In the Family • Investor Profiles:What’S Their Type?

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ALL IN THE FAMILY • INVESTOR PROFILES:WHAT’S THEIR TYPE?

CANADA’S MAGAZINE FOR THE FINANCIAL PROFESSIONAL • AUGUST 2005 • WWW. ADVISOR.CA

BELOW THE RADAR How your friendly neighborhood credit union is becoming your next big competitor

Rogers Publishing Limited, One Mount Pleasant Rd., Toronto, Ont. M4Y 2Y5 • Publications Mail Agreement Number 40070230 AE08_005 7/15/05 4:39 PM Page 5

AUGUST • 2005• THE ON VOLUME 8 COVER NUMBER 8

15 All in the Family

18 Below the Radar How your friendly neighbourhood credit union is becoming your next big competitor

26 Investor Profiles: What’s Their Type? 7 Inside Edge with Darin Diehl There’s always a right time and place when prospecting your friends and neighbours. 12 FRONT END LOAD History Lesson Financial consultant Gabor Vaski dis- 18 cusses author Margaret MacMillan’s NEW COMPETITORS book, Paris 1919: Six Months that Changed the World. And, it’s always a good time to boost your practice offer- 18 28 ings to pre-newlywed clients—whether COVER STORY Below the Radar The Ideal Niche they’re 24 or 40, and on the first, Traditionally, credit union clients have Less is more when building a rewarding second or even third run at marriage. enjoyed the personal service, good mort- practice. By Steven Lamb gage rates and charitable orientation 15 that come with membership. Now, as 31 TOOLBOX Family Ties wealth management is rising in the Attracting the Affluent Pay special attention to client estate ranks of professional service, CUs Sales pitches are passé when courting planning needs when dealing with are responding by adding more advisors wealthy investors. complex, blended family units. in the branches. By Deanne N. Gage By Steven Lamb By Christine Van Cauwenberghe SPECIAL THREE-PART REPORT: 35 Taking Your Practice to the Next Level Tax Break with Gena Katz (with John J. Bowen Jr.) 36 26 Insurance Insights with Rich Friends David Wm. Brown Forging trust and understanding personality types is key when you want 38 to strengthen relationships with your CLOSING BELL with Beasley Hawkes wealthy clients. The Hawkester rants about getting CE 15 By John J. Bowen Jr. credits where they’re due. BLENDED CHALLENGE

www.advisor.ca ADVISOR’S EDGE | AUGUST 2005 5 AE08_007 7/18/05 7:15 PM Page 7 INSIDEEDGE

HAMBURGERS, HOTDOGS AND HEDGE FUNDS A summertime guide to prospecting neighbours, friends and family.

My Sunday night ritual involves to me while lunching with a top hedge fund, or if they want your view transporting an oversized garbage can producer from one of the bank-owned on what constitutes a properly diversi- and two recycling bins down to the brokerage firms. Like all of you, that fied portfolio, the first thing to do is curbside. I always end up doing this advisor is occasionally subject to queries determine whether they’re just making about 10 p.m.—as do many of my from family, friends and neighbours conversation or if they’re sizing you neighbours. about investing, insurance and myriad up as someone they might want to Invariably, a few of us end up con- other financial matters. work with. gregating for a discussion about the past While it’s certainly not uncommon If it’s the latter, then it makes the weekend or a recent household project. for these conversations to evolve into most sense to save the detailed discus- For instance, one neighbour tells me prospecting opportunities, he told me sions of what you do for an appoint- about a bathroom renovation he’s just he often feels uncomfortable discussing ment at your office, or over lunch. completed and I’m impressed enough his business with these people and that It’s just common sense that you pro- to probe further to learn whether his he’s not always sure he even wants to ject a more professional image dressed talents stem from a hobby or a vocation. pursue them as prospects. He also notes in business attire than in cut-off jeans When I discover it’s the latter, I the discomfort sometimes rests equally and sandals. immediately want to talk to him about with the family member, friend or But the issue goes deeper, and assum- a possible bathroom renovation in my neighbour who’s used to dealing with ing you have neighbours, friends and own home. He tells me a bit about his him in a purely social manner, such as family who like you—and whom you company and the type of work it does. having a beer on the porch or burning like in return—then it’s in both of your But when I ask him about costs, he some meat on the barbeque. interests to set boundaries. Bottom line: steers the conversation in a different My renovator neighbour understands Keep your social relationships separate direction. this all too well. Your vocational exper- from emerging business relationships. Instead of attempting to close a sale tise is something you normally talk If a business relationship fails to take on the sidewalk, he suggests I come see to prospects about in a professional root, both parties will have the comfort him at his office one Saturday. “Let’s sit environment. When taking out the of knowing the personal relationship is down and I’ll show you how our firm trash turns into a sidewalk social, you very much intact. operates and the type of work we do,” should only carry a business conversa- he suggests. “Then you can decide if tion so far. DARIN DIEHL you want to pursue this further.” So, next time you’re at the neigh- EXECUTIVE EDITOR & There is an important lesson there bourhood block party and people ASSOCIATE PUBLISHER for advisors, as was recently confirmed ask your opinion about the latest [email protected]

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Online: www.advisor.ca/customerservice Darin Diehl, Executive Editor & Associate Publisher, ADVISOR Group (416) 764-3812, [email protected] E-mail: [email protected] ADVISOR’S EDGE Deanne N. Gage, Editor Harvey Schachter (416) 764-3803, [email protected] Contributing Editor Phone: (866) 236-0608 or (416) 764-3859 Philip Porado, Associate Editor Jennifer Molleson, Production Manager (416) 764-3802, [email protected] (416) 764-3928, [email protected] Heidi Staseson, Assistant Editor Maggie Sicilia, Administrative Assistant (416) 764-3804, [email protected] (416) 764-3822, [email protected] Aniko Nicholson, Art Director (416) 764-3850, [email protected] EDITORIAL ADVISORY BOARD ADVISOR’S EDGE REPORT / ADVISOR.CA Elaine Andrew John Ord Scot Blythe, Editor, Advisor’s Edge Report Kate McCaffery, Senior Reporter Investors Group BMO Nesbitt Burns (416) 764-3810, [email protected] (416) 764-3959 David Wm. Brown Jim Rogers Doug Watt, Editor, Advisor.ca [email protected] Al G. Brown and Associates Rogers Group Financial (416) 764-3815, [email protected] Andrew Gregory, Manager, Web Production & David Christianson Nancy Shewfelt Opal Patel, Practice Management Editor Special Projects, (416) 764-3817 Wellington West Total Wealth Management Wellington West Capital Inc. (416) 764-3818, [email protected] [email protected] John De Goey Thane Stenner Steven Lamb, Assante Capital Management The Stenner Group, CIBC Wood Gundy Investments Editor Robert Fleischacker Lynne Triffon (416) 764-3961, [email protected] Advocis, Stonehaven Financial Group T.E. Financial OBJECTIF CONSEILLER Cynthia J. Kett Yves Bonneau, Editor Christian Benoit-Lapointe, Assistant Editor Stewart & Kett Financial Advisors Ltd. (514) 843-2142 James Wagner, Art Designer Jean Goulet, Publisher SALES Garth Thomas Kathleen Murphy, National Account Manager General Manager (416) 764-3838, [email protected] (416) 764-3806, [email protected] Gisela Stephany Donna Kerry Sales Manager, Eastern Canada National Account Manager (514) 843-2133, [email protected] (416) 764-3805, [email protected] David Carmichael, Marketing Research Analyst Andrew Mooney, National Account Manager (416) 764-3820 (416) 764-3809, [email protected] [email protected] MARKETING AND COMMUNICATIONS WHAT’S NEW @ ADVISOR.CA? Nancy Matheson, Group Director ■ An online client service-themed package to help you attract CIRCULATION AND RESEARCH Keith Fulford, Circulation Director Tricia Benn, Director of Research and retain new business. Under “Special Report” in Cindy Younan, Circulation Manager Rosa Regula, Research Assistant Advisor.ca’s Practice Zone, this special package includes: Ann McDonagh, Group Publisher (416) 764-3830, [email protected] › Expert advice on how to improve your client action Paul Williams, Vice-President, Healthcare & Financial Services Group

