at a bank, but it’s the planning aspect that tunity to work with many clients who were keeps them coming back to him. retired, a market segment that makes up a Does he consider the Internet a threat to large part of his business today. And the case John Davies, CFP the role of a financial advisor? “It’s a threat study he chose was no exception. senior consultant to those who base their businesses on just Davies’ client was facing a crisis. Her Investors Group sales and transactions, not strategies,”he says. husband had undergone triple-bypass surgery Halifax Strategies were something Britney’s clients and had suffered a stroke that left him par- really needed. With an incorporated business tially blind. and a family trust set up based on another Not only did the client need to develop a advisor’s advice, this young couple was con- succession plan for the family business, but fused. she also required estate and tax planning They had no investment plan, inadequate advice to ensure that family and corporate insurance coverage, a need for tax planning assets were protected from excessive tax in and they were desperately seeking guidance. the event of her death or her husband’s. “The “They had no idea what they were doing. reason I chose this case study was because it The trust had been hastily set up, they did involved every aspect of financial planning,” not understand it and there wasn’t any fol- says Davies. “The family really needed some- low-up,”Britney says. “We went from a state one to bring everything together for them. In of absolute confusion to assessing everything addition to the tax and estate planning, and providing them with the information we also explored corporate asset freezes, life they needed to increase their comfort levels.” insurance, asset allocation and income The reason he chose this case study was management.” because it best exemplifies his client focus. Unfortunately, this client’s husband passed “My business is providing the advice and the away, but her relationship with Davies planning,”he says. “The investments are sim- continues as he builds on the trust that has ply a way of implementing the strategies.” been developed. —Lisa Machado —Lisa Machado

ADVISOR’S EDGE 22 ONTARIO REGION

SHEILA ANNE MUNCH CFP,strategic financial advisor, Page & Associates, Oshawa, Ont.

Sheila Munch started doingWINNER her father’s income taxes when she was 13, intent on being an accountant. At age 16, she started to listen to radio shows on financial advice and became entranced. But she didn’t know there was a profession that could serve as an outlet for her interests. In fact, it would take her another 25 years to find her calling. Her first job was as a bank teller and she steadily moved up the hierarchy, working with a few different banks and trust companies, eventually becoming a branch manager.As mutual funds started to heat up in the late 1980s, Munch took a registered representative course. In 1990, she left banking to work with a mutual fund company, figuring she would finally be a financial planner.“But I wasn’t really a financial planner. I was a mutual fund salesperson. I didn’t have the equipment or the knowledge. And my heart wasn’t in selling.” She returned to banking. But as luck sights on. “I knew when I found my passion, would happen, she visited Page & Associates it would be wonderful,” she says. in Oshawa, Ont., when seeking more credit Page & Associates is structured like a law business from financial advisors. Immedi- practice, with associates who are experts in ately, she knew this outfit was where she different areas. wanted to work, liking the attention given to Still new to the field, Munch continues clients and the comprehensive approach adding to her knowledge; her business plan taken to financial affairs. even includes a goal of reading one book a “I realized this was a complete financial month on the world of financial advice. She’s planning organization and it fit my vision. high on Deena Katz on Practice Management, by But I didn’t have the credentials,” she says. the Florida-based advisor, and Getting Clients, She began to get those credentials. A Keeping Clients by Dan Richards of Toronto’s transfer to Oshawa also took her closer to Marketing Solutions, feeling they both her prize. When she joined the Rotary Club helped her to cement a client-oriented in town, in one of those odd twists of pre- practice. destiny that has characterized her life, the So far, it has been working. She has been first person she met was Ron Wilson, who getting a steady stream of new clients happened to be an advisor with Page & through referrals from existing clients who Associates. are pleased with her total dedication to their “I told him, ‘Ron, some day I am going to financial matters. She focuses on the finan- be working with Page & Associates. I’m just cial plan, not selling products, to help getting my ducks in a row but eventually determine client needs. you’ll see me over there.’ ” Munch stresses the importance of Today, Munch is just taking over Ron listening to not only what the clients say but Wilson’s clients as she continues to build what they specifically mean. She also makes her practice in the field she long dreamed sure she speaks equally to both husband of serving in and the firm she also set her and wife—and gives each her business card,

ADVISOR’S EDGE 24 a further acknowledgment of that approach. After more than a quarter century, she is right where she wanted to be: “I’m not a salesperson anymore. I’m their advisor, their trusted CFO.” Munch’s award-winning case was breathtakingly complex, involving a 65-year-old client and his 64-year-old spouse, who were uneducated investors, with the perception that the only “safe” investment is a GIC. The client and his brother had built a business worth over $1mil- lion, in which they were partners, but they had a strained and untrust- ing relationship with each other— and had never talked about what they would do with the business on their deaths. Munch buttonholed anybody she could who was speaking at a Canadian Association of Financial Planners conference, and worked with accountants, lawyers, land appraisers, and even mediators to find answers. She developed a financial strategy; dealt with estate issues; and got the brothers talking about succession and some of the longstanding issues, after gaining their agreement to use a mediator if necessary. Thankfully, it wasn’t.

—Harvey Schachter ONTARIO REGION FINALISTS

here’s something about the financial plan- arry McNulty understands the business Tning profession. Once you’ve experienced Bowners that make up his practice, mainly a taste of it, there’s nothing like it. That’s the because it takes one to know one. Prior to experience Jonathan Flawn has had. entering the financial planning business He worked at one financial planning firm in 1981, McNulty owned a small leasing but was lured away to become a chief business. Jonathan Flawn, financial officer for a public company for a “I have a really good understanding of CA, CFP few years. Ultimately, Flawn ended up business plans,”he explains. “I’ve found that strategic financial returning to advising clients, what he calls his I could approach independent business peo- advisor original love. ple and professionals and make sure they had Page & Associates “Quite often I run into people who could a business plan that was integrated with their Richmond Hill, Ont. hop on the Internet or buy a book and do financial goals and objectives.” financial planning themselves but they come That’s exactly what the client in McNulty’s to me because they need that independent case study submission was looking for. He Barry McNulty, perspective, somebody to help them [make needed assistance with managing his high CFP,RFP,CIM, FSCI decisions],” he explains. level of debt and paying taxes on time. The branch manager Flawn also says it’s a good feeling when client also wanted help establishing a busi- Assante Capital clients trust and respect his opinion. But he’s ness transition plan so he could sell his den- Management Inc. the first to acknowledge that with trust tal practice upon his retirement in 10 years. Markham, Ont. comes a heavy responsibility. “Money is such a vital part of people’s “Quite often I have clients say to me, lives and if you help them to plan it well, you ‘Jonathan, we’re entrusting you with our life can get a lot of personal satisfaction,” savings. We’re retired and we’re not going to McNulty explains. “In our society, money is earn any more money,’ ” he says. “But I’m much more than just a tradable commodity, there for people who need somebody to it’s tied up with how you feel about yourself, rely on.” your marriage, your family and personal The couple in Flawn’s case study submis- freedom.” sion sure needed his help. The couple wanted What does he think makes an excellent to ensure they maintained their current advisor? “I’m a pure financial planner,” lifestyle when they retire in two years. But McNulty says. “When I look at a client’s sit- most of their assets were tied in employer uation, I don’t see their investments, insur- shares and vested options. ance, estate planning and other things as Flawn helped the couple to sort out their being unconnected items. I also like to take finances. They now have peace of mind and lots of [financial planning] courses because a better understanding of their financial it’s like looking at new ways to approach affairs. problems.” —Deanne N. Gage —Deanne N. Gage

ADVISOR’S EDGE 26 PRAIRIES REGION

BRIAN MALLARD CFP,RFP,CLU, CH.F.C.,president, Brian Mallard & Associates, Saskatoon

In Saskatoon, they know BrianWINNER as the symphony guy. Or the theatre guy. Or the art gallery guy. When Mallard went out on his own a second time as an advisor, after a stint managing the practice he sold to Assante Corp., he wanted some way to get known in his city. So he approached a few arts community groups that he had a soft spot for and developed TV commercials that connected him—and his financial planning—to the organizations. The symphony ad preached the perfor- a team of four people, including him. mance and passion of the local symphony and Mallard sees five or six clients a day—every a certain financial advisor. The theatre group day, 220 days a year. That would shock many plans its stage performances meticulously— advisors. But it’s what he feels an advisor must one other attribute that Mallard highlighted do—and by the standards of other profes- in his ads. Through the campaign, these groups sions, he doesn’t feel it’s oppressive. “I have a got some more publicity, the profession got best friend who is a physician and sees some profile, and Mallard shot up from being 70 people a day, some with life-threatening little-known to being recognized by 35% of problems. Yet some financial advisors don’t see citizens. His book doubled in two years—in four or five clients a week,” he says. a very tough market. If you make time for clients, you don’t “TV can’t help you sell what we do. But have to eliminate any clients. And Mallard it can give an impression of approachability strongly opposes the current trend of and professionalism,” he says. advisors pruning their client lists, getting rid Mallard spent his early years in the finan- of C and D clients. “I treat all my clients as cial services industry as an insurance agent A clients. I don’t look at the size of the —a stint that taught him what he didn’t want account. I look at the problem. If you help to do, since he felt the entire approach to people, they’ll tell other people, and often clients was adversarial. Over time, he shifted it’s people with higher income,” he says. into selling mutual funds as well, but it was That leads to six unsolicited clients a only in the early 1990s that he started to week, many who already know Mallard as the shift into financial planning, developing a guy with all the TV commercials. plan for each of his clients and bringing Mallard’s award-winning case study more value to the table. As he began to deal involved a client who needed help negotiat- with his clients on something without any ing a settlement with a former employer. The anticipation of selling product, he notes, “a trick was to avoid a big tax hit and Mallard funny thing happened: My business activity pulled it off, persuading the client’s new increased fourfold.” employer to set up a special pension plan to He sold to Assante in 1996, continuing handle the termination benefit from the pre- to run operations. But he found he wasn’t vious employer and to pay the client a low enjoying being an administrator, overseeing salary with stock options in the first year. a 45-person office. So he started again with —Harvey Schachter

