Category: white papers

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.

A solution advisors need to know to keep aging clients secure

Today life expectancy is 10 years longer than it was 50 years ago and for the first time in Canada’s history, there are now more people aged 65 and older than there are children under 14. Given the stats, some advocacy groups say its time for a National Senior’s Strategy.  

The Canadian Medical Associations (CMA) is warning that hospitals cannot be seen as the safety net for long-term care of the elderly. Polls suggest most prefer to stay in the comfort of their own home. However, maintaining that independence comes at a financial cost and therefore a new approach towards investing by seniors is now required.

With age expectancy on the rise, financial advisors have an opportunity to be part of the solution. Helping to build up a nest egg is one thing but advising a senior to strategically invest and withdraw money over their remaining years is even more valuable.

Seniors and old models of investing

Traditionally, bonds were seen as safe, low risk investments and the principal means of preserving wealth. As clients approached retirement age, bonds like GICs, Canada Savings Bonds and money market funds were recommended over equities because of their financial stability. This was a great approach when interest rates were 18 per cent in the early 80s but in today’s markets with GIC rates less than 3 per cent, seniors run the risk of falling into the red when you consider inflation, fees and taxes.

“With today’s GICs rates, it is difficult to generate the kind of income that seniors expect and need to maintain their independent lifestyle,” says Ryan Kirke, a Chartered Financial Planner with Provisus Wealth Management and “When you think of the long-term costs associated with increased life expectancy, activities like transportation and meal preparation will become more challenging over time, especially if there is no family nearby.”

“With the added costs that are necessary for seniors, they need to make sure their investment returns keep pace for a longer period of time,” advises Kirke.

Taking action for your clients

While bonds in the near future are not likely to be wealth builders, they do need to be part of an individual’s portfolio. The not quite million dollar question is, how much? We know bonds and GICs can act as a form of insurance when things turn ugly in the market and are excellent sources of liquidity.  But the reality is that many seniors would be satisfied if they could get a decent return on such investments and live off the interest while protecting their capital.

“Most of my senior clients, aren’t interested in exciting anymore,” says Lise Allin of Lise Allin Insurance and Estate Planning Services in Belleville Ontario. “They want predictable, steady returns, and to work with an advisor who is knowledgeable.”

Allin knows that older clients want something safe and reasonable. “Some have lost their life-long partner, and don’t have that soundboard to run decisions by anymore.” she says. “They need assurances about what will guarantee them comfort in their later years.”

This can be tricky for financial advisors who want a steady income for clients without eroding their capital. Allin vividly remembers 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 $1.2 M to $750,000.

This person had worked for 40 years to accumulate his wealth. Now a widower and with his kids living far away, he was concerned. “As our seniors age, the last thing we want to add is financial worry. Many still want to be able to leave their kids an inheritance, but they have to be on the right investment trajectory,” Allin asserts.

Since that time, Allin, working with Provisus Wealth Management, has been able 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. “We were able to do this largely with the help of our investment partner Provisus who is able to meet our targets while charging much lower fees,” says Allin.

New fund model

With this type of situation becoming more frequent for many investors, one firm offering a solution is Provisus Wealth Management. The firm recently celebrated its 10 year anniversary and its fourth year on the Profit 500 list. This September, a year after opening a new arm to its business called, the company launched the Multi-Strategy High Yield Fixed Income Fund which is designed to target the risk of short term bonds and generate greater performance.

“It attempts to provide an attractive cash yield and stable returns, while investing in a broad range of non-equity assets,” says Chris Ambridge, President of Provisus Wealth Management and

The fund is made up of corporate bonds, convertible bonds, preferred shares, incomes trusts, REITS, mortgages, secured real estate backed lending, infrastructure products and alternative strategies. It also uses Transcend’s trademarked Pay-for-Performance™ fee model with a fixed annual management fee of 0.25 percent. A performance fee is charged only if the fund outperforms a pre-set industry benchmark – a fee philosophy that Ambridge argues is a very strong incentive for the fund to achieve positive results for clients.

“I’ve been working with Chris’s team for the last ten years,” says Lise Allin. “The company has some of the best money managers around and its service provides me with peace of mind. Most importantly, it has produced stable results for my clients.”

Advisors part of the solution

The new fund is part of Provisus’ ongoing movement in rethinking how advisors can plan for a client’s retirement but also how we can help our seniors responsibly. The new investment landscape means playing it safe for seniors can do more harm than good. They face the unknown danger of outliving their savings and simply cannot afford not to take a level of risk with their investments.