response time ROGERS MEDIA INC. Anthony P.Viner, President and CEO › A client satisfaction survey template you can use in your ROGERS PUBLISHING LIMITED practice Brian Segal, President and CEO John Milne, Senior Vice-President, Healthcare & Financial Services Group › Profiles of advisors with a passion for client service. Harvey Botting, Marc Blondeau and Michael Fox, Senior Vice-Presidents Immee Chee Wah and Larry Michieli, Vice-Presidents ■ An all-new insurance case study in our Product Zone. , established 1998, is published by Rogers Publishing Limited, a division of Rogers Media Inc. Advisor’s Edge subscriptions include 24 issues per year, consisting of 12 issues of Advisor’s Edge in magazine format and 12 issues of Advisor’s Edge Report in tabloid newspaper format. ALWAYS ONLINE @ ADVISOR.CA! Rogers Publishing Limited, One Mount Pleasant Rd., Toronto, Ontario M4Y 2Y5. Montreal office: 1200 avenue McGill College, Bureau 800, Montreal, Quebec H3B 4G7. ■ Daily news coverage of the industry stories and issues you Subscription price per year: $68.95 CDN; outside Canada per year: $139.30 US; single copy price: $15 CDN. ISSN 0703-7732. Printed in Canada. need to know PM 40070230. Canada Post: Please return undeliverable address blocks to Advisor’s Edge, Circulation Department, One Mount Pleasant Rd., 7th floor, Toronto, Ontario M4Y 2Y5. ■ Insurance case study archive under “Insurance Board” in our E-mail: [email protected] We acknowledge the financial support of the Government of Canada, through the Canada Magazine Product Zone Fund, towards our mailing and editorial costs. Contents copyright © 2005 by Rogers Publishing Limited, may not be reprinted without permission. ■ Lively debates on industry issues in our online discussion Advisor’s Edge receives unsolicited materials (including letters to the editor, press releases, promotional items and images) from time to time. Advisor’s Edge, its affiliates and assignees may use, reproduce, publish, re-publish, distribute, store and archive such submissions in whole or in part in any form or medium whatsoever, without forum compensation of any sort. ■ The latest market news, in our twice-daily e-mail bulletins

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8 ADVISOR’S EDGE | AUGUST 2005 www.advisor.ca AE08_012,013 7/15/054:44PMPage12 ENDLOAD YOUR PICKS FRONT 12 HISTORY LESSON Slovakia isbecoming theDetroit of it’s agiven thatyou candothat. worldThe haschanged. of contact withotherparts time when itwas very istheway“This ButIremember itwillalways a think, be.” do thatunlessyou understandtheirbelief is tofind outwhat people’s personaldrivers are, andyou can’t out talkingaboutproducts. Myphilosophy aboutinvesting ple from different backgrounds lookattheworld. Idon’t prised of nowthem. Ourcountry isclosing inonbeing50%com- sensitivities are andhow toapproach stand what peoples’ tomorrow. change coming andlookforfurther theopportunities change is constantandyou have areopposed towhere beingcreated. But theopportunities tends toseethatwe’re America,as losing jobsinNorth ese companiesinvest inSouthKorea andChina. client The are investing andSlovakia inHungary thesameway Japan- teach themthere’s companies there. German anopportunity what itcanproduce andsell. Bloccountriesnow Eastern hastofindformer itsniche and ders thatwere thehistoricalbor- economic EU, isallhappeningbecauseof (EU), where they’re dividing uptheculturalEUversus the Europe. ern of metamorphosis The which effectively MiddleEastandmod- created themodern examines theFirst World Versailles, War andthetreaty of clients. It insights intotheirEuropean andMiddleEastern People tendtoseetheworld astheway itis now and forOutsourcing clients isareal but concern you have to If ADVISOR you read European history, soyou needtounderstandhowimmigrants, peo- ’ Gop astoldtoPhilipPorado Investors Group, World S EDGE o World War created aftertheendof One. Vsi seniorfinancialBy Gabor consultant, Vaski, Book: It’s bookfor agreat advisors lookingfor , by | AUGUST Margaret MacMillan Paris 1919:SixMonthsthat Changed the difficult for my 2005 epe rns eventsandanalysis trends, People, the family in Hungary. Now toteach investors toexpect you’re Europe. Each of the European Union betterable tounder- family tomaintain systems. these start Cnd,June 2005 Canada, Statistics Source: $ billions 1000 1200 -400 -200 200 400 600 800 0 1993 Debt toforeign investors keeps sliding overseas owned assets byCanadians. Total liabilities 1995 in toincreasing response values of Net international investment position 1997 Debt Decrease 1999 Total assets 2001 2003 www.advisor.ca

2005

Dewar Sue by Cartoon AE08_012,013 7/18/05 7:23 PM Page 13 CALENDAR

PRACTICE MANAGEMENT ■ AUGUST 7 to 10, 38th Annual Canadian Employee Benefits Conference, Hyatt Regency UNTYING THE KNOT Vancouver, Vancouver, www.ifebp.org

■ SEPTEMBER 20 to 23, ACPM 2005 Annual hile young couples typically spend the couple with further adjustments such Conference, Fairmont le Manoir Richelieu, W hundreds of hours on their wed- as changing retirement projections to La Malbaie, Que, www.acpm.com

ding plans, a single-day event, they fre- account for the fact that money initially ■ SEPTEMBER 27 to 29, IFIC 19th Annual quently neglect to take charge of their put in RRSPs may now be going toward Conference, Metro Toronto Convention Centre,

financial futures before taking vows. a Home Buyer’s Plan. Toronto, www.ific.ca ■ SEPTEMBER 29 to 30, In fact, a young couple is likely to devote Another reason to start planning 3rd Annual IAFP Symposium, Sheraton Hotel, OF only a few hours a year to addressing how before the trip down the aisle is to ensure Ottawa, www.iafp.ca ■ SEPTEMBER 29 to 30, they’ll meet the financial needs that they no one is in the dark about soon-to-be- 6th Annual Alternative Investment Summit for

will carry through the rest of their lives, shared debts. Roulston stresses it’s Institutional Investors, Paramount, Toronto, EVENTS

says Bradley Roulston, a certified financial important to make sure neither person is www.strategyinstitute.com ■ OCTOBER 21

planner (CFP) with Roulston Financial in surprised to learn “the other has $60,000 to 22, Global Chinese Financial Forum (GCFF) Mississauga, Ont. Such neglect can have in student loans.” Toronto Conference 2005,Toronto Board

repercussions down the road. Sandra McLeod, a CFP and director of Trade, First Canadian Place, Toronto,

The starting point, he suggests, is the of succession and estate planning at www.gcff.ca ■ OCTOBER 27, Morningstar tried and true monthly budget. While Grant Thornton LLP in Toronto, notes dif- Canada Investment Conference, Risk opening a joint bank account or main- ferent rules usually apply to older couples Rewarded: Essential Portfolio Strategies,

taining individual accounts is a personal who, in many cases, are marrying for the The Carlu, Toronto, www.morningstar.ca/

choice, Roulston says operating a com- second or third time. Usually, people in conference.com ■ NOVEMBER 17 to 18, bined account can offer the empowerment this age group have more assets, poten- 11th Annual Regulatory Compliance for of knowing each financial transaction. tially increasing the role an advisor will Financial Institutions,The Sutton Place Hotel,