ADVISOR’S EDGE 28 PRAIRIES REGION FINALISTS

hen asked what made her decide to am McIntosh says what he likes most Wchange the focus of her business from Cabout his job is the people. “I get a lot accounting to financial planning, Terry of enjoyment out of my clients. These rela- Oehler says she was looking for the big tionships are about so much more than num- picture. bers. It’s about building important bonds.” “As an accountant, you’re the first person For 12 years, McIntosh has specialized in Terry Oehler clients look to for tax planning but then they the financial planning needs of Canadians CA,CFP,RFP,CFA ask about their investments,” she says. “I who live and work overseas. He says his work president wanted to be able to look at the big picture requires that he be more of a friend to a Oehler & Associates and be proactive in helping people plan their client rather than their advisor. “Because I Financial entire financial life.” deal exclusively with expatriates, I help them Management Ltd. So that’s what Oehler did, building a with a number of issues that are not finan- Regina financial planning practice based on provid- cial planning-related, such as helping them ing “complete life management” advice. cope with their anxiety levels about leaving What does this mean? “Life management their home country,” he says. Cam McIntosh means you’re there to help your clients decide Anxiety levels weren’t really a concern for CA, CFP what investments to buy or how to improve the clients that McIntosh chose for the case president their tax situation,” she explains. “But more study entry in terms of leaving Canada, since C.A. McIntosh & than that, you’re there to pull all the pieces it had been their choice to relocate to Saudi Associates together and understand what exactly it is Arabia. Calgary they want out of life.” However, they wanted to ensure their For the client that Oehler used as her case non-resident status with the Canada study entry, life management advice was cru- Customs & Revenue Agency in order to cial. During the course of his relationship with avoid Canadian income tax while overseas. Oehler, the client had divorced, almost went “The key to dealing with expatriate clients bankrupt, got remarried and been audited by is understanding their needs and listening to the Canada Customs & Revenue Agency them,” advises McIntosh. “It’s so important twice—all issues for which he sought Oehler’s to gain their trust.” guidance. And with a business based mostly on refer- While Oehler succeeded in getting her client rals, it’s easy to see that he has succeeded in to recognize that the marriage was a partner- establishing this trust. “When I meet with ship, she says it wouldn’t have been possible clients, the actual planning part takes up lit- without the solid relationship she had devel- tle time. The majority of the meeting is spent oped over the years. “This job is about more on their stories. I get to hear about how they than investments,” she says. “It’s about what spend weekends visiting the Pyramids. This is happening in the client’s life.” is where the bonding comes in.” —Lisa Machado —Lisa Machado

ADVISOR’S EDGE 30 B.C./TERRITORIES REGION

BRANT TAYLOR WINNERCFP,RFP,president, Strategic Wealth Management, Vancouver A not-so-funny thing happened to Brant Taylor when he set out to become a financial planner. In October 1987, shortly after graduation with a business degree from Simon Fraser University, he started taking his securities course— just in time for that month’s stock market crash. That led to a delay in completing his ambition, as he worked for a few years in direct response marketing. But the pull of the industry was too strong. “I wanted to do something that would make a difference for families and individuals,” he says. After a year with Manulife, he began where RRSPs and other matters are handled. working with Integrated Financial Concepts, Tax planning is critical. Save your clients now part of the Assante group. From the money on taxes—even if it’s just a deferral— start, he took a comprehensive approach to and they will tell all their friends about their planning, tying everything together for his advisor, generating referrals, he notes. clients. He stresses a team approach, serv- Not that he can handle many more ing as the quarterback for his clients in referrals. He deliberately keeps his practice achieving their game plan. small, currently at 60 families—some high Taylor has formal alliances with some net worth but others only medium. “It’s hard accountants, lawyers, bankers and stock- enough to do this with 60 families—it’s so brokers for those who need stocks and comprehensive. I couldn’t do it with 120,” bonds. His clients are busy and he tries to he says. provide one-stop shopping, even collecting The key with clients, he says, is to build all their tax information and going over it en trust. And at the core, that requires personal masse himself with the two accountants he knowledge, access to other professionals, and is allied with. an organized approach. Above all, he believes, “Clients like it. And I’m more comfort- an advisor must keep checking progress, sys- able making sure we do what we say in the tematically, to the roadmap set up with the financial plan when dealing with these other client in the financial plan. That builds con- professionals. This way I can follow fidence and trust, keeping the relationship through,” he says. flourishing and the client headed towards his There’s another serendipitous—and com- or her financial dream. petitive—advantage. This approach keeps The case he submitted involved a client clients away from potential competition. whose father had died, leaving about a dozen “But the main reason for doing it,” he stocks which had grown from about stresses, “is that the clients are getting the $500,000 to several million in pre-tax value. best service possible.” There was a surviving spouse in her 80s who Clients generally have three full meetings wanted her three children to take responsi- a year: a rigorous review in March before bility for the money. Taylor worked with the income tax, another in the fall to reassess entire family to get them to agree on a plan. progress and handle tax planning, and a third —Harvey Schachter

ADVISOR’S EDGE 34 B.C./TERRITORIES REGION FINALISTS

keela Davis has always been intrigued by im Paziuk’s advisory career began when Athe world of money and finance, but it The was recruited by a life insurance com- took a near tragedy for her to finally pursue pany after graduating with a degree in social her calling. work. After spending several years in the In 1980, Davis was a senior systems spe- insurance industry, Paziuk’s father—who is cialist at a local insurance company. While also in insurance—began to work with him, her job provided no real opportunity to use introducing his son to his network of busi- Akeela Davis her financial knowledge, she increasingly ness professionals. “I recognized there was CFP,RFP found herself fielding questions about a need for someone to oversee the different director of money from family and friends. facets of their professional lives, whether that financial planning Several years later, she was diagnosed with be legal, insurance, tax or investments,” he Berkshire Investment a potentially life-threatening illness—stun- says. So, in 1986, he decided that he was Group Inc. ning news that prompted her to take a close going to be that person. Maple Ridge, B.C. look at her life. “The times that made me Paziuk soon left his insurance practice and happiest were when I helped people with set up his own company in Victoria, The their financial decisions,” Davis explains. So Planning Centre Inc. The company would be Tim Paziuk she left her programming job to actively pur- a place that would provide clients with com- CFP,CLU, CH.F.C. sue a career in financial planning. prehensive financial planning. His company president Ask her what advice she can share about motto reads like this: “Our purpose is to The Planning succeeding in the financial planning business establish lifetime relationships with our Centre Inc. and she says that the client’s best interests clients, allowing us to develop and implement Victoria must always be put first. strategic plans that enhance their quality of In her case study entry, Davis helped her life.” client develop a comprehensive financial plan. That’s exactly what Paziuk did for the Even though the client had a team of advi- client in his case study entry. Recently wid- sors (accountant, lawyer and stockbroker), owed, the client was faced with not only the he still didn’t have a clear idea of where he difficult task of living life without her hus- was headed financially. “These advisors are band, but also settling her family’s financial good at what they do, but I was the one who affairs. As a result of Paziuk’s client-focused was able to give these clients the big picture,” approach, the client was able to put this try- says Davis. ing time behind her with the confidence of Incidentally, three years after the initial knowing that important financial decisions diagnosis, Davis underwent medical tests that have been looked after. “Why are we as good showed no signs of the original disease, a at this as we are? We push the envelope in miracle which Davis has taken as “God’s way terms of how can we do more,” he says. of pointing her in the right direction.” “Being reactive to people’s needs is key.” —Lisa Machado —Lisa Machado

JANUARY 2001 37

MINING for prospects There’s a goldmine of potential clients out there. You just have to drill deep. By Duncan MacPherson • Illustration by Peter Ferguson

THERE’S ONE CONSISTENT question that advisors always want to know—how to generate new business. I’m a firm believer in the importance of stimulating referrals from existing clients and promotional partners. Your most valued prospects (MVPs) are the friends and family members of clients, as well as the clients of the accountants, lawyers and other strategic alliances with whom you might collaborate. That said, prospect-target marketing is also an effective way to attract new clients. The following is a time-tested process you can add to your marketing plan.

Step 1—Get Focused TProspecting has two basic forms: broadcasting and narrowcasting. Broadcast marketing (which includes advertisements, seminars and trade shows) has major drawbacks. Not only does it lack effectiveness, it prepares you for the worst emotion in marketing, disappointment. Yet advisors still choose to broadcast because it can reach many people. However, reaching people who count is more critical than counting the number of people reached. While the odd new client can be stumbled upon using broad- casting techniques, critical mass is rarely achieved. Narrowcast marketing will help you with this by selecting a specific geographic, demographic or socio-economic group. This form of marketing drills much deeper, allowing you to penetrate what group you want to target. Whereas a broadcast mar- keting list might create a list of prospects 300 names long and from 50 different walks of life, a narrowcast marketing list contains 300 names from one or two walks of life. To start, select a target market and develop a relationship with an inside champion, someone who regards you highly and has influence in the market you want to target. Ask that person how you might make yourself more attractive to others. Your contact should provide you with important resource information, such as the names of trade publications, Web sites, conferences and local association meetings that you can attend. The person can also help you make contacts. Continued on page 41

JANUARY 2001 39 Cold calling can work but it is far more advantageous to send a prospect a sequence of three thematically linked letters to build familiarity.

Continued from page 39 Step 2—Get Busy Top prospects are on the radar screens of virtually” all of your competitors. Your goal is to differentiate yourself, especially since top-calibre prospects spend less time weighing alter- natives to their current advisor situations. ‘‘However, during times of turbulence and volatility, people are far more predisposed to weigh their options than during times of unbridled success. The short-term goal is to build trust, familiarity and a relationship with a prospect, thus becoming positioned as that person’s “number two” advisor. Over time, the ing intent. If a prospect doesn’t respond to your calls-to- prospect contrasts your value to that of the “number one” action, it may be due to inopportune timing rather than provider so that the prospect eventually feels dissatisfac- a lack of interest. For this reason, use calls-to-action that tion with the status quo. are disarming, non-threatening and easy to conceptualize. As a caveat, never connect with a prospect for the first time Don’t anticipate an influx of calls with a call-to-action on by telephone. In addition to not being much fun, cold call- a letter that reads: “Contact me to receive a complimen- ing doesn’t reflect well on you. Cold calling can work but it tary review of your portfolio.”It’s imperative to convey an is far more advantageous to send a prospect a sequence of irresistible benefit without the prospect being pressured three thematically linked letters to build familiarity first to commit. before you follow up on the phone. Thus invite prospects to request a free investment kit or an executive summary of one of your recent seminars Step 3 – Drip Patiently but Persistently which they might review at their convenience. If they don’t The marketing process known as “dripping” is sometimes respond, you can expand on the merit of your call-to- mistakenly perceived as sending waves of information out action when you follow up on the phone. to a prospect over a period of time. In truth, dripping Selling the promise of the future to a prospect requires refers to linked and sequential contact, meaning that the that you build a relationship long before that person second letter points to the first and the third points to the becomes a client. Good prospecting that emphasizes your second. As a result, each drip triggers recognition and credentials and relationship building will help you achieve rekindles interest in a particular area. Ultimately, these your desired results. letters become reference points during your follow-up phone call, providing you with specific issues upon which Duncan MacPherson is the president of Duncan MacPherson to expand. & Associates in Ottawa and serves as a consultant to top financial Furthermore, dripping counters the law of diminish- advisors.

