Month: December 2017

Advisor Diversity

There is an old joke in investment management that if everything in your portfolio went up, then it isn’t diversified enough. The same line of thinking also applies to those who work in the industry as well; if everyone thinks the same way then we could get systemic errors occurring all the time. Thankfully diversity has become a key trait to being a successful asset manager and advisor, along with curiosity, tenacity and integrity.


Time has the magical ability to change all things and allow access to fundamental financial advice for all; every age group, gender, family type, religion, sexuality, language or cultural group. The reality is that money is personal. Generally, clients want to talk about their financial issues with someone who is on the same wavelength and appreciates their values, culture and lifestyle.


Today’s clients are expecting the advisor sitting across from them to understand their specific values and culture, and safeguard their financial future. After all, strength lies in differences, not in similarities. However, it is up to each individual advisor to overcome the “stale” part.


Most good advisors are passionate about what they do and actively seek to improve the lives of the clients they work with. But in an increasingly fast paced world with highly volatile and complex markets, going it alone is becoming more difficult. Knowledge is crucial to succeeding in the new world; as is knowing what you do not know. So, advisors will need to adjust their perspective and practices accordingly to successfully navigate the sea of change that is coming.


Here are 5 things that advisors need to do:


  1. Win the War for Talent. Advisors need to prioritize talent management by hiring (and if need be firing) people who have the right qualities and skills and who can strategically move your practice forward. Systematic recruitment, retention and training will be a key to success.
  2. Leverage Technology and Innovation. Make your practice future-ready by embracing innovation and new technologies.
  3. Collaborate. Focus on what you can do yourself and what can be done with third party organizations. There is no need to recreate the wheel, just reach out and get the help you need.
  4. Rejuvenate your Practice Culture. Set out a bold vision that is undaunted by tradition. Having a conservative, “fear of failure” culture will only hamper your practice and drag you down by inertia.
  5. Invest in Diversity. The industry is increasingly undergoing a digital transformation. The next wave of clients think, act and behave differently so by positioning yourself now you will be well situated for the future.


The industry is changing and the demand for financial services that require empathy and top-notch communication skills is rising. Financial advisors are a key conduit of financial knowledge. But the next 10 years will change the landscape beyond recognition. Sure, robo advice grabbed the media’s attention and version 1.0 proved to be a damp squid. But robo 2.0 will be better and robo 5.0 whenever it occurs will be better still. It is the incremental creep that eventual changes the world, not the moonshots.


By being enlightened and progressive you will help clients prosper. There is nothing wrong with being who you are; after all it has gotten you to where you are today. But what you cannot do is remain mired in the past, resistant to new thinking and strategies. The reality is that the industry as it is currently configured has helped countless clients achieve their goals and embracing diversity will get us to where we need to be. Sometimes though, clients just want a hamburger and serving them foie gras does not work.

Prolong your practice

You’ve spent your entire career building your practice from the ground up and now you’re thinking of selling it. You have a book full of loyal clients who you enjoy servicing but the pressures placed on your time is starting to wear on you. While many advisors seem doomed to work long hours into their “would be” retirement years, perhaps you’re considering either selling your book or passing it on to a family member. There’s only one problem: You’re inextricably entwined in the business and you don’t really want to fully retire.

As a personal services business, your clients trust and have a rapport with you; they like the way you treat them and handle their business. While that can make for lifetime customers, it can also make it difficult to sell your business to someone else. There are no guarantees that your clients will stay with the new owner and therefore the value of your business to a potential buyer might be less than you expected. Most advisors who seek to sell their firms won’t get the price they’re after and deep down they don’t even really want to sell.

Another consideration when selling your business is finding an appropriate buyer. Many deals involve a price that’s payable over time, and is largely contingent on how many clients stick around, so you have to be sure that the buyer is someone you trust to do a great job. Do they share a similar investment philosophy? Do they value exceptional service and look after their clients properly? How comfortable are you passing on your life’s work to somebody else?

Another consideration is that once you sell your business, it’s no longer yours. There is no going back so unless you’re 100% certain you’re ready to move on, a better solution would be to look at alternatives. Rather than selling off your business consider an alternate strategy which will allow you to focus only on those parts of your business that you like the best.

For many advisors, the best strategy for their later years might be to slow down, rather than retire outright. Offloading responsibilities can help a planner enjoy staying in business longer than they imagined. Outsourcing the activities that you enjoy the least could save you from the burnout that many veteran advisors face.

Rather than making a decision to abandon your business, you can evolve your business. If advisors are doing everything themselves; conducting annual client meetings, managing money, performing mutual fund research, portfolio construction and monitoring, handling ongoing administration and back office functions, it’s no wonder that many feel burned out.

With that in mind, it’s worthwhile to consider outsourcing as a way to free up time and bring outside expertise into the practice. These considerations can range from the delegation of a portion of the investment management function for some clients, to delegating all facets of the investment and administrative roles for all clients.