Young couples should then identify play.“When you’re looking at putting any Toronto, www.canadianinstitute.com their life goals. Roulston says this exer- kind of lives together, everyone should cise is particularly important because the have a financial plan, but this is a great To submit an event, e-mail [email protected] transition from two single financial plans time to be updating it. And if you don’t to a combined one can be challenging, have one, then absolutely get one that especially if both people have different deals with joint assets,” she says. future expectations.“Now your life goals These more established couples will be are being matched with someone else’s faced with their own sets of planning and it’s very important to write out what issues, such as marriage contracts, fam- those life goals are so you can work ily trusts, and combining families and WON towards them,” he explains.“Sometimes homes, McLeod says. couples will say, ‘I didn’t know you were She notes such financial complexities planning on that.’ Unless I know what strengthen the case for doing your home- for the team! someone wants to achieve, I can’t do a work when young—even before leaving Advisor’s Edge took the gold KRW financial plan for them.” university and regardless of whether mar- Award for Best Merchandising/ Roulston identifies three key areas riage is in the cards. “Today, 50% of Marketing Article for “Hidden Mil- that warrant discussion: having children, marriages end up in divorce,” McLeod lionaires” (May 2004) by writer Ali- buying a house and changing occupations. says. “You really need to at every stage son MacAlpine. AE also landed in the “If two people are saving for a house, I make sure that you are in control, know Top Five for best issue (Oct. 2004). need to know that in four years all that what’s going on and have a plan you’re Advisor.ca received a Top Five nod for equity is going to be put towards the working toward.” best website.The KRW Awards hon- house,” he notes, adding he’ll then help —Heidi Staseson our excellence in business journalism.

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Strategies for advisors from advisors

By Christine Van CauwenbergheTOOLBOX FAMILY TIES Blended families create estate planning challenges for advisors aiming to ensure heirs receive adequate shares.

Oliver and Olivia* are about to get married, each for the second time. Oliver is 45 and has two children, Eric and Emily* (ages 10 and 8). Olivia, age 33, also has two children, Derek and Deborah* (ages 3 and 1). Canada’s 2001 census found more than a half-million people live in blended families. And the high divorce rate means you can expect many of your clients will be in more than one long-term relationship over the course of their lives. Whether in a common-law relationship or married, these blended families present unique planning issues. They also challenge advisors to address competing interests such as a client wanting to leave part of his or her estate to a new spouse, while also leaving a legacy to the children. For Oliver and Olivia, it’s not advisable to draft standard financially dependent on the deceased, the spouse could have mutual wills that leave everything to the surviving spouse or a right to receive support from the estate. In British Colum- common-law partner and then divide everything equally bia, surviving spouses may make a wills variation application, among their children upon death of the second spouse. If regardless of whether or not they were dependent. Oliver were to die first and leave everything directly to Olivia, Further, never assume family property claims will be sat- for example, there is no guarantee Eric or Emily would ever isfied by assets that a spouse owns or receives outside the estate see any part of Oliver’s estate. (such as an inheritance from his or her own parents, Olivia could decide to remarry, rendering all of her previ- or dividends from individually owned investments). The ous wills void (in all provinces except Quebec), and making property rights of surviving spouses are generally against her estate subject to the claims of her new spouse and fam- the estate, regardless of how much they have received from ily. Or, Olivia could rewrite her will and leave her estate exclu- outside sources. sively to her own children, Derek and Deborah. Unless Eric If Oliver wants to leave part of his estate to Olivia, and and Emily were still financially dependent on Olivia at the part of his estate to Eric and Emily, he must talk to his lawyer time she died, they would have no claim against her estate. about how much of his estate Olivia will be entitled to. Also, Having the client leave the entire estate to his or her chil- while Eric and Emily are still minors, any part of his estate dren can also be problematic. A surviving spouse may have a *All client names have been changed. Continued on page 17

Illustration by Stephanie Wunderlich by Stephanie Illustration right to a division of family property, or if he or she were

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TOOLBOX

Continued from page 15 consider using insurance products to left to them should be put in a improve the inheritance. If Oliver leaves testamentary trust. his entire estate to Olivia but also pur- So, what kinds of solutions are being chases an insurance policy for both Eric employed by blended families? One and Emily, he will more than satisfy his popular approach is to create a spousal family property obligations, while still or common-law partner trust. ensuring a legacy for his children. Keep in mind that when a spouse Trust Distribution makes a support claim, insurance pro- Instead of leaving property directly to ceeds (in some jurisdictions) will be a surviving spouse, the couple can leave included as part of the estate when a their estate in a spousal trust. If Oliver determination is made about his or her dies first, Olivia would be entitled to entitlements. In this scenario, Oliver receive all of the trust’s income during will have to review his plans with a ELITE ATHLETES her lifetime. And she would be the only lawyer. In the event the estate is small HAVE COACHES. one entitled to use any of the capital of and the insurance policy is large, the trust as long as she’s alive. Olivia could be entitled to some of the SHOULDN’T When Olivia dies, the capital in the proceeds. ELITE ADVISORS? trust will be distributed according to Since Eric and Emily are currently Oliver’s will, not according to Olivia’s. minors, they should not be designated Introducing a Groundbreaking Assuming all the conditions set out in as the direct beneficiaries of the insur- Coaching Program for Elite Advisors the Income Tax Act are met, the assets ance policy. Instead, Oliver should con- REACH YOUR PERSONAL BEST. can rollover to the spousal trust, with- sider putting the proceeds into an insur- Whether you are competing on the field or in the out triggering capital gains. ance trust to make sure his children office, achieving elite status takes dedica- This approach requires the couple to don’t receive any money until they’re tion and the right attitude. Now there’s a pass the assets through their estates. If mature enough to manage it. coaching program for advisors looking to they hold the assets as joint owners, or It becomes even trickier if the couple elevate their game. CEG Worldwide’s designate one another as the direct ben- has more children after initially creating turnkey coaching program, CULTIVATING THE AFFLUENT eficiaries of all of their assets, there will the blended family. Advisors dealing , is designed to help you take your business to the next level. be no assets in their estates—and there- with these complex family units need to fore nothing to put in the trust. pay special attention to the clients’ estate IS IT RIGHT FOR YOU? FIND OUT. We are In the case of registered assets, Oliver planning needs. They should not assume serious about your success. CEG and Olivia may prefer to designate each techniques used for traditional families Worldwide only accepts advisors into the program who, we believe, will expe- other as direct beneficiaries of their will be appropriate. rience a serious impact on their busi- plans, so that assets can roll over with- nesses and their incomes as a result of out triggering tax after the first spouse Christine Van Cauwenberghe, LL.B., TEP, their participation. Are you ready? dies. But, this means the registered CFP, is the director, tax and estate planning, assets won’t go into the spousal trust. with Investors Group Financial Services Inc. DOWNLOAD So, if Oliver dies first and much of his in Ottawa. This article is written by and your free special report estate consists of his RRSPs, there will reproduced with the permission of Investors on CEG Worldwide’s coaching program for CULTIVATING be fewer assets left in the spousal trust Group Financial Services Inc. as a general financial advisors THE after Olivia dies, meaning a lessened source of information only. It is not a ON THE WEB: cegworldwide.com/coach AFFLUENT legacy for Eric and Emily. solicitation to buy or sell investments, TOLL-FREE: If Oliver does not have sufficient nor is it intended as investment, financial, (866) 348-2406 assets to leave enough for Olivia, Eric legal, accounting, tax or other personalized and Emily directly, then he should professional advice.

www.advisor.ca ADVISOR’S EDGE | AUGUST 2005 17 AE08_018,019,021,023-025BELO 7/15/05 4:21 PM Page 18 THE Your friendly neighbourhood credit union is also your next big competitive threat. By Deanne N. Gage

YOU hear the myths all the time. Rocky Mountains, Pacific Ocean and ® Credit unions are lending institutions, lush green forests. To your right is a nook HANDS & GLOBE Design is owned by the World Council of Credit Unions. and certainly not providers of financial with free Internet access for unlimited advice. And they aren’t even close to surfing. Or members can simply relax becoming fierce competitors, at least not there with a beverage purchased from the in English Canada. chi-chi coffeehouse next door. The phys- If that’s your impression, go to the ical space, and the way it’s packaged, Village at Park Royal, in the heart of consistently evokes the Canadian West. affluent West Vancouver. Step inside “We are really shifting from being a North Shore Credit Union, the charm- community credit union to being a ing, urban-yet-rural building across from branded financial boutique,” explains Home Depot. You’ll immediately be Chris Catliff, North Shore Credit Union’s greeted by Sabra, the concierge, and president and CEO. “If you go to a very notice the classic waterfall behind her. good hotel where everyone knows your You’ll see wide-open spaces everywhere, preferences, that’s what we’re doing. But with plasma screens that highlight the we’re doing it more to the mid-market.” AE08_018,019,021,023-025 7/15/05 4:21 PM Page 19 OW Cover Story RADAR