Advisors need to explain why a new approach is necessary and also provide better investment options. Doing so will ease the burden of financial worries that many seniors face on a daily basis.  


Going Independent

Transitioning to a Financial Planning Model

This document is for advisors who are contemplating an independent business model for greater professional freedom, deeper client relationships and the financial rewards of owning a business.  It is organized into the following sections: Why Advisors Go Independent; The Economics of Independence; Putting Together a Plan; and Choosing a Platform.


Why Advisors Go Independent


Personal Freedom – Many advisors understand that their success flows from their own skills and abilities, not the resources and reputation of their dealer. For these advisors, independence offers the freedom to control, and retain more earnings and build equity in a business that could eventually be worth millions.


A Client Centric Service – Having built a book over many years you are now in a position to focus on your best relationships and perhaps attract new clients by providing unbiased, trustworthy advice, together with a compensation structure which is in sync with customer needs.


Clients Losing Trust in Institutions – Clients are choosing independent advisors more frequently because they believe they are more objective. Clients may be happy with their advisors but mistrustful of large dealers or the industry as a whole. Independence eliminates concerns of a parent company that could potential be associated with a scandal, tainting the image of the service. Clients who were once attracted by the name of a major dealer are now recoiling because of the negative publicity.


Conflict of Interest Resolution – Although the pressure to sell proprietary products has abated at many firms, some advisors acknowledge “subtle encouragement” to offer specific products.  Independent advisors aren’t under pressure to sell in-house products and have greater freedom to discuss the services and strategies which are in the best interest of their clients.


Compliance Restraints – Advisors are finding it harder to do business due to increasing regulation as a result of the financial crisis, dot com bust, scandals, frauds and firm failures.  Financial planners are able to look at the big picture on behalf of their clients while outsourcing compliance responsibilities to other providers to shoulder the majority of the burden.  


Independence Can Be Lucrative – Many advisors have already moved toward a fee based platform by running their own firm within the payout structure of a larger institution but they could be leaving money on the table. Advisors who transfer this same business model to an independent platform can, depending on how they manage expenses, have the opportunity to significantly increase their income.

Independent advisors are also building equity in their business. A successful independent advisory firm may exceed 25% operating profit margin after fairly compensating the owners and meeting overhead expenses. The profitability of independent firms creates a transferable cash flow stream. The industry press has reported numerous acquisitions at valuations from 1.5 to 3 times annual revenues or between 6 and 10 times earnings. An advisor with $1 million in annual fees could, by taking the business independent, create an asset worth between $1.5 and $3 million, a portion of which may be tax free in Canada.


The Industry Is Embracing the Fee Based Model – The fee based model provides a predictable revenue stream to the advisor, who continues to serve the account throughout the year and across market cycles, which in turn aligns interests with the client. When fees are based on assets under management, the advisor has an incentive to increase revenues by growing client assets. Independent advisors enjoy greater flexibility in setting client fees which helps them to become more competitive and manage their practices more effectively.


Advisors Want to Control Their Professional Future – Of all the reasons advisors choose to go independent, autonomy is perhaps the biggest lure. Independent advisors who have an entrepreneurial spirit want greater independence. The independent advisor model gives them the Theyfreedom to create their own value proposition.


The Economics of Independence

The transition to an independent platform is highly dependent upon having sufficient resources and a detailed transition plan. There are organizations that can simplify the process but the initial step must be to understand the economics of independence for your circumstances.

Independent advisors typically retain 100% of their revenue but at the same time assume the expenses of their own office. A detailed plan is required to ensure that after paying rent, utilities, insurance, software, marketing, administrative salaries and other business expenses you end up with a profitable firm. Results vary primarily by expense management and your client profile. Advisors that serve smaller household accounts tend to be less profitable than their peers. When turning independent, advisors must always remember that in addition to serving clients they are also running a business.

An advisor’s outlook on independence may also be influenced via forgivable loans from their dealer which were taken on as a signing bonus.  Focusing on such loans may be shortsighted because with independence, the financial rewards come from building your own business. Clients are generally considered to belong to the dealer but under the independent model your clients are truly the foundation for building equity. When you are ready to retire, the business can be sold for a multiple of revenues or income.

Then there is the risk of moving from a firm where the payout seems consistent to an independent model where expense management becomes a significant concern. Becoming independent also involves a number of other issues beyond the fundamental economics.