JANUARY 2001 41 BY LISA MACHADO

Global Fortunes The experts have spoken. Here’s what they say about the hottest places in the world to invest.

GIOVANNA GAZES INTO HER CRYSTAL BALL, HER HANDS GENTLY rubbing the glass. “I’m getting a good feeling from Europe,”she says, when asked what country holds the most promise for investors. “But, there are rough times ahead, particularly in 2004.”The Toronto-based psychic also mentions that she sees glimmers of fortunes to be had in the Pacific Rim. “Asia is a good place to invest, but be careful of Japan. It will return to turbulent times in 2008. I also see good things in store for investors in Thailand, Hong Kong and the U.S.” It takes a lot more than psychic revelations to convince you of what the future holds for international investing, but according to industry observers, Giovanna’s predictions aren’t too far off the mark. Despite the apprehension surrounding Japan, the consensus is that as long as your clients have European and Asian exposure in their portfolio, they are set to reap the rewards of hot global markets. Continued on page 44

PHOTOGRAPHY BY GREG HOLMAN

JANUARY 2001 43 Continued from page 43 he says. “I would be careful of any country that is attached The European Comeback to the Euro simply because the currency is so uncertain. If you are looking for exciting global investment It’s been under terrific pressure and while the Central Bank opportunities, look no further than Europe, says Robert tried to prop it up, it hasn’t been a sustainable effort.” Treich, a London, England-based manager of the CIBC At Synergy Mutual Funds in Toronto, the outlook for International Small Companies Fund. Although he Europe is so positive that the company has recently launched acknowledges that the currency is weak, he believes the the Synergy European Momentum Fund. “With the Euro expected gains far outweigh the impact of a faltering Euro. at its lowest point ever, this is like a fire sale,” says Joe “Investors may lose a bit against the Euro, but the Canavan, Synergy’s president and CEO. “A year from now, performance that we’ve seen, and are going to see, at the the period surrounding the U.S. election will be seen as a individual stock level more than makes up for it. Can there great buying opportunity in the history of the market and really be much more downside? I don’t think so.” this new fund will capitalize on it.” Mark Mobius agrees. “I don’t see the Euro going much So what’s going to be driving these opportunities? Michael lower. It’s had a terrific beating,” says Mobius, managing Mahoney, lead portfolio manager of the Synergy Global director of Templeton Asset Management Ltd. in Style Management Class Fund, says there will be a definite Singapore. He also expects some turnaround in Hong shift from the U.S., where the economy has been the strongest Kong, Mexico, Brazil, China and Korea. “That doesn’t in the world in terms of profit growth, to Europe where a mean there will be a big recovery, but I don’t see much vigorous restructuring process is under way. “There is downside from here, particularly if there’s a downturn in massive reform happening at the government level,” he says.

The weak currency has meant that European had a currency pricing advantage when selling

—Craig Stanford, senior portfolio manager and back up manager of the Mawer World Investment Fund

U.S. markets, which means that capital flowing into the “Significant tax cuts are happening in Germany, which France “U.S. will slow. That should augur well for a halt in the and Italy will follow. This tax competition will translate into decline of the Euro.” strong improvements to profits for European companies and However, the news about a weak Euro is not all bad, help give them an incentive to restructure. We’re seeing a which is why it’s important to continue to favour reorientation to shareholder value because these countries European markets, says Craig Stanford, senior portfolio want to be attractive investment candidates on a global basis.” manager and back up manager of the Calgary-based Mawer World Investment Fund. “The weak currency has Curing the Asian Flu meant that European companies have had a currency pric- Another continent looking to gain the favour of investors ing advantage when selling to the U.S., which has resulted is Asia, in particular, Japan. After a decade of downside, in very attractive earnings.” Japan continues to buckle under the weight of continued Not only does earnings growth make Europe attrac- restructuring issues in the financial services and banking tive for investors, but the larger demand for equities that industries. But things are looking up. “There is a exists there compared to that in the U.S. is also a huge changing corporate culture in Japan which provides a good factor, says Sam Pinto, chairman and chief investment offi- backdrop for the long term outlook,” says John Burchard, cer of BLC-Edmond de Rothschild in Montreal. senior fund analyst of the Fidelity Overseas Fund in But Fred Ketchen, managing director of equity Toronto. “Companies are more focused on building share- trading at ScotiaMcLeod in Toronto, is not as confident. holder value than they have been in the last decade, which

Photography by Brian Harder by Brian Photography “The Euro is too questionable for me to be comfortable,” makes the restructuring process look very positive.”

ADVISOR’S EDGE 44 But Bill Chornous, portfolio manager of the Investors interesting diversifier. It lowers risks and enhances returns Group North American Growth Fund in Winnipeg, because your clients are gaining access to areas that they doesn’t share Mahoney’s enthusiasm about Japan. “We’re would otherwise not have access to,” he says. not as favourable on Japan as we are on other parts of Not a bad strategy considering that global markets are Asia,”he says. “Japan has identified the problems that have more affordable than ever. “International markets are put them in a decade of underperformance, but there will slumping because of concern that the global economy is still be a period of time before it resolves itself.”That said, slowing,” says Ranga Chand, an economist, mutual fund Chornous cautions investors against trying to time Japan’s analyst and author of Chand’s World of Mutual Funds recovery. “We don’t think Japan can get worse, but you (Stoddart). “The Federal Reserve is trying to cool the U.S. can’t time it. By the time you realize that Japan has turned economy and because of the weight this economy has around, it’ll be too late. The larger part of the market move throughout the world, it has a spillover effect.”Chand also will have happened by the time everyone starts talking credits skyrocketing oil prices, a weak Euro and technol- about it, so the key is to get there early.” ogy turmoil for the slowdown. Stanford is also wary of Asia. “Asia continues to pro- He emphasizes the importance of educating your clients vide selective opportunities, so we to think long-term when investing remain cautious,” he says. Ketchen is globally. “The key is to have a long- taking a long term approach. “It’s too term perspective. If your client has a early for investors to look at Japan seri- five- to ten-year time horizon, then ously, except for the long-term. That’s they need a well- diversified portfolio.” Chand also suggests that you pay close attention to where your clients are companies have invested. “If your clients have broadly based international funds, they are also to the U.S. investing in emerging markets, which would add more volatility,” he notes. Speaking of volatility, no matter how positive the outlook is for global markets, you cannot ignore the potential risks of investing outside more than five years.” Canadian and U.S. borders. “Global investing gives you an additional degree of risk because you are taking on The Future of Global Investing the domestic risk of the country, whether that be polit- Whether you choose to add a little Europe to your client’s ical or economic,” says Chornous. “But you’re also portfolio, a bit of” Asia or both, the consensus among the accepting currency risk which is a significant driver of experts is that every client’s portfolio should have your overall return. The key is to do this in balance; build exposure to the global opportunities these countries offer. a portfolio with exposure to domestic markets and from “Diversification is extremely valuable,” says Mobius, there add geographic diversity.” noting that the timing has never been better for investors, But the investment potential of the future isn’t limited given the trends that are expected. “The U.S. market, to outside Canada. Giovanna says that our nation is in for which has been the leader globally, is beginning to falter. a prosperous 18 months. “The market will pull itself out This augurs well for global markets because it makes peo- of the slump it has been in,” she says. Canadian investors ple realize that the NASDAQ and the S&P don’t go up have been doing a lot of soul searching in the past few forever and that they’ve got to be diversified globally.” months in terms of where to invest. That will change this But more than providing the opportunity to access year, with more Canadians getting into the market. There’s global returns, diversification also balances the overall port- a little psychic revelation that bodes well for you. folio performance by reducing volatility, says Lawrence Kymisis, lead portfolio manager of the Spectrum Global Lisa Machado ([email protected]) is associate editor of Growth Fund in London. “Foreign content is an Advisor’s Edge.

JANUARY 2001 45 PORTFOLIO Comprehensive wealth management MUTUAL We can expect that actively managed funds, which typically have more cash WATCH than passive funds, will be less Bear markets affected by a downturn. Are your clients prepared for But don’t get comfortable. Just prolonged market downturns? because your clients are invested in By Scott Mackenzie actively managed funds does not mean that their risk-to-reward factor is safe. While it is true that indexed products generally do better in bull uring this volatile invest- concerned about, but, of course, are markets and actively managed prod- ment period, talk of probably more disturbed by. ucts do better in bear markets, the D looming bear markets and With generally rising markets, long-term results, for most, are the harder times is escalating daily. index funds, ETFs and other so-called only ones that really matter. Investors are understandably con- “passive” investments have, not sur- Upon examining the risk/return fused by contradictory headlines. We prisingly, done extremely well. While characteristics of actively managed have all seen the covers of major busi- not suffering the drag that is associ- Canadian equity portfolios and pas- ness publications heralding the begin- ated with the relatively high cash lev- sively managed portfolios (including ning of the great bear, or some sim- els that actively managed mutual the i60 ETF), we found that over ilarly panic-oriented assessment of funds generally exhibit, these passive longer periods of time, you are likely current markets. Worse, many small investments can achieve near-market to experience slightly higher rates of investors in the market have not expe- performance at a low cost. return with the passive products, but rienced a prolonged bear market, let By way of contrast, so-called at the not-so-unexpected price of alone can they fully grasp what one “active” portfolio managers have to higher volatility. might actually entail. beat their passive cousins by at least The trade-off between performance Once again, a little education of the fee premium they typically bring and volatility is often measured using your client can go a long way in rein- to the table. The average index fund the Sharpe ratio—the higher the ratio, forcing loyalty and mitigating panic currently charges 0.75% per year in the better the trade-off. The average decision-making. The mantra of overall management expenses. The Canadian equity fund has a five-year “investing for the long term” is los- typical actively managed fund charges Sharpe ratio of 0.75, whereas index ing currency with many investors and 2.5%. That means average stock- funds generally enjoy Sharpe ratios in they might benefit from some con- picking managers have to outperform excess of 0.95. Clearly, investors in text supplied from their trusted their indexed competitors by 175 indexed products are compensated for financial advisor. basis points—year in and year out— their additional assumed risk. Teach First, let’s define a bear market. before becoming attractive to your clients the importance of the While it is clear that no single, widely investors. risk/return trade-off! accepted definition exists, consensus Canada has performed well over By educating your clients that the seems to indicate that a drop of 15% the last year, relative to other markets. bear is an expected—albeit unin- to 20% in overall market value over Problem is, given that these passive vited—guest to the investment party, a period of two months or more is a investments tend to be fully invested they may be less inclined to react good starting point. Any shorter a (meaning there is little or no cash in rashly to its arrival. period is generally deemed a “cor- the fund), any downturn in the mar- rection” in the markets—something ket will be just as dramatic as an Scott Mackenzie is vice-president of your clients should be even less upturn, as recent numbers will attest. Morningstar Canada in Toronto.