Take a drive down to Pitt Meadows, office. Instead, Brady’s priority is to names and the year they joined the B.C., a suburb southeast of Vancouver. greet and chat with as many members Alterna branch. In the Meadowtown Centre is the just- as possible. During its inaugural two Branches like these are far removed opened Aperio “store” of Coast Capi- weeks, the Aperio store opened more from the long-held perception of credit tal Savings. With its bright neon colours than 100 accounts. unions with 1970s-style cement walls and and inviting, open-concept interior, it Toronto credit unions are also expe- green, deep-pile carpeting. And more looks like an upmarket version of Ikea. riencing some transformation. Take the renovation is coming. Design has been “How can we help you?” are the first College streetcar to Bay Street. On the turned on its head to emphasize places of words you see upon entering the store. northwest corner is the recently interaction instead of transaction. There The same question is also on every staff redesigned Alterna Savings, which has is substance to the style, though. It’s all member’s mandatory name tag. The a coffee shop as a focal point of the part of the bigger vision to get members store, with its interactive wickets and branch. Dozens of poster-sized images to take advantage of financial plan- self-serve kiosks, is entirely built around of Alterna members (representing dif- ning and wealth management services the customer. “It’s more like a retail ferent ethnicities and ages) are displayed being made available by their friendly environment,” explains store manager from one end of the branch to the neighbourhood credit union. Paul Brady, who doesn’t even have an other. The posters display the members’ Continued on page 21

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Continued from page 19 They have their work cut out for them. While more than 10 million Canadians currently use a credit union, it’s more likely for term deposits and mortgages, not financial advice. An internal study of Vancouver City Sav- ings Credit Union (VanCity), Canada’s largest, shows most of its members (95%) have their investment business at other financial institutions such as banks, full-service brokerages, insurance companies and financial planning firms. London, Ont.-based St. Willibrord Credit Union hired industry consult- ants to gauge the wealth management opportunity. And the opportunity is beyond huge. The consultant estimated St. Willibrord’s 46,000 members have a combined $4 billion in assets invested elsewhere. With numbers like that, it’s no wonder credit unions want in on Chris Catliff in the Park Royal the action. branch of North Shore Credit Union, “Being competitive helps us main- West Vancouver. tain our membership,” notes Hugh O’Hare, CEO of Winnipeg-based Buf- management arena. It’s already starting In the eyes of credit union executives, falo Credit Union, a medium-sized to pay off in some cases. North Shore the right advisors are highly accredited, outfit. “Bottom line, if credit unions wealth management assets have grown with preference given to the certified don’t target wealth management, we’re by 37% a year. And according to Bob financial planner (CFP) designation. going to lose our members to outside Carpenter, assistant vice-president (Those who don’t have the CFP are firms.” for investment services at Envision expected to earn it within two years.) But credit unions have an ace in the Financial, the Langley, B.C.-based credit The right advisors also actively vol- hole: unwavering trust. Members con- union saw its investment assets increase unteer in their communities and have sistently rate credit unions high in by 50% in two years. He notes 70% of experience providing top-notch service customer service. Service is to credit members who deal with an Envision to members. Like Stephanie Komar- unions what money is to banks. While financial planner saw Envision as their nisky, they ultimately see financial banks must answer to customers and primary financial institution. planning as part of a greater cause. “I’m shareholders, two distinct groups whose personally not interested in owning interests may or may not align, credit The Right Stuff three homes across the country. I want union members are customers and own- The first step in a wealth management to earn a living doing something that ers. Credit union profits go back into war is hiring the right advisors . . . and helps people . . . that helps the little the community and to the members. fast. Many credit union advisors have guy,” explains Komarnisky, an invest- The strategy? Extend member trust been run off their feet since demand for ment advisor who left a bank brokerage Continued on page 23 Williams by Douglas Photography into the newly developing wealth their services is rapidly growing.

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Continued from page 21 analyst at Edmonton-based Capital City the lowest and six being the highest. to join Winnipeg-based Carpathia, Savings, attributes branch referrals as Advisor bonuses are tied directly to the a Ukrainian-focused credit union. “At the reason his assets under administra- number of fives and sixes they earn. “It the banks, what head office says, goes. tion grew from $13 million to $57 mil- aligns advisors completely with the At credit unions . . . someone three lion in three years. “I felt there was an members,” says Catliff. provinces away does not make decisions opportunity to grow faster at a smaller Coast Capital Savings takes it further for people they will never meet, know organization,” he says. by actually tracking the number of or understand. In a society that has a Credit union advisors also generally client phone conversations and in- selling-to-the-highest-bidder mentality, receive a bonus, which is based on person financial planning checkups. the credit union environment offers profitability and, unconventionally, Smaller accounts certainly aren’t me a refreshing change of pace. People client service. At North Shore, for screened from this process, notes Trudi matter here.” example, members are asked to fill out Kloepper, senior vice-president of Advisor compensation is competitive an annual survey which asks questions Coast Capital Savings in Surrey, B.C. at credit unions, but the payout struc- such as: “Would you recommend your The goal is to serve high-net-worth ture tends to be different. Credit unions friends or family to this account man- accounts, but not at the expense of usually pay a base salary and, like ager?” “Do you feel your financial plan middle-income people. “We’re prepared the banks, have a solid pool of branch is well taken care of ?” “Are we deliver- to do financial plans for anyone who referrals to prospect for business. Stan ing to your expectations?” Members comes through our door,” she says. Penner, a CFP and chartered financial give numeric answers, with zero being “There’s a huge untapped market of people who are ignored by other institutions because of low assets.” And Kloepper believes people will remember which institutions shunned them and, more important, which ones welcomed them from the beginning. VanCity also encourages smaller accounts. Two years ago, the credit union divided its advisors into two camps: investment advisors, IDA- licensed CFPs who serve members with more than $100,000 in investable assets; and investment specialists, MFDA-licensed CFPs who focus on members just getting started with financial planning. “Someone has to care about $25,000 accounts because these people are also members of VanCity and they deserve our attention,”explains investment specialist Petra Remy. “It’s not the credit union way to leave small Paul Brady and Trudi Kloepper in the accounts behind.” Aperio “store” of Coast Capital Savings, In Emil Shahmooradian’s experience, Pitt Meadows, B.C. most members view consulting with an Continued on page 24

