Month: March 2016

Selecting Money Managers

Managing wealth has evolved beyond investment management. Advisors must provide greater value to their clients to justify their fees or else risk losing business to lower-cost competitors. For clients, the question becomes how do you choose money managers?

Four key principles for selecting money managers:

Portfolio: Does the manager have a philosophy that is entrenched in the portfolio over time? Is the level of risk appropriate? What is the asset allocation or investment objective?

Performance: Are the manager’s performance results consistent with the stated investment process? Does he or she consistently outperform the benchmark?

People: Does the manager have reliable experience and ability? Does he or she assess and operate on information wisely?

Process: Does the manager have a clearly stated investment process? Is it applied consistently?

Trust is the bedrock for who you select as your money manager. Clients can determine who they can trust by examining the four key principles for selecting money managers.

CRM2: The client-relationship model is about to change

The Canadian investment community is quickly gearing up for upcoming legislation called the Customer Relationship Management Model, Phase Two (CRM2) that since announced, has caused financial advisors to re-think how they do business.  This means that as of July 15, when the legislation kicks in, money managers will need to be more transparent about fees charged to your account.

Perhaps your advisor already discloses their fees in dollar amounts. Or, you are a customer that keenly keeps an eye on the numbers and consistently asks for a break-down of fees. Either way, this is always the best practice. If you’re new to investments, CRM2 is a handy piece of information that essentially lets you know exactly what you are paying for in a way you can understand.

But upcoming changes are more than just about fees. Here’s a breakdown of what you should expect from an advisor.


What to expect with CRM2 beyond fee breakdowns

Two new annual reports:

  1. Annual performance report
  2. This report will summarize how your investments performed over various  standard measurement periods.
  3. Annual charges and compensation report
  4. This report will itemize the cost of everything you pay for; from embedded trailer-fee commissions, to redemption fees, point-of-sale commissions, switching fees and RRSP administration fees, as well as provide an aggregate dollar figure for the 12-month period.

*Note: Although these laws become effective July 15, 2016, advisors have until 2017 to produce these reports to you.


What’s the point of all this?

The industry is shifting its focus to clients and consumers. These changes will help ensure you know what you’re paying through each transaction. Figures will be presented in dollar figures versus percentages.  For those already in investments: be warned you might have initial sticker shock when you see the dollar figures for the first time.

Of course, it’s important not to overpay, but your focus for planning for the future should be on value, not just sticker price. Give your advisor an opportunity to explain the fees to you. Chances are, you already have a good idea whether or not you’re happy with their service.


How to get better value from your financial advisor

Try making a list of what your financial goals are, and what services are important to you. Saving for your children’s education, for example, would be a financial goal. Being able to call your advisor for quick advice would be a service. There are many different types of advisors and client-advisor relationships. Figure out what needs you have and write them down.

Next time you meet with your advisor, keep track of your checklist benchmark and you’ll have a much better idea of whether or not you’re receiving the value you deserve.

Click here to find out more about how you can make sure you have the right financial advisor. For more details on CRM2, click here.




Escape Velocity

Something very rare occurred on February the 12th, 16th and 17th as the S&P/TSX stock market index gained more than 1.4% per day for three consecutive days. Since 1980 this has only happened nine other times. The interesting aspect is that it has historically triggered an extraordinarily large surge in the value of stock prices in each instance a year later. Obviously kickoff rallies like these are not the only force pushing up stock prices but this pattern is particularly compelling.

Different triggers work better in different situations.  In the case of physics, escape velocity is a term that describes the minimum speed needed for an object to break free from the gravitational forces of a massive body. Unfortunately, there is no foolproof means of determining what is needed to propel stocks out of a downward spiral or holding pattern.

Regardless of the S&P/TSX index’s future path, history suggests that as the stock market moves through its various stages, this trigger is worth heeding.  At the initial stage of any market recovery, the first step to break a prolonged downtrend or sideways meandering is to form a base.  Eventual sellers lose power and buyers become more aggressive.  Once an upward trend is launched, more and more investors jump back into the market, even if the fundamentals are bad and the outlook is negative.

The chart to the right shows how the S&P/TSX index performed one year after the last day with a 1.4% gain. The return in the chart shows the average daily gains for all nine sample periods measured. The table to the left lists each occurrence along with the return one year after the last daily gain. Clearly a 20.7% annual return is very impressive, especially since the average annual return for the S&P/TSX index since 1980 is 9.9%.

As compelling as this historic pattern may be, tunnel vision is an extravagance investors can  ill afford. The scope of the potential market rally is far from being clear. Identifying a rally’s starting point is both an art and a science and any number of causes can set it off. For soothsayers, astrologers and stock market chartists, predicting the market’s future from past patterns is a very human pursuit. Investors sometimes see things that are not really there and just because something happened a certain way in the past, does not mean it will in the future. Conversely, some patterns do tell us something about the future. After all, those who cannot remember the past are condemned to repeat it and those who study market history have the opportunity to profit from it.



This report may contain forward looking statements. Forward looking statements are not guarantees of future performance as actual events and results could differ materially from those expressed or implied. The information in this publication does not constitute investment advice by Provisus Wealth Management Limited and is provided for informational purposes only and therefore is not an offer to buy or sell securities. Past performance may not be indicative of future results.

While every effort has been made to ensure the correctness of the numbers and data presented, Provisus Wealth Management does not warrant the accuracy of the data in this publication. This publication is for informational purposes only.