JANUARY 2001 47 PORTFOLIO

TAXBREAK

Taxing spin-offs There’s tax relief in sight for clients who hold shares in restructured foreign companies. By Gena Katz

ntil recently, tax conces- U.S. will likewise be eligible for announcement that the federal gov- sions did not apply to rollover treatment in Canada. Not ernment intends to develop a tax U Canadian shareholders only does this particular proposal deferral rule for cross-border share- of foreign corporations even if the apply to future spin-offs, but it may for-share exchanges. reorganization transactions were tax- be applicable retroactively to eligi- Currently, where a Canadian res- exempt in the foreign countries. ble U.S. company spin-off distri- ident shareholder exchanges shares of Consider a U.S. divestiture. butions made after 1997. With a Canadian corporation for shares of Under U.S. tax law, a parent com- respect to other foreign company a foreign corporation—for example, pany may distribute shares of a spin-offs, it is intended that similar where there is a takeover of a Cana- controlled corporation, commonly relief will be available where the cor- dian company by a U.S. company— referred to as a spin-off, directly to porations involved are resident in a there is a taxable disposition of the its shareholders without an income country with which Canada has a Canadian company shares for an inclusion to the shareholder. But tax treaty. However, in this case, the amount equal to the value of the under Canadian tax law, such foreign relief will only be available on a shares received on the exchange and spin-offs result in taxable distribu- prospective basis. an acquisition of the foreign com- tions to Canadian resident share- The tax-free rollover in relation pany shares with a cost equal to that holders. The Canadian sharehold- to foreign spin-offs is elective by the same value. To defer the immediate ers are deemed to receive a shareholder and must be made in his tax impact to Canadian sharehold- dividend-in-kind equal to the value or her tax return for the year of dis- ers, such takeover transactions have of the shares at the time they are tribution, except that for distribu- often been structured such that spun off, despite the fact that value tions received before October 18, “exchangeable shares” (shares of a of the shareholders’ total investment the election may be made before Canadian subsidiary of the acquir- has not increased. July 1, 2001. ing foreign corporation) are issued Tax officials in Canada have been Where the new Canadian tax as consideration for the Canadian reviewing the taxation of foreign relief for foreign spin-offs applies, company shares. The value of the spin-offs for some time and the shares received on a spin-off will exchangeable shares generally tracks finally introduced proposals in the not result in a taxable dividend. the value of the acquiring company October 18th Economic Statement However, the cost base of the orig- shares and the Canadian shareholder and Budget Update that would pro- inal shares will have to be reallocated defers tax until the time that the vide tax relief to Canadian resident to the original and spin-off shares. exchangeable shares are disposed of

shareholders who receive shares as The allocation will be based on the or are actually exchanged for the Photography by Rob Waymen a consequence of foreign spin-off relative fair market values of the two foreign company shares. transactions. sets of shares at the time of the Under new proposals, most spin- spin-off distribution. Gena Katz, CA, CFP, is a principal with offs of U.S. public companies that The Economic Statement and Ernst & Young’s National Tax Practice in are non-taxable transactions in the Budget Update also included an Toronto.

JANUARY 2001 49 YOURBUSINESS Practice management strategies that work

Building a Web site ...... 53 Upcoming events ...... 55 Seven deadly Gauging clients’ needs ...... 56 mistakes Contact management ...... 56 Advisor Mini-Profile Want to unleash a successful e-business? Mike Andrews ...... 58 Avoid these costly errors. Management practices ...... 59 By Gordon Sandford and Tina Naser Nick Murray ...... 61

ow do you use the through Y2K to now successfully ees to constantly upgrade your skills. Internet as an effective execute e-business projects. So what Yes, it is important to recruit quali- H delivery and marketing can you do? Assess staffing require- fied staff. But equally, it is important tool to build a better business? Avoid ments for new engagements and to recognize that your current IT these seven mistakes. allow ample time to staff the project personnel have an understanding of with the right people. If you lack your business that is invaluable, ❶ You don’t plan your which likely means that they are technology. among the best candidates for your E-business projects fail for upcoming project. If you want your the same reason that tradi- project to be successful, there is tional projects fail—lack no substitute for the appropri- of proper planning and ate skill set. management. According to Gartner Group Inc., ❸ You have an eye- a Stamford, Conn.- catching Web site, but it based research firm, fails to deliver the goods. 75% of e-business The Internet has undoubt- projects will likely fail to edly shifted the balance of meet their objectives power to consumers and because of flaws in pro- exposed the commodity ject planning. Expect to nature of most financial prod- see a direct correlation ucts. Hence, you want to under- between the amount of effort stand your clients and make your spent planning and the relative Web sites more appealing. success of your project. For large But this initiative should not projects, it is not uncommon to see come at the expense of developing 40% of the overall budget devoted qualified staff, consider using out- back-office operations that can sup- to planning. side resources to complement the port the promises you make to your Illustration by Steve Adams current resource base. Whoever said clients. ❷ You attempt the impossible, like you can’t teach an old dog new tricks A sexy Web site will cause more trying to fit square pegs into round wasn’t thinking about e-business. harm than good if you are unable to holes. Given the pace at which the tech- meet your clients’ heightened expec- It’s unrealistic to expect the com- nology landscape changes, it will be tations. In many cases, real profits puter programmers who got you necessary for you and your employ- Continued on page 52 JANUARY 2001 51 YOURBUSINESS

Continued from page 51 ECNs already account for 30% of good communication. Engage the will come from efficiencies in trading in shares in NASDAQ. This business, your staff, the customer, the back-end operations. figure is expected to grow to over vendor, or anyone else who may 50% by 2001. directly be affected by the outcome ❹You trust your IT staff completely. of the project as early as possible and Technology is changing rapidly so it ❻ You think your technology systems keep them involved. The better you may not be possible or even impor- will be so cool—when it all works. communicate between interested par- tant for you to stay on top of all the While it is important to keep abreast ties, the greater the likelihood you technology. Many companies today of technology trends, it is also impor- will exceed expectations. are outsourcing non-core functions tant to maintain focus on the Too often, technology projects to outside vendors who more business imperative. Don’t implement become too focused on implement- efficiently provide solutions. But an technology for technology’s sake. If ing a solution and lose sight of the increased dependency on outside your project isn’t significantly improv- customer or user. The danger here is parties heightens the importance of ing value for the customer, then why that expectations and scope often vendor management. Perform ‘due are you doing it? This seems self-evi- change over time. diligence’ before making partnership dent, but many companies are forging Without ongoing communication, agreements. ahead into e-business projects without a gap develops between what the properly assessing the impact on the business expects and what technology ❺ You aren’t aware of technology business. will deliver. trends. It’s called the “in-flight magazine The better informed each party is, It is important to try to anticipate syndrome.” Many people read or hear the better the company can make technology trends. Consider the about projects and feel that they must intelligent decisions regarding the impact of wireless technology. The take action or they will be left behind. business. This is especially challeng- Gartner Group predicts that by Much has been said about the “first ing when faced with daunting 2004, at least 40% of business-to- mover advantage” that is so important timelines and aggressive goals. Effec- consumer e-commerce transactions in e-business. However, making tive communication will always pay outside North America will be initi- sure that your strategy is right, while dividends in the end. ated from portable, cellular-enabled adding value to your company, is most devices. New uses of technology have important. Gordon Sandford is a manager in Deloitte opened doors to new markets. The Consulting’s Financial Services and Infor- emergence of Electronic Commerce ❼ You stop communicating. mation Strategy practice in the Toronto office. Networks (ECNs), for example, is Perhaps the single most crucial fac- Tina Naser is a senior consultant with the e- threatening the existence of tradi- tor leading to successful implemen- technology integration practice at Deloitte tional stock exchanges. In the U.S., tation of any technology project is Consulting’s Toronto office. YOURBUSINESS

the Web site in order. This is a three- provider for you. Most companies Web step process. that provide a connection to the Internet will give you a certain designs ❶ Choose your domain. Since domain amount of free space to build a per- A great Web site is a names are being gobbled up at an sonal Web site. But this doesn’t allow worthwhile investment exponential rate, this can be one of you to have your new domain name with many happy returns. the hardest or easiest things to do. hosted. By Craig Elder First, decide how to market yourself When you register a domain name and whether or not you can grab you eventually need a host service to “yourbusiness.com” or have to settle rent you space to store your site. You uilding a Web site to service your B clients may be the most effective business tool you ever employ to add strength to your practice. But before you get started, there are a few things to consider. First, determine your target market and ask yourself if it warrants investment into a Web site. Are you following a trend or will it be a useful tool to service your existing clients and market yourself to potential clients? This is very important. Why spend the money if it isn’t going to be used properly? And if your clientele isn’t Web friendly, what’s the point? However, if you are trying to attract new clients and want to utilize the full arsenal of marketing tools, then you would be foolish not to consider the Web. for what most still consider to be will be charged based on how much Once you’ve decided that a Web secondary suffixes like “org,” “net” memory space and resources you site is a good investment, determine and even “ca.” There are many online intend to use. The cost can be as lit- what the content is going to be. At sites through which you can register tle as $10 per month to $100 per the beginning, you should keep it a domain name, but the most com- month. simple. Once you have the core of the mon site for Canadians is Internic For example, Internic will also host site up and running, ask your target (www.internicdomainservices.com). the site and give you a choice of three market or clientele for input on what packages that range from US$10 to they would like to see. ❷ Find a Web site host: There are so $60 per month. With all the com- Now comes the hard part. You many host services that it can be a petition out there, many host services have to get the technical aspects of frustrating ordeal to find the right Continued on page 55 JANUARY 2001 53 YOURBUSINESS

Continued from page 53 to pay at least $2,000 to design a six- the Internet operates 24 hours a day. will try to provide you with a pack- to eight-page site with password pro- And by providing clients with the flex- age that is customized to your needs. tections and administrative windows. ibility to check their accounts, find But how do you know what you need? The better the design of the site, the research and recommendations, you How much space will your site use? easier it is for you to maintain and add value to your service. The solution to these questions is to update. look for someone who can design and The benefits to developing your Craig Elder, CFP, works as a technology host your site. Host services that pro- own Web site are endless. You can com- trainer for one of Canada’s largest investment vide design services may give you a municate with clients on their time— brokerage firms. better deal on the monthly cost of hosting your site. This way, you can ensure that the hosting package also meets your design needs.