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Continued from page 23 LARGEST 10 CREDIT UNIONS (excluding Quebec) advisor as an added bonus since many ASSET SIZE (Q1 2005) hadn’t had the pleasure of working with 1. Vancouver City Savings (VanCity) Credit Union (B.C.) $8.18 billion one before. Desjardins Credit Union 2. Coast Capital Savings (B.C.) $6.96 billion recently hired him and 12 other advisors 3. Meridian Credit Union (Ont.) $3.24 billion to work in Ontario branches, where 4. Capital City Savings Credit Union (Alta.) $2.26 billion wealth management services are still in 5. Envision Credit Union (B.C.) $2.17 billion the developing stage. In his three months 6. Desjardins Credit Union (Ont.) $1.93 billion at Desjardins, Toronto-based Shah- 7. Community Credit Union (Alta.) $1.76 billion mooradian has already built a book 8. Alterna Savings (Ont.) $1.72 billion of $150 million. “Before they hired 9. Steinbach (Man.) $1.61 billion advisors, members would just come in 10. Prospera Credit Union (B.C.) $1.48 billion and renew their GICs,” he explains. “Now, members have the opportunity Source: Credit Union Central of Canada, 2005 to look into other investment options besides GICs. They appreciate having that communication.” wealth management become a strategic priority,” says Elaine McHarg, senior vice-president and chief marketing officer “Gee, I Wish I Knew About This” for Credential, a dealer for most of Canada’s credit unions. Credit unions have made progress but some industry observers “Some credit unions need to understand that a wealth feel wealth management still takes a back seat to traditional management strategy is about more than selling mutual funds. fare such as mortgages and term deposits. “It’s important It’s about financial advice.” Thomas Tsiaras, an investment advisor at VanCity Invest- ment Advisory Services, believes wealth management is still Darin Diehl, Executive Editor and Associate Publisher, a well-kept secret among members. “They know we do Advisor Group is pleased to announce the following promotions: term deposits and GICs but we also do a lot more—and we Deanne Gage is promoted to editor of Advisor’s Edge. Deanne has been with the magazine for more than do it well.” six years. She has been instrumental in evolving the publication into Canada’s premiere English-language Tsiaras adds many members often find out about VanCity’s monthly focused on the practice management needs of advisors. Deanne’s stewardship has helped Advisor’s wealth management services just after they’ve committed sig- Edge win numerous KRW and other industry awards. nificant assets at another financial institution, often com-

Scot Blythe is promoted to editor of Advisor’s Edge menting, “I wish I knew about this.” Report. Scot has been managing editor of the newspaper since its launch in January. He has been with the Once the assets are at a competitor, it’s hard to transfer Advisor Group for more than four years, serving as senior investments editor on Advisor.ca for much of them back since members either can’t be bothered or become that time. He brings to his new position many years of preoccupied with other things. As O’Hare explains, “Switch- newspaper and magazine writing and editing experience. ing your financial institution is one of the toughest things you Doug Watt is promoted to editor of Advisor.ca. Doug has been with the web site since 2000. He started out can do. You’ve got your automatic payments, credit cards, as a reporter, and eventually rose to news director. Doug is highly respected by the industry for his dili- everything linked to a specific institution. In order to move gent, fair and comprehensive coverage of the issues that, it’s a pretty major transaction. Usually the only time that affect advisors. a consumer is going to move is if it’s a fairly traumatic situation.”

The ADVISOR GROUP is a part of Rogers Publishing, a division of Rogers Media Inc., a division of Rogers Communications Inc. (TSX: RCI; NYSE: RG) Rogers Communications Inc. is a diversified Canadian communications and media company. It is engaged in cable television, high-speed Internet Other Hurdles access and video retailing through Canada’s largest cable television provider, Rogers Cable Inc.; in wireless voice and data communications services through Canada’s leading national GSM/GPRS Some credit unions also have to cope with the fact they can’t cellular provider, Rogers Wireless Communications Inc.; and in radio, television broadcasting, televised shopping and publishing businesses through Rogers Media Inc. offer securities at the branch level. Coast Capital Savings, for instance, offers securities through Q-Trade, a discount

24 ADVISOR’S EDGE | AUGUST 2005 www.advisor.ca AE08_018,019,021,023-025 7/15/05 4:26 PM Page 25

brokerage. But what if members want can’t get product-specific. It is a hurdle.” (SRI). Alterna, on the other hand, nur- advice on securities? The credit union Mergers can also create consumer tured the query and the client invested refers them to a specific department at confusion, since they require people to a small portion in SRI equities. She National Bank Financial, Kloepper get accustomed to new names and then moved the rest of her assets to says, noting that both institutions have branding. Two high-profile mergers Alterna. Promptly. non-compete clauses with Coast Cap- occurred a few months ago in Ontario. ital Savings. HEPCOE and Niagara Credit Union Deanne N. Gage is editor of Advisor’s A fair solution, but certainly not the joined and are now known as Meridian Edge. [email protected] same as working with an investment Credit Union, while Toronto-based advisor in your own credit union Metro Credit Union and Ottawa-based branch. Envision identified its securities Civil Service CO-OP became Alterna More online limitation years ago and joined the IDA. Savings. @ “At the end of the day, credit unions are “Credit unions are getting to the www.advisor.ca/interact competing with the banks. To have point where there will definitely be Credit unions are the masters of a channel that doesn’t sell securities is more mergers. To provide the full range service. Are you looking for ways to limiting,” says Carpenter. of services that our members want attract and retain clients by providing On the insurance side, some branches and to do it well, credit unions require superior client service? Then be sure to check out Advisor.ca’s latest maintain a separate entrance for insur- certain economies of scale,” says special report.This online package ance-licensed advisors to comply with Ivan Fraser, manager of financial includes:

regulations. But in Ontario, some credit advisory services for Alterna Savings • Advice on how to improve your union advisors aren’t allowed to sell in Toronto. client action response time insurance at all, so many simply provide More mergers also create more credit • A template client satisfaction members with newsletters and advise union visibility and more serious com- survey to use in your practice them to contact a specific call centre for petitors to attract members. And some • Profiles of advisors with a passion for client service more information. serious competition is already taking “No insurance is a restriction of the place. There’s a story Fraser likes to tell. All this and much more can be credit union act,” explains John Adam- An Alterna Savings client with found in the Practice Zone at www.advisor.ca starting August 8, son, manager of advisory services for St. $350,000 in investable assets had the 2005. For other online resources Willibrord Credit Union. “[Insurance] lion’s share of her holdings with other related to articles in this magazine, please visit www.advisor.ca/interact/. has to be kept distinctly separate. Our firms. Her advisors kept ignoring her CFPs can get into needs analysis but interest in socially responsible investing

www.advisor.ca ADVISOR’S EDGE | AUGUST 2005 25 AE08_026,027 7/15/054:27PMPage26

Illustration by Amanda G. Duffy RICH FRIENDS 26 RussAlanPrince and Brett Van Bortel, Source: ONE of this meansdeveloping knowledge adeep advisors seekingtoreach theelitelevel, market istoknow itinsideandout.For to increase. theirnumberswillcontinue also agree has grown substantially. individuals high-net-worth number of researcher, but onetrend isclear: The marketaffluent vary mates onthesizeandgrowth of ent individuals inrecent years. Esti- tial increase inthenumberof How advisors rate receptive are clients affluent of percentage large A advisors. switching to Poor Fair Excellent RATING Lynch Capgemini/Merrill The 2005 Americahasseenasubstan- North investors.affluent ADVISOR way to successfully cultivate a OF ’ J oe,Jr. Bowen, By John J. ADVISOR S EDGE | AUGUST onthe depending Researchers 2005 PERCENTAGE 69.7% 26.7% 3.6% afflu- Advisor Millionaire’s The the relationship.advisory Wealthy clients forging placeapremium when ontrust an realize tremendous success. you needonly capture atiny sliceto rate thanprevious years. large andgetting larger, albeitataslower by 2008. several years, andreach $ more than estimatestheseassetswillgrow report trol $9.3trillionUSinassets. The individualsthese high-net-worth con- exceeding $ Americawithinvestablein North assets mates there are 2.7millionindividuals World Wealth for Report, example, esti- For individual advisors, thismeans So it’s market clear theaffluent is • • • • • CONSEQUENCES Will switchadvisors soon Will notaddassets Receptive toother advisors Will addassets Will refer others 10% annually over thenext nlss CEGWorldwide. Analysis: . 1 million US. Together, 14 trillionUS react. Here are thepersonalitytypes: stand how theseinvestors thinkand hope to—it’s essentialfor you tounder- ing andtheirfinancial advisors. behave understanding how investors affluent psychology—aworth framework for sonalities form investorsaffluent fall into. per- These distinct personalitieswhich nearly Millionaire’s Advisor research andco-authorof partner there’s more toit.Russ AlanPrince,my to theindividual personalities,but at all. would prefer you nottalkaboutit ifications atlength,while another wanting todiscussitscausesandram- marketmight react toasharp drop by way situations.One toparticular wealthy clients don’t respond thesame No doubtyou’ve noticeddifferent Personality Patterns • Family Stewards If You mightchalk upthesedifferences families. Dominant focus istotake careoftheir you work withtheaffluent—or andwhat they want from invest- thebasisof