Working with a third party provider to handle everything from portfolio construction and management to rebalancing, compliance, research and back office support has been a fast growing trend among advisors over the past decade. Before choosing an outsource supplier, consider the following:
Look for providers that share your investment philosophy
Determine all fees and costs
Confirm advisor and client account minimums
Find out who is the firm’s custodian
Ensure the technology is easy to use and integrates with your structure
Consider the ease of transitioning in and out of the plan
Evaluate the advisor and client logistics to change to the new business model

This is where Transcend can help out. We can free up your time so that you can focus on advancing your business to where you want it to be. We can be an extension of your office, handling your investment and administrative needs such as determining asset allocation, researching investments, selecting portfolio managers, and due diligence. On the administration side we take care of trading client accounts, managing client cash needs, managing fee based billing and reporting, as well as providing regular investment and performance updates to clients. Transcend will work with you to customize your service experience so you can work as efficiently as possible.

While the process of outsourcing can be a challenging one, the objective is to free up your time and energy so that you can focus on the activities you enjoy. By outsourcing these responsibilities, not only will you reduce your paperwork, but you’ll gain time for yourself, your family and the rest of your business.


Investors had taken most of the summer off as the S&P/TSX stock index drifted aimlessly, trading between 15,500 in May and 15,000 at the end of August, but since then it has undergone a steep 7.5% increase. Of course for those investors who closely follow the market, it seemed to be moving in all kinds of directions, falling for a week, rallying for two and jumping about like a chicken on a hot tin roof the rest of the time.


If investors were to glance at volatility measures however, they would come away yawning. The socalled “fear gauge” has been nothing but a sea of tranquility. The best level of fear gauge for the Canadian stock market is the Montreal Exchange’s Implied Volatility Index VIXc (or MVX prior to October 2010) which measures the implied volatility of the iShares CDN S&P/TSX 60 Fund (XIU). VIXc is a good proxy of investor sentiment for the Canadian equity market: the higher the Index, the higher the risk of market turmoil. A rising Index therefore reflects the heightened fears of investors for the coming month. A high VIXc is not necessarily bearish for stocks, as it measures the fear of volatility both to the upside as well as the downside. The highest VIXc readings will occur when investors anticipate large moves in either direction. Only when investors anticipate neither significant downside risk nor significant upside, will the VIXc be low.

The chart below shows the VIXc values as well as the S&P/TSX Stock Index. Currently the VIXc is trading around 8.2 which is very low and confirms that the market is not anticipating any dramatic swing in volatility for the foreseeable future. Low levels of implied volatility are often good periods to enter the market as the risks are relatively low. Equity markets tend to disconnect from their underlying values in periods of high volatility as investors scramble quickly to trade those shares that are coming in or going out of favour. On the other hand, a peak in volatility in down markets can be a useful indicator as it closely precedes a market bottom. Think of 2008 when the VIXc spiked to 88 nine days before the market bottomed, in 2011 the VIXc spiked to 37 the day before the market bottomed and in 2015 the VIXc spiked to the 33 which was the day the market bottomed. Following the years the Canadian stock market experienced significant declines, the VIXc shone the light on the pending major stock market recovery.

Another factor to consider when assessing the timing of a move to equities is the current cash on hand. Not only are retail investors switching from cash and bonds into equities, but hedge funds and institutional managers have been moving this way for some time. Back in 2009 hedge funds and experienced investment managers were well ahead of the retail crowd in buying up equities early in the rally, as they covered short positions and began accumulating long positions. The amount of cash on the sidelines currently has the potential to drive forward a long term equity rally. While it is difficult to say when a rally will begin, savvy investors may want to use this period of low volatility to add to equity levels.

Market Data


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

How high investment fees can diminish Investment Returns

Special to the Financial Independence Hub

The objective for most investors is to earn value-added performance. Unfortunately there are fees and other costs that can diminish investment returns. The reality is that the costs associated with investing in these products can lead to underperformance when measured against industry standard benchmarks.

The above chart shows the average annual fees and their impact on investment performance for Equity Mutual Funds, Exchange Traded Funds (ETFs), robo-advisors and Transcend’s Pay-for-Performance™model. This is illustrated by comparing their returns against a benchmark. The benchmark is a universally accepted representation of a particular stock market that is used to measure the performance of a portfolio manager.  For example, a benchmark for Canadian equities is the S&P/TSX and a benchmark for U.S. equities is the S&P 500.

Ultimately, excessive fees reduce clients’ investment performance and hampers their ability to reach their financial goals.

While ETFs and robo-advisors are gaining in popularity, mutual funds are still the prevalent investment product for retail investors despite numerous studies that have confirmed the weak investment returns of equity mutual funds relative to their benchmarks. In Canada, a fairly new approach developed by S&P Dow Jones Indices called the SPIVA Canada Scorecard confirms performance failings. The latest result based upon five years of data ending December 2016 confirms that equity mutual funds have underperformed their benchmark, often because fees have such a negative impact on the overall portfolio results.