Putting Together a Plan

Initially, you should evaluate your existing clients to:

  • determine which clients are a good fit for the independent business model
  • the likelihood that they will move with you
  • the timing of asset transfers
  • the subsequent implications for cash flow

You will also need to craft a very compelling value proposition to clearly explain why you are making the move and the benefits of continuing the relationship.

Once you have identified potential clients and their portfolios you will need to:

  • Thoroughly understand the terms of any non-compete and confidentiality agreements that you have with your dealer
  • Assess the implications of changing from a commission based to a fee based business, including how to handle trailer fees
  • Consider the clients’ portfolios that may hold proprietary investment products of the dealer and the tax or expense implications of liquidating them
  • Become familiar with the types of assets that can be easily transferred from one financial institution to another

Once your potential asset base has been determined you can start on your business plan:

  • Service model – the types of services you want to provide at the start, and as you grow
  • Target market – determine the ideal client profile, including age, geography, minimum account size, and investment needs
  • Your strengths – a list of the your competitive differentiators and value added capabilities
  • Location – the site for the new business, and whether the firm will share, lease, or own the premises
  • Timeline – key steps and dates for getting started and for managing the firm on an ongoing basis
  • Revenue projections – first year revenue and profit targets, including sources of revenues and projected cash flow – knowing that not all of the clients will necessarily be part of the practice on day one, and fees are typically paid quarterly in arrears
  • Budget – a first year budget for major expenses
  • Insurance – ensure proper coverage

With a fundamental plan sketched out, you can add more detail at the next stage which includes the assessment of other service providers.

  • Strategic planning – create a business plan and think through the strategic considerations of the change
  • Technology and client reporting – seek out turnkey portfolio data management and client performance reporting
  • Business set-up – create a workplace that will welcome clients and motivate employees
  • Marketing – design a sound marketing strategy that broadcasts the value of the services to the target audience


Choosing a Platform

As you can see there are many steps involved in becoming independent but it is possible to find support from outside firms. Unfortunately, too many advisors spend too much time inefficiently trying to do everything from asset allocation to writing investment policy statements, performance reporting, investment selection, customer service and day-to-day business operations. It’s little wonder they feel exhausted at the end of the day.

Many functions can and should be delegated. The value-added services that you should consider outsourcing include:

  • Client management and compliance– CRM technology, client profiling, KYC requirements, investment policy statements and asset allocation
  • Investment management – manager due diligence, research, rebalancing, overlay portfolio management and access to institutional managers
  • Account administration – account opening paperwork, setting up accounts, monitoring transfers and overseeing the ongoing administration of accounts
  • Performance monitoring – data aggregation, reconciliation and performance reporting
  • Operations – billing, compliance tools and online account access
  • Market and manager analysis – manager reviews, quantitative evaluations and performance comparisons
  • Training and education support – newsletters, industry insight and product support

The platform you choose should allow you to remove the burden of cumbersome, complicated back office responsibilities and gain access to a one stop shop of investment services and professionals. It should reduce the resources you allocate to in-house asset management, where it is increasingly difficult to gain a competitive edge relative to the big, specialized players and it should maximize your capacity to provide the highest level of personal service possible to clients.

In the final planning stage, you should evaluate potential platform providers.  Here are some questions you should ask when conducting this crucial assessment:

  • Product value – Does the platform’s product solution create real value for my firm and my clients? Does the platform provide incentives to sell certain products? What is the platform’s breadth of manager/investment selection?
  • Service value – Does the platform provide education on business building issues? Does the platform offer technical support on a range of topics that may be of interest to clients? What is the platform’s reporting capacities?
  • Personnel value – Besides helping advisors with the day-to-day running of their firm, how well does the platform help advisors think strategically, grow their business and increase their income?
  • Image value – How experienced is the platform’s management team and what are their areas of expertise? What are the platform’s investment philosophy and process like?
  • Time costs – How rapidly can the relationship begin and how soon will it make a difference? What are the platform’s service quality and responsiveness like?

Keep in mind that the platform should provide a level of service you cannot find elsewhere. If the platform is employee owned, it can empathize with small business owners. Additionally, they should offer a state of the art platform that allows the advisor to stand out from a service perspective.

The Business Decision Tree – Where Do You Belong?