❸ Care about the design of your site. Your Web site is supposed to represent you and your professional advice. If it looks like a five-year-old designed it, you may get a lot of piggy banks handed to you—not the market you had in mind. Remember, this is a client service tool as much as a marketing tool, so invest a little money. Kelowna, B.C.-based Carbon Design (www.- carbondesign.bc.ca) has experience in designing sites for advisors. Expect

January 18 & 19 January 24 & 25 Mark your calendar Mutual Fund Dealers Rules Online Insurance Implementation Course Holiday Inn on King,Toronto January 11 to 13 Toronto Board of Trade Hosted by Insight Information Co., FPA Broker-Dealer Conference This conference, hosted by the Strat- this event will explore ways of Hilton Walt Disney Orlando, Florida egy Institute, will tell you everything managing and minimizing risk of Hosted by the Financial Planning you need to know about applying to online insurance business, designing Association, this conference will the MFDA.Topics include making internal compliance programs and analyze the future of the financial your firm compliance-ready, how to risk-management tips for dealing services profession.Topics include meet the requirements of the new with online interruptions. Keynote exploring the changing regulatory business conduct rules and what it speakers include Michael L. Haskell, landscape, how to plan an effective takes to prepare properly for the president and CEO of Allstate Insur- meeting and selling exchange-traded continuous review procedures.To ance Company of Canada. For more funds. To register,visit www.iafp.org. register call (416) 944-8833. information, call (800) 815-0604.

JANUARY 2001 55 YOURBUSINESS

ASKJulie... Q I have received a number of referrals recently and I believe that Gauging this is one of the best ways to build my practice. How can I keep the interests momentum going? A survey can help you A Ask your clients why they sent determine your you their friends and colleagues in the clients’ specific needs. first place. These clients are not only a wealth of information as to specif- By Julie Littlechild ically what makes a client provide Q Clients often say they are inter- information may take some probing. referrals, but your best source of fur- ested in learning about certain top- Try conducting an annual telephone ther referrals. ics, but don’t show up to workshops. survey of your clients. This could Try calling a group of clients who How can we get a better sense of easily be handled by a team member have provided referrals in the last few their real interests? who would ask clients: months. Let them know how much • what their interests are; you appreciate their support and con- A Understanding how clients want to • how they want to be educated on fidence and that referrals are your be introduced to new concepts is just new concepts; best method of growing the business. as important as understanding their • to provide missing profile I’ll take another look at generating needs and interests. information, such as e-mail referrals in an upcoming issue. Is the best method a workshop, an addresses; and article, a telephone meeting or a fam- • to provide feedback on past or Julie Littlechild is the president of Toronto- ily conference? The method can change planned client appreciation based Advisor Impact. Send your questions to by topic and finding out specific activities. [email protected].

THE VALUE OF ADVICE Contact management Education and financial planning don’t eliminate the need to be there for your clients. By Sandra Foster

f you are a bit over- (except in hindsight) but clients are services. Instead, many find it con- whelmed by the invest- bombarded with endless advertising, fusing, overwhelming and intimidat- I ment services and choices media articles and calls from other ing. Perhaps, rather than focusing on you could offer your clients, consider advisors who want to help them the stock of the day, they need to the prospective clients who are try- mind their money. understand the difference between ing to figure out what they should But having more product choices trading, investing and planning. do. I’m a firm believer that there is does not make Canadians better Trading: placing an order to buy or no one “best” investment choice investors or consumers of financial sell an investment.

JANUARY 2001 56 YOURBUSINESS

Investing: developing and managing achieving them. Even a retirement have tried to tell me they didn’t need a portfolio to meet the investor’s independence calculation, which to call their clients when the market financial objectives. many Canadians mistakenly think is dropped 840 points in one day, Planning: implementing strategies a financial plan, can help the client because they had educated them to to help the client meet their life focus on what they want to achieve focus on the long term. I respectfully objectives, which helps determine and offer a target rate of return they disagree. Even the best-educated their investment objectives. need to try to earn. This target client is still a person with concerns Many advisors try to change return, in turn, determines the port- and fears. My teenagers, who think traders into investors by building folio weighting for cash, fixed I don’t know anything most of the academically sound investment port- income and equities (which may be time, still need to know I’m there folios. I’ve become a believer in the value of an investment policy state- ment (IPS)—but not for the reason I originally liked. Certainly, it pro- vides rigor to the invest- ment process and out- lines the rules of engagement for the investment professional and the client. But from a client’s perspective, it provides a framework for them to better under- stand their investment decisions. The questionnaire portion is supposed to help assess clients’ risk tolerances by focusing on how they would react when their portfolio dropped in value and some questions related to the facts of their per- sonal situation, including their time different than a portfolio based on a when things get tough. horizon. The results of the question- risk tolerance questionnaire) and Contacting your clients when the naire are used to develop the client’s provides a more personal framework markets get volatile strengthens your portfolio weighting for cash, fixed for their decision-making. brand and reminds them of the value income and equities. Most ques- The rigor of developing an invest- of working with you. Remember, the tionnaires, however, focus on market ment policy or a written financial media focuses on the market’s event, risk, a risk most clients don’t fully plan does not eliminate the need for and even radio stations that do not appreciate, rather than the risk of you to be there for your clients. At routinely report the business news not achieving their life objectives. some of the professional develop- interrupted their regularly scheduled A financial plan focuses on clients’ ment programs I have been facilitat- broadcasts to report that day’s life goals and the risk of not ing across Canada, some advisors Continued on page 58 JANUARY 2001 57 YOURBUSINESS

Continued from page 57 know how the events impact their Some advisors have carnage when the market fell 840 abilities to achieve their life’s objec- points. Have you called your clients tives, only then can they really tried to tell me they to see if they had any questions as remain focused on their long-term didn’t need to call their to how the current market condi- goals. tions would affect their personal clients when the market situation, or are you leaving them Sandra Foster is the author of Who’s dropped 840 points in to turn to the media for their Minding Your Money? Financial “advice”? Intelligence for Canadian Investors “one day. I respectfully When your clients know you are (John Wiley & Sons). She can be reached at disagree. on top of the market’s events, and [email protected]. MYEDGE” Changing gears Mountain biking makes you strive to always do better, which is a similar goal of advisors, says Mike Andrews. By Peter Boisseau

here’s nothing like riding business plans, a year that seems through the rocky terrain mediocre from a business standpoint T on a steep mountain side can suddenly look brighter, says to drive home the importance of Andrews, whose recent plan included pushing yourself to do better, says teaching his daughter how to ride a Mike Andrews, who likes to ride bike. “That’s more important to me mountain bikes and scale cliffs as a than becoming a little more fluent in change of pace from the office. “It’s some computer program.” very similar to the job of a financial Andrews interprets his duties to his advisor,” he says. “You’re always out clients just as broadly. He says people there, thinking of new and different are feeling increasingly isolated as strategies to serve your clients better.” more financial services become auto- Of course, you don’t have to climb mated. “I think clients are looking for MINI-PROFILE mountains to find an edge. All it takes their advisor to be more than that, a MIKE ANDREWS, is a business plan that gives as much coach, a facilitator, a psychologist, a RFP,CFP,CIM, FCSI ASSANTE CAPITAL MANAGEMENT weight to personal achievements as motivator, a business partner and LONDON,ONT. professional ones, says Andrews, who sometimes just a friend,” he says. NUMBER OF CLIENTS: 300 is a certified financial planner with Andrews suggests that advisors get AVERAGE AGE: 45 TO 60 ASSETS UNDER MANAGEMENT: Assante Capital Management Ltd. in together with other advisors to dis- $45 MILLION London, Ont. He believes many advi- cuss ideas and get feedback. “Some- Photography by Jeff Carroll YEARS IN BUSINESS:13 sors mistakenly focus their annual times you get caught in that trap of plans solely on corporate goals and either being in a rut or a void, and you production numbers. “But what they lose perspective.” leave out are the physical, social, fam- ily and spiritual factors,” he says. Peter Boisseau is a contributing editor of By including those measures in Advisor’s Edge. He lives in Toronto.