, hasidentified nine BOWEN LEVEL level next TO PRACTICE YOUR TAKING NEXT THE www.advisor.ca a high-net- all The AE08_026,027 7/18/05 7:25 PM Page 27

THE NEXT LEVEL

• Conservative in personal and Gamblers advisor-client relationship. If you can professional life. • Enjoy the excitement of investing. provide this, you will have delighted • Frequently not very knowledgeable • Tend to be very knowledgeable and clients who are likely to remain with about investing. involved. you over the long term, while provid- • Exhibit a high level of risk tolerance. ing additional assets and referrals. Phobics • Confused and frustrated by the Innovators The Dissatisfied Affluent responsibility of wealth. • Focus on leading-edge Despite the fact most advisors aspire to • Dislike managing finances and avoid products and services. work with the affluent, most wealthy technical discussions. • Sophisticated invest- investors are generally not satisfied with • Choose wealth managers based ors who like complex the level of service they get. on a sense of personal trust. products. According to our research, most • Tend to be technically savvy and affluent clients are decidedly unhappy Independents highly educated. with their current advisors and are likely • Seek the personal freedom money to remain with those advisors only until can provide. What the Affluent Want someone they perceive as better comes • View wealth management as a Many advisors make the mistake of along. necessary means to an end. assuming that if they simply manage Only about one-quarter of wealthy • Not interested in the process of assets properly, their clients will be sat- clients rate their advisors as excellent. wealth management. isfied. Accordingly, they spend most of Such clients not only remain with their their time and effort trying to ensure advisors, but also provide them with The Anonymous satisfactory investment performance. both additional assets and referrals. • Confidentiality is their Unfortunately, industry research tells The remaining three-quarters (see prominent concern. us this assumption is off the mark. table, page 26) are likely to leave their • Prize privacy in their While investment performance is cer- advisors at any time. financial affairs. tainly important to keeping wealthy While this is obviously bad news for • Likely to concentrate clients happy, it’s not enough. the many advisors who aren’t serving their assets with an advisor who they feel We see this clearly when looking at rea- their affluent clients well, it highlights protects them. sons wealthy investors give for switching a tremendous opportunity for those advisors. One study, based on Prince’s who design and run their businesses Moguls survey of 449 wealthy clients who had with an eye toward ensuring clients are • Want to be in control. changed advisors, found 87% left because content at every step. • View wealth management as a of a poor service relationship. A mere So, foster your personal relationships means to extend personal power. 13% switched because of investment per- with the affluent, or fail in your efforts • Decisive in decisions, rarely look back. formance. to work with them at all. If there is any Specific reasons given by investors for one approach I would emphasize to dra- VIPs dropping advisors speak volumes. These matically increase your chances of suc- • Wealth management lets them buy comments are typical: cess, it is to focus on your relationships status possessions. • “Very little ever seemed to go right in with each of your high-net-worth • Prestige is important. our relationship.” clients. No other factor even comes • Affiliate with institutions and man- • “I wasn’t sure if he really knew who I close in importance, so begin today to agers recognized as industry leaders. was when I called.” build a priority on client relationships • “I never heard from him. It always into your practice. Accumulators seemed like I called him.” • Focus on making their portfolios bigger. • “I didn’t have a warm personal rela- Copyright 2005, CEG Worldwide, LLC. All • Performance-oriented investors. tionship with her.” rights reserved. John Bowen is founder and • Tend to live below their means and These clients are looking for excel- CEO of CEG Worldwide, a U.S.-based global spend frugally. lent service highlighted by a strong training, research and consulting firm.

www.advisor.ca ADVISOR’S EDGE | AUGUST 2005 27 AE08_028,029 7/18/05 7:25 PM Page 28

TAKING

YOUR

PRACTICE

TO THE nextNEXT LEVELlevel

THE IDEAL NICHE BOWEN By Steven Lamb A focused practice, with fewer clients, can be both rewarding and profitable.

ADVISOR coach John J. Bowen Jr. minimum,” Stewart says. Financial Analysts. “I’m going to cannot overemphasize the importance He acknowledges he’ll have to do his approach associations and support of advisors finding a narrow, yet deep, research on the topic, but adds he’s been groups that deal with divorce, to sit niche. But what is a niche? It’s not the gravitating toward the niche for some down with four or five people who have 250,000 Canadian households that time, by building his brand around serv- their finger on the pulse of this niche,” have liquid, investable assets of $1 mil- ing affluent women. he says. “I’m going to start writing lion. Lawyers are also not a niche. Stewart recently launched a seminar articles for the association or for Toronto-based labour lawyers who rep- series on financial independence for the lawyers, which is something we’ve resent unions with memberships in women, holding six sessions last year. done in the past.” excess of 20,000? That’s a niche. For the most part, the attendees had lit- Duncan Stewart manages strategic tle knowledge about how to manage As advisors add more asset allocation for clients at Stewart their money. “The more narrowly you ideal clients to their Financial, a family run, fee-for-service can define your niche, the deeper you books, they will need planning firm in Oakville, Ont. He can get engrained into that subculture, directs the investment strategy for the better it is,” he says. “There are to start winnowing. clients, while his father takes care of the other advisors who focus on divorced clients’ tax and estate planning. women, but there are not a lot.” Who the ideal client is will differ Traditionally, the Stewarts have By focusing on women going through from advisor to advisor. Even if poten- focused on small business owners, divorce, Stewart plans to build his tial clients fit your niche, there is no which have become a much-coveted reputation as an expert in this narrow guarantee you will enjoy working with market segment among advisors. Now market to establish what Bowen calls them. Depending on personality, they he wants to take the business into “credibility marketing.” may be too hands-on, or otherwise dif- another, more focused direction: Stewart plans to pursue a designation ficult to work with. divorce. in divorce—there are at least two: the “I think most advisors enjoy working “Over the next 12 months, my goal Financial Divorce Specialist, offered with the family steward,” says Bowen, is to get two lawyers excited enough to through the Academy of Financial president of U.S.-based consulting firm refer 10 women who are going through Divorce Specialists; and the U.S.-based CEG Worldwide. Their first priority is a crisis or transition, with assets Certified Divorce Financial Analyst, the family, but they tend to have decent under management of $500,000 as a offered by the Institute for Divorce social networks and are willing to make

28 ADVISOR’S EDGE | AUGUST 2005 www.advisor.ca AE08_028,029 7/15/05 4:46 PM Page 29

THE NEXT LEVEL referrals. Investment phobics, on the on a client with a mere $700,000 if he $5 million, but that’s probably not other hand, aren’t much fun to work or she believes the prospect shows practical in our market.” with, even though they require a very potential. But Bowen recommends As advisors add more ideal clients to low level of service. They’re also known charging a minimum fee, so this client their books, they will need to start win- for being terrible referral generators. will pay the same amount for nowing out the non-ideal clients— After all, if they don’t want to talk your services as the $1 million client. those with too few assets, or those who about investments with their advisors, You are running an exclusive practice, are just unpleasant to work with, regard- they aren’t likely to share their thoughts after all. less of how big a contribution they with their friends. David Christianson, a fee-only plan- make to the bottom line. ner and investment counsel at Welling- “I’ve finally committed to reducing Small is Beautiful ton West Total Wealth Management the size of our clientele. It’s already very Affluent clients do not simply want in Winnipeg, raised his minimum to small—we only have about 700 clients,” excellent service, they want to know the $1 million four years ago. The benefits Christianson says. “Seventy-five of service they receive is superior to what were realized almost instantly. them qualify for our ‘serious’ service, everyone else is getting—exclusive treat- “As soon as we set that minimum, all but probably 10 of those and 10 of the ment commensurate to their wealth. of a sudden all the people that call you others have to go.” Bowen strongly recommends the set- are the affluent people,” Christianson Christianson adds that such a cut ting of a high minimum for clients says. “Our only shortcoming is we would allow him to work only four or because it makes it easier to turn away haven’t increased it since then, when we five days a week, instead of seven. people you don’t want to deal with. had a number of clients come in well The advisor with a $1 million limit over that minimum. I would like to Steven Lamb is investments editor of can always make exceptions and take see that minimum at $3 million to Advisor.ca. [email protected]