The investment industry has become a maze of choices that advisors must navigate in order to discover how to best build and manage a business. The various combinations of technologies, investment services, operations and regulations are fairly well defined in Canada. However, sometimes new third party solutions present themselves and offer a chance to change your business model. In these instances it becomes more difficult to determine which business model is best for you.  Should you stick with the current system or explore the other alternatives? Or should you simply join another firm that offers a change of venue and a slightly higher level of satisfaction and rewards?


The affiliation questions are fairly straightforward. You should be able to easily determine where you will find the best combination of resources, economics and business philosophy and, therefore where you belong. The decision comes down to four questions in a very specific sequence and a fifth question that runs in tandem and holds more weight than all the others. The questions are:


  1. Are you more suited to being an employee or a business owner?
  2. Do you wish to outsource investment management?
  3. Do you see a strategic role for commission based business in your practice?
  4. How will you achieve scale to economically support your business?


These questions are a decision tree that should lead to a business model that allows you to achieve both your professional and personal goals. Each model represents a unique combination of risks and rewards and essentially trades varying degrees of control and independence for support and resources. At some point, you also have to ask this last and very important question:


  1. Where will you feel a sense of cultural belonging?


At any point in the process, this question can trump all others. If you feel that you belong in your current organization and that the people you respect are in that organization; if you currently have the freedom to manage your clients robustly; and if you can realize your aspirations within the framework of your current organization, then it may be worthwhile to continue in your current environment. The opposite is also true. If you no longer feel that you culturally belong; if the people you respect are now elsewhere; if you do not have the freedom to manage your clients prudently; and if you cannot fulfill your career goals where you are, then you should consider changing your affiliation.


There are three general contractual models in the industry based on the level of independence and the responsibilities assumed by advisors and their firms – IIROC, MFDA and independent financial planners. The choice of model depends upon the relationship between you and your dealer, the ownership of the client relationship, your strategic decision making power, your product options, and the responsibility for operational infrastructure and ultimately the control of the business.


The Ownership Question

The single most prominent reason to be independent is to own and control your practice and to be fully responsible for its success or failure. This takes a level of risk tolerance and self reliance that not all advisors possess. Advisors who are not passionate about building a practice of their own should never try to be independent. Without passion, independence is just a long list of chores.


If you are stuck comparing the value of your deferred revenue plan to the equity valuation to an independent practice, you should probably not be independent. If you cannot bear the thought of your branch manager telling you that you need to add “this fund” and “that fund” to your client accounts then you probably are well on your way to independence.


Third Party Investment Management

Whether or not you decide to affiliate with a particular third party is often based on your past experience. Advisors who have had a bad experience will have a hard time believing that another party can actually have any constructive input into their investment management process. You have to consider the issues around the decision-making process before selecting a third party affiliation. Some advisors will never trust a third party and do not want anyone else influencing their decisions. Those who feel this way may forfeit the scale, flexibility and robust solutions required to successfully build their practice.



Simply put, if you have a strategically important reason for requiring commissions in your business it makes sense to affiliate with a dealer. The key word is strategic. If the use of commissions is temporary or accidental then the decision to move to a fee based model is fairly easy. Becoming independent in almost all instances requires converting to a wholly fee based revenue stream.


The Economic Models

The economic models are surprisingly straightforward but they are also a common source of confusion and misunderstanding. The first task is to compare the differences in expenses between contractual models. Some of the expenses are very scalable and therefore their magnitude as a percent of the revenue of the practice will vary widely between the dealer and the independent model.


Essentially, in order to move from a dealer to an independent model, you will need to be able to pay for your own branding, office staff and physical infrastructure and technology. The total budget will vary depending on the size of the practice and its unique needs. Some advisors are able to function with a lower budget in a shared office where they peripheral staff and services are included in the lease. The hidden cost of independence is time. This cost is perhaps more significant than any other expense, so budgeting and seeking appropriate help is of paramount importance.


So Where Do You Belong?

It should be a relatively straightforward process for you to find the best combination of resources to achieve your professional and personal goals; however, the five decision tree questions can combine to produce many different outcomes. The factor that often gets overlooked but is one of the most important influencers is the cultural decision. The strongest social drive we have as human beings is the desire to belong. That sense of belonging can trump all the rational reasons but it can also be a powerful booster for the rational choices. What is often misunderstood is that the sense of belonging is present in all the models from independence to full time employment. It is not about the people you greet in the office in the morning but rather about the people with whom you feel you share the same values, ideals and goals. That defines where you belong much better than payouts and printouts.