ADVISOR’S EDGE 58 YOURBUSINESS

o you believe that peo- MANAGING ple are trustworthy? Conflicting D Do you believe that people seek responsibility and theories accountability? There are two ways Do you believe that people natu- that managers react to rally want to learn? employees. Only one leads Do you believe that people seek to empowerment. meaning in their work? By Harvey Schachter Do you believe that people don’t resist change but resist being changed? sibility and preferring to be led. He they are. Management is still Do you believe that people pre- or she is inherently self-centred, responsible for organizing the ele- fer work to being idle? indifferent to organizational needs. ments of productive enterprise— The answers to those questions He or she is resistant to change and money, materials, equipment and point to whether you subscribe— not that bright. That’s why man- people—in the interest of eco- instinctively, rather than hypotheti- agers were created, after all. nomic ends. But management must cally—to Douglas McGregor’s Theory Y is the opposite. The assume that the people they oversee famed Theory X and Theory Y. belief is that people first satisfy have the potential for development, Although first outlined in 1957, physiological and safety needs, then the capacity for assuming respon- the Massachusetts Institute of ego desires, and finally seek self- sibility and the readiness to direct Technology professor’s managerial fulfilment, to reach their potential behaviours towards organizational schema remains relevant today. for self-development and self-actu- goals. McGregor outlined two opposite alization. Once a lower-level drive is In an era of empowerment today, ways in which managers react to satisfied, the individual is no longer few of us would admit to Theory X employees. Managers who are motivated by that need. impulses. But in Douglas McGregor On instinctively cautious—or even hos- Management can use a carrot- Management (John Wiley & Sons), a tile—towards subordinates, doubt- and-stick approach with subordi- recent book by Gary Heil, Warren ing their willingness to work hard, nates desperate for employment or Bennis and Deborah Stephens, we’re were labelled as Theory X. They security, withholding or extending advised that McGregor didn’t pre- believe management must direct favours, to mould behaviour. “But sent these dichotomies because he employee efforts, motivating them, the carrot-and-stick approach does felt we would or could automati- controlling their actions and mod- not work at all once a man has cally fit into only one camp. He ifying their behaviour to fit the reached an adequate subsistence presented the framework to be used needs of the organization. level and is motivated primarily by as a mirror, to hold up and view “Without this active intervention higher needs. Management cannot how we manage and how we might by management, people would be provide a man with self-respect, or improve. passive—even resistant to organiza- with the respect of his fellows, or Most of us have elements of tional needs. They must therefore with the satisfaction of needs for both Theory X and Theory Y. The be persuaded, rewarded, punished, self-fulfilment,” McGregor wrote. key is to recognize that reality—and controlled—their activities must be Most financial advisors would if you want to be a Theory Y directed,” wrote McGregor. probably say they seek self- manager, to shift further along the Essentially, it’s a belief that the fulfilment through work. But we’re continuum in that direction. average worker is, by nature, indo- not sure others—particularly sub- lent, working as little as possible— ordinates—are as noble. Harvey Schachter is a contributing editor of lacking ambition, disliking respon- McGregor’s Theory Y suggests Advisor’s Edge.

JANUARY 2001 59 YOURBUSINESS THE QUEST FOR EXCELLENCE

It was a very good year By Nick Murray

here are, at the end of the (In November of last year, still mak- neither of which is a prerequisite to the day, only two kinds of ing no attempt to call a turn, I said that achievement of our clients’ financial T people in the world: peo- pessimism is never a rational long-term goals. We get paid to try to keep people from ple with too much class to say “I told investment policy, and that the revul- blowing themselves up. you so,” and people like me. sion du jour seemed to me to be getting And this has been a particularly It is not the goal of this column— overdone. The former point is inar- good year for the excellent advisor nor has it the capacity—to “call” guable, but even I would admit that the precisely because it has presented the economic or market events. That said, jury’s still out on the latter.) investor with so many (and so varied) I’ve been able to make some sugges- Having suffered through this opportunities—from terror to eupho- tions over the last year or so, the con- self-congratulatory screed so far, you ria and back again in a twelvemonth— tent and even the timing of which may have concluded its title suggests to blow himself up. That’s when you were (if I do say so myself, and I do) only that this column had “a very good and I can really shine. not without merit. year.” Unless, of course (as the aforemen- In October 1999, I wrote that the Well, that too, I suppose. But the tioned letter to the editor bears sad wit- Y2K panic was a case study in the per- fact is that I’m trying to make a much ness), we ourselves get caught up in the sistence of investor pessimism—when it doesn’t have a real “crisis” to worry about, the mob hallucinates one—and We don’t get paid to call markets or pick that Y2K itself would turn out to be the non-event of the millennium. (This superior performing mutual funds. We get paid to column provoked an absolutely hyster- ical letter to the editor which is mor- try to keep people from blowing themselves up. bidly fascinating to go back and read.) Then in November 1999, I was at “ some pains to ridicule the mania for larger, much better point. Which is that madness. Then the gargoyles have taken index funds; 1999 turned out to be the this period of time was a vintage year over the cathedral, and all is lost. For, first year in quite a while that the aver- for the craft of personal financial advice—for as Huey Newton said, if you’re not age managed fund beat the S&P 500. the exercise of the patience, discipline, part of the solution, you’re part of the In February and April of last year, perspective and above all wisdom problem. ” I bracketed the March Nasdaq mega- which can only come from an advisor As the new year begins, let’s renew top with pieces that said, respectively: and which can never come from a our commitment to being of real value (a) the dot.com stock mania was the machine. to our clients by opposing—gently but greatest financial bubble in the history It’s a cardinal precept of this col- firmly—their worst instincts. We can of the world, and virtually every dollar umn, and indeed of all my work, that truly help them, or we can help them invested in dot.com IPOs in the pre- the highest and best function of the do what they want to do at any given vious year would ultimately be lost; excellent financial advisor is behavioural moment. But never both. (b) on any but a cap-weighted basis, rather than intellectual. We don’t get Nasdaq was already in a bear market, paid to call markets or pick superior © 2001 Nick Murray. All rights reserved. For and that the tech mania would have to performing mutual funds—neither of more information about Nick’s books, tapes and flame out at some point. which we can consistently do, and other activities, please visit www.nickmurray.com.

JANUARY 2001 61 NEWSMAKER

Born in Iona Station, Ont., in 1908, John Kenneth Galbraith oly. But I don’t think there is John has been an American citizen since 1937. He received a PhD any special case in Microsoft. in agricultural economics from the University of California Bill Gates perhaps had a sim- Kenneth at Berkeley, and has also received 45 honourary degrees from ilar advantage, in this respect, institutions around the world. One of the most influential econ- omists of the 20th century, Galbraith has been an advisor and to the advantage John D. Galbraith speechwriter for Franklin Roosevelt, Adlai Stevenson, Eugene Rockefeller had with Stan- The renowned Harvard McCarthy, George McGovern and John F. Kennedy. He’s dard Oil in the last century. currently the Warburg Professor of Economics Emeritus at Rockefeller was ahead of professor continues to Harvard University. anybody else in seeing the challenge conventional prospects for petroleum. Do you think Canada is a With increasing globalization, There is always an advantage thinking. kinder,gentler nation than the do you think people are doing to being a little bit ahead. By Barb Clapham, CFA United States and that North enough for debt relief for the Americans are becoming poorest nations of the world? There has been a lot of talk greedier? This is a very important about our current economy I don’t think this comes question. This is, as it long being a new type of economy; primarily from the United has been, a matter on the a new era of sustainable States, although that country conscience of well-fed peo- growth. Is there any truth to is a participant. This has ple, well-housed, comfort- this idea? been a trend of all the able people who manage to There is a long-term trend advanced industrial coun- close their minds to the that enlarges the private sector tries, including Japan, West- much less satisfactory situa- and I don’t deny the role of ern Europe and, not least of tion of those who suffer technology in that. It’s not all, Canada. hunger and deprivation. We confined to technology, should be aware of an though. We have also had a important human tendency. huge expansion in the enter- When something is bad tainment industry and a very enough, you don’t try to considerable expansion in all remedy it; you close your journalistic and literary activ- mind to it. The strongest ity. Most of the references to phrase that one should a new society are from people attribute to the English lan- who are heavily involved in the guage is, “too unpleasant to stock market and want to jus- think about.” tify the notion that their stock market gains are forever. You have said that free enter- When you hear somebody in prise leads to monopoly. Is the the financial world say this is development of Microsoft an a new era, by all means take example of this? cover. No. There is a strong thrust in many industries to a struc- Barb Clapham is the editor of ture of controlled prices and Canadian Investment Review controlled costs, which are (CIR), a sister publication of “Most references to a new society are the natural attribute of mar- Advisor’s Edge. You can read from people who want to justify the notion that ket power, and possibly what the full interview in the Winter issue their stock market gains are forever.”

Photography by Jim Kalett by Jim Photography the ancient even call monop- of CIR.

ADVISOR’S EDGE 62 WHY IS RICHARD STONE SO COMFORTABLE ON BAY STREET?

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1 2 3 4 5 SINCE YEAR YEAR YEAR YEAR YEAR INCEPTION SOLIDLY EMBRACING THE CLIENT / ADVISOR 25.1% 20.8% 12.0% 13.1% 15.0% 14.8% RELATIONSHIP

100% CANADIAN OWNED. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. The indicated rates of return are the historical annual compounded total returns for the period ending November 30, 2000 including changes in unit value and reinvestment of all distributions and do not take into account sales, redemption, distribution or optional charges or income taxes payable by any securityholder that would have reduced returns. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. APPOINTMENT NOTICE

James Hunter, president of Mackenzie Financial Corporation, is pleased to announce the appointment of Andrew Dalglish as executive vice president and chief operating officer (C.O.O.). Previously, Mr. Dalglish was executive vice president and C.O.O. of the company’s mutual fund distribution arm, Mackenzie Financial Services Inc. In his new role, Mr. Dalglish will work with the entire Mackenzie group of companies to drive new strategic initiatives and to further the integration and deployment of new technology. Since joining Mackenzie in 1993 as assistant vice president responsible for fund administration, Mr. Dalglish has held progressively senior roles. This year, Mr. Dalglish was honoured with Canada’s Top 40 under 40™ for his out- standing leadership contributions to Mackenzie and the community. Prior to joining Mackenzie, he spent ten years at Deloitte & Touche specializing in financial services including investment funds, banks and venture capital. Until February, he served as chairman of FundSERV, an organization cooperatively owned and managed by Canada’s mutual fund industry leaders with a mission to maximize the efficiency of Andrew Dalglish the Canadian investment fund industry. As well, Mr. Dalglish is an active member of the Crohns and Colitis Foundation and is in his second year as national president. Mackenzie Financial Corporation (TSE: MKF) is a multi- faceted investment management and financial services corporation founded in 1967. Mackenzie’s core business is the management of mutual funds on behalf of investors throughout North America.The company manages $40 billion for more than one million investors through its family of mutual, segregated, and pension funds. Mackenzie funds are sold through more than 30,000 independent financial advisers across Canada. APPOINTMENT NOTICE