www.advisor.ca ADVISOR’S EDGE | AUGUST 2005 29

As a new Advisor, The Personal Coach provided me with the process and an understanding for what I needed to do to be successful in business today. Their mentoring and support were instrumental in breaking down the barriers often associated with business succession. Peter Marlatt, CFP, CLU, CH.F.C. and Brad Amlin, CFP, found that working with The Personal Coach allowed them to successfully move through their business succession planning. The smooth transition in their firm strengthened the loyalty in their client base, increased their revenue by 37% and their practice continues to grow. “There will always be a need for The The Personal Coach to assist our business and is an ongoing investment for our future.” The Personal Coach is a national organization, offering unique value to financial Advisors. We have a genuine commitment to your success. • If you are interested in finding out how The Personal Coach’s “New Advisor Excel-eration ProgramTM” or “Succession Progression ProgramTM” can help you move your business forward, then contact us today. 519-576-2262 Email: [email protected] www.thepersonalcoach.ca To discover if The Personal Coach would work for you, contact us for your one-hour complimentary consultation. AE08_031-033 7/15/054:47PMPage31

Illustration by Amanda G. Duffy THE AFFLUENT ATTRACTING www.advisor.ca dental tradepublication. orcolumnfor a planning article dentists, theyshouldwriteafinancial advisors want toattract For example, if the market subsettheywant toreach. foring articles publications thattarget themselves ahouseholdnameby writ- theirtarget niche, making the fabric of in this.” Don’tbe calledanexpert. get caughtup IF o licence to how of needtoget somesort idea of “Many advisors get caughtuponthe based consultingfirm says Bowen, president of needs,” yourself working ispositioning withtheaffluent such instances,perception iseverything. foras experts thosemarket In segments. target niches andpositioningthemselves withadvisors identifyingtheir starts for marketing towealthy prospects. It Bowen Jr. hasabetter-proven strategy tives, thinkagain. Advisor coach John J. through massmarketingaffluent initia- As advisors make themselves known Bowen advisors suggests infiltrate of part “It isclear thatanimportant you’re attemptingtoattractthe thinkingtheysome- expertise, atmeetingtheir as anexpert By StevenLamb CEG Worldwide. U.S.- that leadstolasting relationships. Wealthy investors requirecourtship Ditch thesalespitch. with adifferent meetings,each liminary which includes five consultative on transactions. concentrating toomuch into thecommontrapof Bowen says many riskfalling managing client relationships. advisors mustthenfocus on giving and TV radiointerviews. white papersorbooks,andeventually following upwithspeeches, publishing their marketing through themedia— within thoseniches, theycanexpand amoreHe suggests Once established asexperts, approach, pre- dealing withthewealthy. single factor forimportant successwhen lot, but Bowen stresses it’s themost focus. Five meetingsmay soundlike a ADVISOR ’ S EDGE BOWEN LEVEL level next TO PRACTICE YOUR TAKING | Continued onpage33 AUGUST NEXT THE 2005 31 AE08_033BAL 7/15/05 4:52 PM Page 33

THE NEXT LEVEL

Continued from page 31 living up to their requirements. Bowen The first meeting is called the dis- admits this can be tricky, since many covery meeting, where the advisor learns advisors started their careers by accept- far more about the client than what ing any client with a pulse. would be garnered from the check-box Affluent investors expect superior approach of most Know-Your-Client service to what’s given to run-of-the- forms. Such a process involves learning mill clients, and it is virtually impossi- about the client’s value systems and ble to position a practice as exclusive if where his or her priorities lie. it includes lower-rung clients. But many Conrad Toner, a certified financial advisors are reluctant to give up the rev- planner (CFP) with Investors Group in enue smaller clients contribute to the Peterborough, Ont., has experienced the bottom line, even if it diminishes other reaction of clients who receive too aspects of their practices. much information at once. “A key chal- Bowen suggests the pain of losing lenge is the process of going through that revenue can be reduced if the advi- the discovery meeting and taking what sor sells these small clients as a block of you learn from that to the next meet- business, rather than simply cutting ing, where you discuss the investment them loose or referring them away. That plan,” he says. “Going through that way, the advisor is compensated upfront process—so you’re not doing a com- for the loss of longer-term revenues. Seventh prehensive job of trying to give them Mary Thorpe, a branch manager with everything at once—has been a chal- Dundee Wealth Management in Annual lenge for me. Some clients get over- Burlington, Ont., says she’d never whelmed by that.” thought of packaging up smaller clients ADVISOR OF THE YEAR Brian Smith, a CFP at Legacy Wealth and selling them as a group. “We all AWARDS PROGRAM Management in London, Ont., has an think about who we are going to give insurance background but is planning the clients to. We don’t want to get rid ENTRY FORM ON PAGES 10 & 11 to expand his practice to include more of them, but by receiving some revenue, NEW FOR 2005: holistic planning, including investments. it’s easier to let go.” NEW CATEGORIES, He says the discovery process will help Her long-term goal is to work a four- ONE NATIONAL WINNER him identify the needs of his more day week, with two of those days fully PER CATEGORY affluent clients, not only from a mone- devoted to client meetings. Winnowing tary perspective, but also to realize their the less profitable clients will make this BEST INSURANCE SOLUTION non-financial aspirations. goal far more attainable, she says. BEST INVESTMENT SOLUTION He views it as a complete process, As a CFP, she is accustomed to taking BEST TAX SOLUTION from the initial interview and asking the a more holistic approach to clients and BEST STANDARD FINANCIAL PLAN client about his or her values, all the way managing all facets of their financial BEST ADVANCED FINANCIAL PLAN through to the post-sell. That type of lives, but she is now seriously consider- linear system can encourage wealthy ing following Bowen’s advice about out- Celebration. prospects to move their business to your sourcing the investment management. Excellence. shop. “If you can show them that She plans to spend more time in front of there’s a better way of doing what they her clients, with her assistant taking on Innovation. want to do, then they’re open to jump- more responsibility for everyday tasks Professionalism. ing ship,” says Smith. like data management.

Trimming the Fat Steven Lamb is investments editor of Advisors have heard it before: They Advisor.ca. need to get rid of clients who aren’t [email protected]

www.advisor.ca ADVISOR’S EDGE | AUGUST 2005 33 AE08_035 7/15/05 4:54 PM Page 35

TAX BREAK

MULTIPLE PROPERTIES Your home is your tax shelter . . . most of the time. By Gena Katz

