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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.

Transcend launches new fund under pay-for-performance fee model (P&T)

Clients who invest in Multi-Strategy High Yield Fixed Income pay a nominal amount unless the fund outperforms its benchmark

Toronto-based Transcend Private Client Corp., a subsidiary of Provisus Wealth Management Ltd., has launched a new fixed-income fund, Multi-Strategy High Yield Fixed
Income, which will follow the pay-for-performance fee model introduced to the Transcend platform in September 2016.

Under the pay-for-performance fee model, clients only pay a nominal amount unless performance results are above the industry benchmark.

“This fund offers investors a secure alternative investment that yields better results than a bond or GIC,” says Chris Ambridge, CEO of Transcend, in a statement. “We are offering Canadians a reliable fund with low risk, based on our company philosophy that you only pay if the results are better than the benchmark.”

The fund will be “Canadian-centric,” the firm says, and diversified in terms of assets through active management. The fund will be comprised of corporate bonds, convertible bonds, preferred shares, income trusts, real estate investment trusts, secured real estate and infrastructure projects, as well as alternative investment strategies and hedge funds.

The investment strategy will be focused on a short to mid-term structure, similar to a five-year GIC, the firm adds.

Investors using the fund will not be required to pay anything above basic management costs unless the fund outperforms the benchmark, which is 50% of the FTSE short bond index and 50% of the FTSE mid bond index.

Canadian Stocks In Great Shape

Why are investors still waiting for a correction? Some investors would like to see a pullback to cool off the  white hot equity markets, but they may have to wait a little longer.  This is because  without a yield curve inversion there will be no correction. This mantra remains as  true today as it did 47 years ago. The yield curve is one of the most reliable  economic indicators and one that savvy market watchers always keep on their  radar. Sure this bull market may be long in the tooth, but the Canadian stock  market just reached its first all-time high since 2008.

The yield curve indicates the difference between short term cash yields and long  term bond yields. It is an excellent tool for predicting the direction of the economy.  Typically, short term interest rates are lower than long term rates, so the yield  curve slopes upwards, reflecting higher yields for longer term investments. This is  referred to as a normal yield curve. When the spread between short and long term   interest rates narrows, the yield curve begins to flatten. Lastly, when short term   rates move above long term rates the curve becomes inverted and this is a major signal that a slowdown is likely. It is no wonder that an inverted yield curve produces so much fear.

The yield curve has an excellent track record of predicting the top of the stock market over the past 47 years and it is not signaling a bear market now. We are currently in the longest period without an inversion since 1970; while concerning for its longevity, it does not mean much since an actual inversion is the only true signal. The yield curve inversion usually takes place about 12 months before the start of a recession, but the lead time ranges from 5 to 16 months. The peak in the stock market comes around the time of the yield curve inversion, just ahead of a recession.

The chart to the right illustrates the spread between 3 month T-bills and 10 year bonds for the past 47 years and when that differential has turned negative (or inverted). The chart also compares this spread to movements in the S&P/TSX Stock index. The yield curve had been flattening until August 2016 as bond investors started to worry about when the Bank of Canada (BOC) would begin hiking its lending rate. Since then the curve has moved upward as longer bond yields have increased while short term rates remained steady.  It appears that we are still a long ways from inverting. If the BOC aggressively hikes its key policy rate and short term yields rise swiftly, they would have to increase yields by 1.1% (assuming bond yields stay the same) before the yield curve becomes inverted. This will likely not occur quickly; as the consensus remains that the next hike is a long way off.

Investors may hear cries from many circles to ignore the yield curve and that “it has lost its edge” as a leading indicator. Do not believe them; it has called each of the last 10 recessions since World War II with precision. The yield curve is an invaluable forecasting tool for predicting recessions and stock market corrections and is equally as important for what it predicts when it is not inverted: a bull market or continued strong period for equities. So based upon what the yield curve is telling investors currently, this bull market has more room to run because a bear market will not come until the yield curve says so.


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.

Act, React, or Just Plan Ahead

Most investors have a consistent and orderly life so it is somewhat surprising that the current choppiness in the markets would trigger investors to want to alter their portfolios or make even more far reaching changes. Volatile market conditions may prompt investment changes, but giving into temptation and responding to short term circumstances should be avoided at all costs. Volatility is just a normal part of investing and if any action should be taken it should be to re-assess, re-affirm and ensure your goals and objectives are accurate.

Although the basics are mother’s milk to most seasoned investors, they bear repeating: focus on asset allocation as it is the most important investment decision you will make; use high conviction active managers; pragmatically diversify investments with an emphasis on reducing downside risk; ensure the cost and implementation structure is efficient and disciplined; and avoid the latest fads and flavour of the month as your portfolio is meant to last for years.

One item that is overlooked or deliberately ignored by most investors is the concept of asset consolidation. It is commonly believed that for every dollar clients have with one advisor they have three elsewhere. However, creating a streamlined and efficient portfolio will benefit investors on many levels. Investors use multiple advisors for many reasons but consolidating their holding will significantly help them meet their investment needs both today and for future generations. The list of benefits for clients is just too lengthy to ignore but include the following:

Asset mix: Consolidation can help manage the asset mix and limit duplication of holdings. It provides a clear picture of the client’s total holdings. Multiple advisors could lead to dangerous levels of concentration of holdings and poor tax efficiency as the household assets are managed for divergent purposes across different providers.

Simplicity: Get a better view of your client’s overall situation. Multiple advisors means multiple statements, multiple solutions and usually multiple (and likely diverging) points of view of the current state of the market and the future outlook. All of these could lead to a great deal of confusion for all but the most astute clients.

Service: In a perfect world all clients are treated equally. Unfortunately larger clients tend to get better service so having multiple small accounts would likely mean clients would get less than the optimal attention at each institution. Consolidation would overcome this issue.

Reducing Risk: In the past using multiple advisors was a way to diversify risk. But in reality excess diversification comes at a great cost because it increases the likelihood of having index-like portfolios but paying active management fees. This is a recipe for guaranteed underperformance.

Savings Fees: Clients often pay lower fees when they consolidate their assets. Since it is not possible to guarantee investment returns, ensuring the best potential results is only possible by minimizing fees and taxes.

Creating a Plan: A major flaw of most financial planning analysis is the need to use expected return numbers. If there are duplicate portfolios across multiple firms then determining potential future results becomes a difficult challenge.

Managing Cash Flow: To obtain a complete picture of a client’s financial situation the advisor needs to understand their total level of income earned. This can be difficult to manage across multiple investment accounts.

Estate Planning: Having investments with one firm will simplify estate planning and administration for navigating the increasingly complex probate process.

Monitoring Performance: Comparing the performance of multiple providers is difficult unless there is really a true apples to apples comparison, which is seldom the case. It is easier for clients to understand how their investments are performing when the assets are consolidated.

Better Clarity: Knowing the entire financial picture provides clients with a customized and personalized service. For example, if the registered and non-registered accounts are at different firms, tax minimizing asset mix based opportunities become difficult to achieve. As well, consolidation would limit the confusion and number of tax receipts each year and likely reduce the client’s accounting fees for completing complex income tax returns.

The objective should be to plan ahead and act now.