Laurie Munro, president and chief executive officer of The MRS Group of Companies is pleased to announce the appointment of Laurie Davis as senior vice president, Special Projects. Ms. Davis will be responsible for a number of new and innovative strategic initiatives designed to better serve the independent financial planning community. Ms. Davis joins MRS from a large Canadian mutual fund company where she was also responsible for special projects. Previously, she was chief operating officer at Financial Concept Group for two years and served as chief financial officer at 20/20 Financial Inc. from 1987 to 1995. Ms. Davis is a chartered accountant. The MRS Group of Companies is Canada’s largest dedicated investment and mutual fund dealer support firm with over $18 billion in assets under administration. Laurie Davis Approximately 9,500 financial planners representing some 400-dealer firms use the services of MRS. MRS is a wholly owned subsidiary of Mackenzie Financial Corporation. Mackenzie Financial Corporation (TSE:MKF) is a multi- faceted investment management and financial services corporation founded in 1967. Mackenzie’s core business is the management of mutual funds on behalf of investors throughout North America. The company manages $40 billion for more than one million investors through its family of mutual, segregated, and pension funds. Mackenzie funds are sold through more than 30,000 independent financial advisers across Canada. APPOINTMENT NOTICE

Phil Cunningham, president of Mackenzie Financial Services Inc., is pleased to announce the appointment of Oliver Murray as executive vice president and chief operating officer. Mr. Murray joins Mackenzie with fifteen years of experience in financial services, ten of which were spent directly in the mutual fund industry addressing the demands of client service and administration. Previously, he was executive vice president and chief operating officer of a Canadian mutual fund company where he led operations and adminis- tration. He was formerly the president of AdminSource Inc., providing administration services to other mutual fund com- panies in Canada. Mr. Murray has also been actively involved in improving the industry’s practices most recently as chairman of FundServ Inc., an organization cooperatively owned and managed by Canada’s mutual fund leaders with a mission to maximize the efficiency of the Canadian investment fund industry. Oliver Murray At Mackenzie Financial Services, Murray will oversee administration, client service, processing and various project departments. From a service perspective, he will also work closely with Mackenzie subsidiary, MRS, to leverage the strength of both organizations in providing competent, quality service to the advisor, dealer and unitholder channels. Mackenzie Financial Corporation (TSE: MKF) is a multi- faceted investment management and financial services corpo- ration founded in 1967. Mackenzie’s core business is the management of mutual funds on behalf of investors throughout North America. The company manages $40 billion for more than one million investors through its family of mutual, segregated, and pension funds. Mackenzie funds are sold through more than 30,000 independent financial advisers across Canada. A World of Opportunities

leads the way. In a world filled

A World with investment options, ASSET MANAGEMENT INC. BLC-EDMOND DE ROTHSCHILD of Opportunities BLC-Edmond De Rothschild Asset Management: A World of Opportunities

nvesting in global markets remains the most effective way for Canadian investors to ensure the best performance for their investment portfolio. Not only does diversification help to reduce risk, but it also provides the opportunity to access the extraordinary returns that are just not available within Canada’s borders. The universe of possibilities that exists in global mar- kets tells a compelling story, one that investors cannot afford to miss. At BLC-Edmond de Rothschild Asset Management we can help you bring this universe to your clients.

Part I. A History of Success would provide unequivocal value management subsidiary last June. For more than 200 years, the for Canadian financial advisors This acquisition makes it possible IRothschild name has been known and their clients. “At that time, as for BLC-Edmond de Rothschild for its association with wine and it still is today, the international Asset Management to strategical- finance—both industries in story was somewhat underex- ly position itself in both institu- which the family has achieved posed in Canada,” says Michael tional money market and private remarkable success. The family’s Greer, Senior Vice-President, Nat- portfolio management. history in finance goes as far back ional Sales. “There was a definite as the Industrial Revolution. opportunity to bring a whole new A Different Approach From railway construction in story through our products to Besides a strong global brand, Europe to the emergence of the Canadian advisors that would BLC-Edmond de Rothschild very first industries, the Roths- allow them to add more value to Asset Management is a mid-size childs enjoyed considerable their client relationships.” boutique with more than $1.2 bil- influence in both financial cir- But more than a strong inter- lion in assets under management. cles and in the country’s eco- national product, BLC-Edmond It operates independently and nomic initiatives and quickly de Rothschild Asset Management believes in the importance of became Europe’s most influential also brought to Canadian in- allowing its portfolio managers to bankers. It’s a tradition contin- vestors more than two centuries actively manage based on their ued by La Compagnie Fin- of investment expertise and a convictions. The managers at anciere Edmond de Rothschild brand that was renowned BLC-Edmond de Rothschild Banque in Paris. Now, after throughout the world for quality, Asset Management do not follow decades of building a stellar rep- innovation and performance. “In trends for the sake of following utation and amassing an incredi- this volatile financial services trends. “Our style of management ble wealth of financial knowl- marketplace, brand wins,” says is quite different from the very edge that guides the expert selec- Greer. “There is a flight to quality large investment houses,” says tion of investments, La Com- and people stick with the names Sam Pinto, Chief Investment pagnie Financiere Edmond de they know. The name itself Officer. “We are stock pickers. We Rothschild Banque has brought attracts some of the best portfolio can differentiate from the index all of its skill to Canada with the management talent in the busi- because we follow our convic- creation of BLC-Edmond de ness. It was the opportunity to tions. Our style is much less Rothschild Asset Management. represent quality managers that benchmarked than most large The BLC-Rothschild Asset attracted me to the firm.” asset managers which I think is Management story began in 1999 Following its continued com- very good for investors.” with the partnership of La Com- mitment to making inroads in the Today, following this disci- pagnie Financiere Edmond de Canadian financial services plined style and drawing on the Rothschild Banque in Paris and marketplace, the firm acquired strength of a management team Laurentian Bank of Canada in Laurvest, Laurentian Bank of with a proven track record of suc- Montreal. It was a match that Canada’s institutional portfolio cess, BLC-Edmond de Rothschild Asset Management has demon- that meet certain key criteria. Greer. “Now, global themes are strated its commitment to The next step is to implement what’s driving the market, not Canadians by building a a qualitative analysis of each just economies.” fortress of innovative global company which includes “We’re adding a third layer products that offer investors meeting with management and to your client’s portfolio. Your the opportunity to achieve investigating financial reports. client may have a traditional maximum diversification in Only after each company’s Canadian product and a plain their portfolios both geograph- management and financial vanilla international product. ically as well as thematically. statements have been reviewed Now based on the client’s risk There are six diversified is a decision made. tolerance, you can buy that international R funds plus the But what else makes BLC- third essential ingredient R Money Market Fund. There Edmond de Rothschild Asset through BLC-Edmond de are also three brand-new R Management’s product line-up Rothschild Asset Management, Funds to be introduced to the something your clients can’t that is, global themes.” R Fund Family: the R afford to miss out on? The It’s these global themes European Small and Mid-Cap answer is as simple as three that allow BLC-Edmond de Fund, the R European Techno- words, says Greer. “Regional, Rothschild Asset Management Media Fund and the R Canadian Leaders Fund. All “Our style of management is quite different the international R Funds are managed by a portfolio man- from the very large investment houses,” says agement team that operates Sam Pinto, Chairman and Chief Investment out of the Paris headquarters of LCF Rothschild Asset Officer. “We are stock pickers. We can Management. Since the team differentiate from the index because works in one location, LCF Rothschild Asset Management we follow our convictions. Our style is able to maintain a manage- is much less benchmarked than most ment style that takes a strong international focus in which large asset managers which I think is efficiency is enhanced by an very good for investors.” all-encompassing world view of the markets.