Mutual funds can charge management fees as well as administrative costs and custodial fees. They can also charge clients for trading, legal, audit and other operational expenses. In the chart above, these fees plus investment related underperformance add up to the average true cost (-2.37%) of investing during the last five years for equity mutual funds.

Even low-cost ETFs, which are designed to mirror a benchmark, tend to disappoint. The performance lag can be tied to the level of fees of 0.32%, plus trading and rebalancing costs as well as a potential cash balancing drag of up to 0.42%, based on 2015 data from the Management Reports of Fund Performance (MRFP) found on the website. This analysis does not include the negative impact of brokerage costs to buy and sell, and potential custodian or registration fees. With that in mind, the chart reveals that ETF investors underperform the market appropriate benchmark by -0.74%.

Robo-advisors to the rescue?

Another relatively new entrant to the low cost investment marketplace is the robo-advisor. Employing several common assumptions such as an average portfolio size of $50,000 and trading costs of 0.2% per year, it can be determined that the average robo-advisor fee in Canada is 0.63%.

This cost shows that it is more efficient than traditional wealth management fees, but still lags behind the Pay-for-Performance™ model. While everyone is talking about robo-advisors, the true question should be about getting value for your money and how much fees can impact actual outcomes.

For example, using the average fee on a $50,000 portfolio, the cost of an equity ETF is $367 per year, a robo-advisor would set you back at $682 and an equity mutual fund has a total average annual cost of $1,185.

These high costs are exactly why some investors are reconsidering and questioning traditional methods of investing. Lise Allin of Lise Allin Insurance and Estate Planning Services is an advisor we work with in Ontario and she recalled one case involving a senior, now her client, who in a 10 year time span with an investment bank saw his wealth at retirement go from $1,200,000 to $750,000. This person had worked for 40 years to accumulate his wealth and the decline of his capital was very worrisome, given that he is now a widower with children living far away.

“Many still want to be able to leave their kids an inheritance, but they have to be on the right investment path,” Allin says. Since that time, Allin has been working with us to stabilize her client’s investments around the $750,000 mark, while he is still able to withdraw the $40,000 he needs on a yearly basis. This is a clear illustration of how fees and poor investment choices can quickly erode capital and create a risky situation, especially for senior investors.

What’s new?

Find a firm that puts clients first and adheres to a set of prudent wealth management principles. The goal with your investments should be to build a portfolio that combines effective risk management techniques with superior investment returns.

Recognizing the impact of fees on performance, offers a revolutionary platform. A client-friendly fee structure that charges much less in fixed costs while manager compensation is based on merit, not asset size, when delivering returns that outperform the market.

Written by: Chris AmbridgeSource:


Understanding tax loss harvesting: tips and tricks

We are reaching the end of 2017 and for retail investors that also marks the end of another tax year. As we look forward to 2018, we prepare for tax time and dread it as we may, understanding the options is the best way to ensure investors are minimizing their taxes owing.

Tax loss harvesting

One tactic investors hear about during this time of year is tax loss harvesting. Tax loss harvesting is a method by which an investor purposely incurs capital losses to offset the taxes they would otherwise pay on capital gains. Essentially, the investor makes the best of a bad situation.

The process involves:

  1. Selling shares on which a loss has been incurred.
  2. Potentially reinvesting, if there is faith in that sector (or in a similar sector, but not too related as to not drastically alter their market exposure).  
  3. Claim capital losses incurred to offset capital gains on the tax return.

There are some important considerations to keep in mind prior to implementing this strategy:

Purchase a similar security: If an investor feels that the investment in which there has been a loss still has potential for growth in the future, it would be wise to reinvest in a similar security whose performance is close to the stock being sold.

Utilize tax loss harvesting as a secondary option: A primary investment plan should always take precedence.

Use capital losses for past and future returns: Losses must first be applied to 2017 taxes, but if the amount allows for it, they can also be applied to the previous three returns, or carried forward indefinitely.

Do not use this method for registered accounts: Successful tax loss harvesting can only be performed in non-registered accounts and may not be used for investments within a TFSA or RRSP.

Ensure this is not a superficial loss: CRA rules prohibit the rebuying of the same shares that were sold off to incur a capital loss right away. An investor must wait 30 days after selling a stock before repurchasing. This includes purchases made by a spouse and purchases made from different accounts owned by the investor.

Start early: Official transfer of shares occurs approximately three days after the trade is executed. Also, don’t forget that there are several statutory holidays near the end of December that impact trading dates. If using this tactic, it is best to do so before December 20.

Triggering losses to decrease capital gains taxes could be the right approach for you this tax season. Determining if this method fits your needs is one way we can help.