gain on more than one THIS IS THE SECOND OF A TWO-PART SERIES property, at least in part. CALCULATION OPTION ON RESIDENTIAL TAX ISSUES. Generally, the PRE formula Using the alternate calculation can assumes gains accrued evenly minimize the gain on a sale. The Principal Residence Exemp- during ownership. However, tion (PRE) is dependent on designat- to keep pre-1982 gains STANDARD CALCULATION ing a qualifying property as a Princi- exempt, an alternate calcula- Gain $289,000 pal Residence (PR) on a year-by-year tion is used for homes pur- Exemption ((7+1)/30 years) $77,067 basis. It is computed in the year of chased before that year. The Net capital gain $211,933 sale as the gain, multiplied by the ratio alternate calculation computes ALTERNATE CALCULATION of the number of years the home is the gain separately for the pre- Pre-1982 gain $89,000 designated as a PR, plus one, over the 1982 and post-1981 periods. Exempt portion $89,000 number of years the house was owned. Here’s an example. As part Post-1981 gain $200,000 The designation is made by filing of their retirement plan, Gail Exempt portion (1/24) $8,333 form T2091. However, under the and Edward sell their cottage Net capital gain $191,667 CRA’s long-standing position, the this year and plan to downsize form is not required when the gain is from their large city home to a condo cottage at least six years of exemption. completely exempt. When the form is within the next two years (See chart: For the years after 1981, the gain per not filed, it’s assumed the PRE has Principal Decision). They purchased year on the home is significantly greater completely eliminated the gain. the city home (their first house) in than the gain per year on the cottage, so Prior to 1982, each individual 1973 for $104,000. At the end of it makes sense to save the PR designa- could designate a property as a PR, 1981, it was valued at $210,000 and tion for the post-1981 years for their but the designation has since been has now jumped to $640,000. Gail city home. In addition, because the restricted to one residence per family inherited the couple’s cottage in 1976 post-1981 gain per year is higher than unit per year. So if a family has owned when it was worth $61,000. It was the pre-1982 period for the home, the more than one home continuously valued at $150,000 at the end of alternate method will not be used on since before 1982, it can shelter the 1981 and was recently sold for the home. Therefore, for the home, all $350,000. years but one can be designated as PRINCIPAL DECISION Gail and PR to fully protect the gain. This leaves Edward can each one year of designation for the post- When deciding on PR designations, compare the standard designate a 1981 period for the cottage (See chart: calculation and alternative formulas. property as a Calculation Option). HOME COTTAGE PR for the pre- STANDARD CALCULATION (gain/year) $16,545 $ 9,633 1982 years, so Gena Katz, CA, CFP, is a senior ALTERNATE CALCULATION (gain/year) the home would principal with Ernst & Young’s National Pre-1982 period $11,778 $14,833 get at least nine Tax Practice in Toronto. “Tax Break” Post-1981 period $18,333 $ 8,333 years and the appears monthly.

www.advisor.ca ADVISOR’S EDGE | AUGUST 2005 35 AE08_036 7/15/05 4:55 PM Page 36

INSURANCE INSIGHTS

SAFE HAVEN Life insurance trusts are flexible tools that can be used in many estate plans. By David Wm. Brown

attribution rules, and if the child while protecting the estate’s assets. A THIS IS THE FIRST OF A receives income from the trust it will testamentary trust established by a will TWO-PART SERIES ON THE USES AND STRUCTURE be taxed in the child’s lower tax is also an effective holding venue for OF TRUSTS DESIGNATED TO bracket. These testamentary insurance insurance proceeds designated for a RECEIVE THE PROCEEDS OF LIFE INSURANCE POLICIES. trusts also have the advantage of being client whose estate may be obliged to taxed on a progressive basis, the same make continuing support payments to The concept of trusts has been system applied to individuals. either a former spouse or children. around a long time, deriving in fact Many testamentary insurance trusts Instead of appointing a former from a medieval English system to are established for the benefit of chil- spouse as an irrevocable beneficiary of allow Franciscan Friars to benefit from dren, or family members who may an insurance policy, the owner can property ownership while keeping be minors, elderly or otherwise unable designate a trustee on behalf of the their vows of poverty. A trust is a legal to make sound financial decisions minor beneficiaries. The trustee can entity, similar to a corporation, where because of physical or mental limita- then administer the funds and ensure title is divided between a trustee, who tions. As an intermediary, the trustee regular payments are made to the holds physical ownership, and the must help make decisions and admin- spouse or children, instead of having beneficiary, who owns equitable title. ister the assets. For example, your the policy pay out a lump sum that Insurance trusts can be powerful client may have an elderly parent, or could be spent immediately. estate planning tools and there are sev- a physically or cognitively disabled Establishment of a testamentary eral reasons an advisor would recom- dependent. To assist that dependent, insurance trust may also be appropri- mend their use to receive insurance a trust can be established through pro- ate in situations where a family mem- proceeds in an estate plan. Among ceeds of a life insurance policy to pro- ber is receiving government benefits. the most common is the avoidance vide for his or her needs while alive. Henson trusts give the trustees of probate or estate administration After the dependent dies, the remain- absolute discretion over the distribu- taxes. Ontario’s Estate Administration ing capital can be added to the residue tion of the trust funds to the benefi- Tax Act of 1998 introduced new of the client’s estate. ciary. They are designed to allow the levies and, in turn, made people start Spousal trusts are also very com- trustees to distribute funds without looking for ways to avoid the tax. Life mon. They allow proceeds from an adversely affecting the payments from insurance trusts were among the first insurance policy to be paid into a trust government sources. programmes set up to avoid these for the benefit of a surviving spouse. taxes. This type of trust will ensure certain David Wm. Brown, CFP, CLU, Ch.F.C., When a trust established in a tes- assets not used by the spouse are RHU, is a member of the MDRT. He is a tator’s will receives insurance proceeds, eventually passed down to the children partner at Al G. Brown and Associates in it qualifies as a testamentary trust as or other heirs intact. Toronto. “Insurance Insights” appears every specified in Technical Interpretation Such vehicles are useful if your other issue. Bulletin #9605575 (December 17, client is concerned his or her insur- More online 1996). A trust established under a ance money will be squandered. The @ will for a child is not subject to the spousal trust can provide for support www.advisor.ca/interact

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BY BEASLEY HAWKES closingBELL THE CE DEBACLE

What’s this obsession with CE credits? “How did they get accredited?” We obviously need them, • Upgrade your knowledge this year in a certain area, and seek out the best but when did they become the second sources of information. For tax, this might mean attending one of the currency of the realm? Canadian Tax Foundation confer- I don’t know which is funnier, the so-called accredited events or the CE-obsessed ences. Or take Level One of the CFA advisors looming at the registration desk looking for their credit certificates before course if you’re looking to boost they get their second chocolate croissant. your investment savvy. For financial If you have trouble accounting for 30 or 40 hours of continuing education, planning, there’s the Canadian Insti- then you are either doing your clients a deep disservice or not keeping track of tute of Financial Planners conference all you do. How can you not spend more than an hour a week sharpening your and the annual Institute of Advanced knowledge and still call yourself an advisor? Financial Planning symposium. The Not every newspaper you read will qualify for CE, nor will every episode of Advocis conference has an excellent Squawk Box or ROB TV, but lots of meaningful events qualify for credits and marketing stream. give you some beneficial knowledge. On the other hand, some of the best events • Don’t repeatedly see the same speak- don’t need the CE currency to attract participants, so those events don’t apply. ers, unless they evolve their curricu- That’s one of the tragedies of the current devolution of the CE business. Advi- lum each time. sors who are only looking for the credits will go with the matchbook-cover types • Participate in at least one meaning- of institutions that give the frequent attender points. If I were a skeptic, I might ful learning experience that does not say that just perpetuates their ignorance, but that wouldn’t be charitable. provide CE credits. If it’s really good, Lest I get on a rant, I’ll admit I’m partly to blame. I was an executive of two such let your associations know about it. organizations when they instituted the hourly CE requirements. In both cases, we No learning organization that hopes thought members were professionals, or at least grown-ups, and had them keep to cater to advisors can survive without track of their own credits. The general assumption was every member was doing the promise of CE credit certificates. so much more than the required 30 hours. The requirement just put some struc- But only we can convince our associa- ture and variety in the type of study they did, such as technical reading, attending tions we want a better quality of knowl- tax and investment symposia, local luncheons, annual conventions, preparing for edge and not stuff that results from public seminars and even serving the profession itself through volunteering. Not selling us to those CE providers with surprisingly, it worked very well. the deepest pockets. I’m not quite sure when CE credits got out of hand, but here’s how you can fix it: • Make a rough plan of the professional development events you want to attend. Beasley Hawkes is a pseudonym. He is a Restrict your plan to those that will educate you and, in turn, benefit your clients. practising financial advisor with a firm he’d • Boycott anything that smacks of a sham. You know it’s a sham if rather not name. Hawkes can be reached at you’re only attracted by the CE credits and you continually find yourself asking, [email protected]

38 ADVISOR’S EDGE | AUGUST 2005 www.advisor.ca