A Disciplined Sam Pinto Investment Process Chairman and Chief Investment Officer, With a central mandate to LCF Rothschild Asset Management maintain a core portfolio of at least 60% of growth compa- sectoral and thematic. Advis- to offer your clients investment nies, each manager has the ors can take our regional, the- products that are pure prod- freedom to also create a satel- matic and sector specific ucts in terms of asset classes as lite portfolio made up of a funds, add them to what well as in terms of risk—a rare maximum of 40% of the Fund’s they’ve already established for quality and one that adds a assets to take advantage of spe- their client’s portfolio to truly defining characteristic to the cial situations such as IPOs, create another level of risk long-term return potential of takeovers and turnaround diversification and perfor- your clients’ portfolios. stocks, and exploit them for mance enhancement.” And BLC-Edmond de Rothschild the benefit of investors. with today’s rapid pace of glob- Asset Management. A name Each R Fund is managed alization, this other level is that is synonymous with prod- using the same global invest- more crucial than ever before uct quality, a global brand, ment process that seeks to achieving long-term return decades of investment exper- growth and quality. The first potential. “The traditional tise, a commitment to the step is to take a big-picture benefit of simply diversifying Canadian investor and advisor look at the entire universe of internationally doesn’t in itself and a way to participate in the companies specific to each achieve the objectives that we rewards the global market uni- Fund. Then, using quantitative once thought it would because verse has to offer. Can you analysis methods, this universe of the high levels of correlation afford to offer your clients any- is reduced to those companies between world markets,” says thing less? Part ll: Global Investing: and positive equity market.” As for where in the world investors should be focusing, Looking to the Future Pinto says that he likes Europe. “There’s been a strong correlation between Europe and the U.S. for he year 2000 was a difficult the last few years. We are defi- one for the global equity mar- nitely more comfortable with Europe because earnings growth kets, and an effective reminder is higher and because the demand to investors of the importance for equities will be stronger there than in the U.S.” of long-term growth rather Other factors that point to a than short-term profit. With positive European market for Canadian-based investors, says the market’s severe correction Pinto, is the current undervalua- this past spring, the R Funds tion of the Euro, lower unem- ployment, and stronger consump- felt the impact. However, be- tion as a result of household con- cause of their thematic and geographic focus, the Funds fidence. Although he also points to Asia as a good buying opportu- remain well-positioned to benefit from the profitable global nity for investors, Pinto stresses T that successful global investing is trends that will shape the future of investing. really more a question of sector “It has been a tough year for global Fund Managers and a than of countries. “The TMT sec- tough one in which to start a new family of Funds,” says tors are very attractive. We are also very confident about more Michael Greer, Senior Vice-President, National Sales. “But our traditional sectors like energy, long-term track record is impeccable and above all, our invest- finance and healthcare especially, which appear attractive to us on ment process is unwavering which is critical in today’s highly both sides of the Atlantic.” volatile market.” R Life & Health Fund: A Sound Balance Between Looking forward, balanced positive where equities are con- Defensive and Growth Shares and long-lasting growth seems to cerned,” he says. “Yes, we have a Given BLC-Edmond de Roths- be taking hold in the United large technology bubble that is child Asset Management’s focus States as well as in Europe and now correcting, but the correc- on thematic investing, it’s no sur- Asia. With the Euro currency fal- tion is close to being over. In fact, prise that Pinto singles out the tering and Asian markets contin- it should be over in the next healthcare industry. Health-care uing attempts to recover from a three months. Some good trends spending continues to grow decade of poor performance, will be developing.” around the world, driven by a international performance was Pinto expects good growth for number of catalysts including a less than lackluster. Add to this next year, in the range of 3% for growing elderly population which disappointment a technology both the United States and Europe. is increasing healthcare consump- sector that posted incredible While he concedes that there has tion, state-of-the-art technology gains in the first quarter of the been a temporary slowdown in which is increasing biotechnolo- year, before experiencing a stom- market growth in America and gy discoveries as well as the ach-churning correction later, Europe, Pinto says that both these preservation of quality of life and it was enough to make regions will be headed in the right which has become a priority investors retreat to the safe direction in the second half of next around the world. havens of more defensive sectors year. “As far as fundamentals are To capitalize on these trends, and markets. But all that turmoil concerned, we’ll have good growth BLC-Edmond de Rothschild is almost over, says Sam Pinto, overall next year,” he says. “The Asset Management offers the R Chief Investment Officer, who world is growing faster, Asia is Life & Health Fund, which advises investors to continue to growing faster. Low inflation and invests in the equity securities of look to global markets. “The low interest rates are very helpful international corporations that whole picture is actually quite to lay the ground work for a sound specialize in the health sector with an emphasis on pharmacy biotechnology, medical diag- “The difference between a pharmaceutical nostics, as well as in the food industry, food distribution and company and a biotechnology company restaurant chains. For Francois is that the first has a broad pipeline Roudet, portfolio manager for the R Life & Health Fund, food of products . . . I try to find and health-related stocks are pharmaceutical companies with a the perfect places for investors to be focused because they are deep pipeline of products so they exposed to both defensive and can generate revenues for the growth characteristics. When it comes to stock selec- next fifteen years.” tion, Roudet uses different strategies depending on the sec- Francois Roudet, tor. For pharmaceutical stocks, Portfolio Manager, R Life & Health Fund he focuses on those companies that have a significant product the way the company wants to drive the returns clients are diversity with the potential to find the cure. This is more a expecting. This is the most produce returns over the long- bet on the company, manage- important source of value- term. “The difference between a ment and the process,” he says. added in international invest- pharmaceutical company and a “That’s why we work with an ing.” biotechnology company is that outside advisor who provides the first has a broad pipeline of us with medical and scientific Tapping into New products,” he says. “In this advice before we take a posi- Global Opportunities pipeline, there will always be tion in a biotech company.” In addition to helping some products that emerge and It’s this attention to stock investors capitalize on the be sold into the markets and selection that gives BLC- trends in health in the world some that will not. That’s why I Edmond de Rothschild Asset today, BLC-Edmond de Roths- try to find pharmaceutical com- Management its edge in global child Asset Management has panies with a deep pipeline of investing strategies. “Stock also positioned its Funds to reap products so they can generate selection is really critical today the rewards of technological revenues for the next fifteen because the variability in the growth trends both in Europe years.” performance of individual with the new R European Biotechnology stock pick- companies has increased dra- Techno-Media Fund and in the ing is a little more risky matically,” says Greer, Senior world with the R Techno-Media because it’s difficult to be sure Vice-President, National Sales. Fund. At the same time, in- if a product will work until the “It comes down to the manag- vestors can tap into the extraor- very end, says Roudet. “We er’s ability, from a bottom up dinary growth opportunities evaluate the management and process, to pick the stocks that that are expected in the near future in European small and Drug Prescriptions/Population Cycle 1999 mid-cap stocks by investing in the R European Small and Mid- % of Population Annual Number of Rx's Cap Fund. Other specialized 18 18 funds include the R World 16 16 Leaders Fund, which invests in 14 14 the world’s best companies, and

12 12 the R Canadian Leaders Fund, which focuses on Canada’s top- 10 10 quality companies. Add these 8 8 dynamic theme Funds to BLC- 6 6 Edmond de Rothschild Asset 4 4 Management’s three regional

2 2 Funds, the R American Fund, the R Asian Fund and the R 0 0 0-5 6-10 11-17 18-24 25-34 35-44 45-54 55-64 64-74 75+ European Fund and your clients have the power of the world dri- Source: U.S. Census Bureau, Walgreen Co. estimates (1999) ving their portfolio. Part lll: that the Canada Customs and Revenue Agency will allow in registered retirement plans. Your Client’s Guide to While in the past Canadian investors have been limited to Global Investing 20% foreign exposure, that limit was recently raised to 25% and will increase to 30% in 2001. But your clients don’t have to be lim- nfortunately, not everyone ited by this restriction. With knows how important it is to 100% RSP-eligible Funds which mirror an underlying interna- have some global exposure in tional Fund such as those avail- their investment portfolio. And able from BLC-Edmond de Rothschild Asset Management, looking back on the tumul- Canadians can invest up to 100% tuous year that global markets of their registered portfolio in international equity markets. have seen, it’s understandable These RSP Funds use cus- that your clients may be a little tomized forward contracts issued by domestic financial institutions cautious and apprehensive and purchased by the RSP Fund. about pouring their hard-earned investment dollars into over- This gives the Fund exposure to the securities held by the under- Useas markets. However, the bottom line is that if your clients lying foreign content fund. are not invested globally, they will undoubtedly miss out on 3 Tax issues some of the most impressive market gains to be had in the next For some investors, concerns decade—now that’s a pretty frightening possibility. about taxation may influence their decision to invest globally. Still, despite the hype about our investment dollars,” says Because Canadians are taxed on diversification, there is still a fear Michael Greer, Senior Vice- their worldwide income, the of the unknown for many President, National Sales. “The income received from foreign investors. So, what if you had all bottom line is that diversification investments is subject to a degree the right answers to your clients’ means less risk. By diversifying of tax which depends on the type global investing questions? What your investment dollars you can of income received. While if you had a solution for their increase your return and lower Canadian dividend income is eli- every concern? It would certain- your risk. There aren’t many clients gible for a dividend tax credit, ly make it easier for you to do the who don’t want that scenario.” dividends from foreign securities best job you can for your clients. Then there’s the issue of home are not, and are therefore fully That’s why we created this simple country bias, says Greer. Despite taxable. However, one way of get- guide to help you help your all of the evidence that supports ting around this is to choose for- clients go global. It’s just one part diversification, he says many eign stocks that generate capital of our commitment to you and clients prefer to keep their invest- gains. This type of investment your clients. The potential gain is ment dollars within their home income does not generate imme- more than worth it. borders. “This home country bias diate tax consequences. And the means people buy what they inclusion rate for the taxation of 1 Diversification versus risk know. But I’ll say it again. If capital gains has declined recent- Canada only represents approxi- they’re not investing beyond our ly—from 75% in February, to mately 3% of the total global mar- domestic borders, if they are 66.67% in March and finally, to ket capitalization, which means putting a large part of their retire- 50% in October 2000. that by not investing in other parts ment portfolio into only 3% of the of the world, your clients are pass- global equity basket, that’s true 4 Currency risk ing up the potential to reap the risk.” Some investors may prefer to rewards of the other 97%. invest domestically because they “Historically, Canadians have done 2 Foreign content rule concerns want to avoid exposure to curren- that partly because we’ve had for- There have been recent increases cy risk. However, without a eign content restrictions put on in the amount of foreign content doubt, the risk of not diversifying internationally and missing out on the potential gains “This home country bias means poses far more danger than the risk posed by currency fluctua- people buy what they know. But I’ll tions. say it again. If they’re not investing

5 Country risk beyond our domestic borders, if Issues like economic and polit- they are putting a large part of ical conditions within a coun- try can have a strong impact their retirement portfolio into on global investment perfor- only 3% of the global equity basket, mance and can be a reason for your clients to avoid overseas that’s true risk.” markets. But it’s important to remind your client that while investing globally does have Michael Greer, some risks, as their advisor, Senior Vice-President, National Sales you are there to help them make the best investment tives, and most importantly, Rothschild Asset Management choices based on their risk tol- their risk tolerance. Armed to North America and it’s also erance. with this information, you will what continues to drive our not only be able to provide bet- commitment to Canadian 6 Where to invest ter service, but you will also be advisors and investors. Deciding where to invest can able to build a portfolio that BLC-Edmond de Rothschild be a daunting task for your satisfies the long-term objec- Asset Management has taken clients. Again, it’s your role as tives that your clients are look- the strength of a team, the their advisor to help them nav- ing for. power of a global brand and igate through the complex At BLC-Edmond de Roths- the return potential of a solid waters of global investment child Asset Management, inter- family of top-performing products and build a portfolio national investing isn’t just an international Funds and com- that is well-positioned to access investment strategy; it’s a phi- bined them to offer you the the opportunities offered by losophy. It’s a belief that diver- opportunity to access the ulti- international markets. sification based on themes and mate tools in global investing. Whatever concerns your sectors is truly the most effec- Let BLC-Edmond de Roths- clients have about global tive way to maximize the child Asset Management take investing, the key to helping potential of your clients’ you and your clients on a them maximize their invest- investment dollars. This pas- global adventure in 2001. ment portfolio is understand- sion for investing excellence is Don’t miss out on the fortunes ing their goals, their objec- what brought BLC-Edmond de of the global universe.

Canada’s market capitalization vs. the world For more information Europe 32% To learn more about the U.S. 51% spectacular global opportunities that BLC-Edmond de Rothschild Asset Management can offer your clients, e-mail us at [email protected] or call us at: 1-866-400-0419

BLC-Edmond de Rothschild Asia 14% Asset Management Inc. 130 Adelaide Street West Suite 2720 Toronto, Ontario Canada 3% M5H 3P5 Source: MSCI World (as of Nov. 30, 2000)