Relationships built on mutual trust

By Paul Brent

For most people, taking care of their finances, investments and retirement planning is too much. That’s why finding and enlisting the services of a trusted financial advisor is so vital. But how do you find the right advisor for you, given the vast array of choices out there?

“To start I would ask people you trust, whether it be a lawyer, accountant or a family member,” says Craig Hayman, principal, Client Solutions at Edward Jones Canada. “I would find out who is completely satisfied with the relationship that they have with their financial advisor and I would ask them [why] they are satisfied.”

Mr. Hayman says the second part of the question — finding out why their friend or family member is satisfied — is almost as important as asking if they are satisfied. If they say they are satisfied because they are getting great returns, it is likely that this is more tied to the improving stock market over the past year or two. Regardless, getting good returns “is not a good enough answer,” he explains.

All good investment advisors know that short term performance is not an indicator of skill. In fact, selecting an advisor on the basis of short-term returns during a hot period in the market could prove to be a form of “chasing returns,” he says. It is unlikely that an advisor is going to have the ability to consistently outsmart everybody else; which is what is required for them to continually generate better returns for clients. Mr. Hayman argues that “You hire an advisor as someone to pilot your financial plane, pilots don’t perdict weather they prepare for all types of weather.”

Investors looking for a perfect financial fit with an advisor might also start the process by first starting that process by looking at themselves in the mirror, suggests Hugh Innes, director of business development with Foster & Associates. “This is easily the No.1 aspect of it: know thyself,” he said. “It is imperative that the client knows who he or she is as a client because if you don’t know who you are, you will find the markets are an expensive place to find out.”

Mr. Innes adds that too much investment activity conducted by people today is carried out on a hit-or-miss basis around those all-too familiar deadline days: year-end, RRSP time or that tax filing dead- line. “Most people don’t want to get too involved with their money and just want to hire an advisor to deal with it. That is a pretty reactive approach.”

A proactive approach in Mr. Innes’ mind comes about after an investor has taken the time to figure out what type of investor he or she is and what his/her financial expectations, goals and objectives are. “Then, if you find that you are at cross purposes with somebody who is going to be your advisor, then you don’t have a fit.” Considerations for the client should include the level of interaction you want with an advisor.

Open communication critical to quality investor/client relationship

Mr. Innes says that there are essentially two types of investment advisors who investors can tap into: the broker, who traditionally is paid by amount of transactions handled; and a portfolio manager, who is typically paid a percentage of the client’s assets under management. Your level of interest and how often you want to deal with your financial advisor should very often therefore dictate whether you deal with a broker or an investment management firm.

Whether the investor winds up working with a broker or an investor, the same underlying rules apply.

“You have to have from the get-go a feeling of trust and confidence in these people,” Mr. Innes says. “You have to believe ongoing that they are doing things in your best interest. Even if it is not working out, that they are doing their damnedest for you. Trust is imperative.”

Keeping the advisor-relationship a strong one is based upon open communications on both sides of the table.

“What we recommend for our advisors to do is to always send a follow-up letter to the client after every meeting to outline what was talked about to make sure that nothing was left out, and encourage them to set up a call if necessary,” says Chris Enright, who is senior vice-president of wealth management distribution with Industrial Alliance.

A written and agreed-upon financial plan is “an absolute must” when it comes to building and maintaining a strong and vibrant advisor-client relationship, Mr. Enright says. That financial plan may include an engagement letter that will outline details such as how often the advisor will meet and/or communicate with the client.

“That is the core document, along with the investment policy statement, that should be referred to in follow-up meetings.” An investment policy statement, often based upon a risk-tolerance questionnaire, details how the client wants their money invested and is the basis for their investment strategy.

The investment policy statement can serve to provide some of the rationale and underpinning of the client’s portfolio, Mr. Enright notes. “When everything is going up people say they can take lots of risk, and in the down market we saw in 2008, peoples’ attitude toward risk was very, very different. The advisors have to do a very good job of determining really what is the client’s tolerance for risk.”

Finally, the client has responsibility to let the financial advisor know if he is unhappy with a particular investment or direction.

“If there is anything bothering the client at all, it is incumbent upon him or her to let the advisor know,” says Mr. Innes, who adds that it is no different than the way people conduct happy personal relationships. “It is always back to communications, so don’t be afraid to ask questions. There are no stupid questions be- cause when you think about it, who’s money is it?”

Doing the Right Thing Should be the Mantra

Advisor Code

Integrity key to relationship with clients

By Thomas Caldwell

A good definition of integrity: “Consistently trying to do the right thing for the right reasons.” It is an action word, not one of arrival. It is about intent, rather than results.

Anyone speaking about integrity is presumed to have “arrived” at some state of success in that regard. Not so; integrity is about having a compass and continually striving to stay on course, particularly during challenging times. As an investor for some period, I seek positive results. That being said, I would have no complaints with an unsatisfactory outcome if everyone involved did their very best to achieve success.

Throughout my career in the investment industry, I have witnessed the vast majority of investment advisors striving to do the “right thing.” Yes, there are painful cases of abuse but frankly miniscule, considering the trillions of dollars changing hands daily.

Challenges to integrity transcend any one industry as they are societal in nature. In the secular world in which we now live we have all become mini gods and have lost a sense of accountability.

In this “age of entitlement” it is all about the individual’s goals.

That is why the most frequent lapses in integrity come not from inherently dishonest people but from normally decent people who rationalize their behaviour as acceptable. That includes all of us.

How many of us would not rationalize accepting tens of millions of dollars in executive compensation if a lax board of directors awarded it to us? Integrity comes down to our spiritual basis or operating system. In life, there is right or wrong, good or evil — period.

Strong values help advisors navigate tough times

This truth may be unpopular in our relativist world but trying to work on that basis cuts down on the mental apologetics for bad behaviour.

In situations of stress or crisis, rationalizing can reach its apex.

People do buckle under pressure and that is when basic training, strong values and one’s personal code count. Anyone can have a high degree of integrity while calmly sitting and writing about it.

As individuals or companies attempt to serve too many masters, conflicts arise. In these cases, the investment industry’s determinant has to be “put the client first, that is the investing client.” The investing clients must have priority over trading departments and companies seeking to raise funds, as they are the ones trusting their advisor with their future.

Accepted business practices and teaching also present challenges. For example, larger companies delay payments to suppliers (usually 90 to 180 days) to reap interest on those funds.

Smaller suppliers are always being strangled for the cash they need for overhead and supplies. Children are taught the bigger ones should not bully the smaller ones. This is bullying at its worst and is an issue of integrity.

In the final analysis, integrity is very much about empathy, caring about others and considering their needs ahead of our own. That is what is required when people entrust us with their money.

Integrity is a torment, a matter of consistent striving, yet never fully arriving. It is an individual quest.

￿ Thomas S. Caldwell is chairman and CEO of Caldwell Securities Ltd.

‘Rule of hard knocks’

By Vito Cupoli

When a novice investor joins up with a financial advisor, managing the client’s expectations is often one of the advisor’s first tasks. Sometimes, a new investor will arrive at the broker’s office fully prepared to earn 50% a year on his or her money, not realizing that big, profitable years do happen but they are not common, and that 50% years don’t happen back to back. Such expectations just aren’t realistic, says Joel Kruzich of Hampton Securities in Toronto.

“People with less experience in the market tend to be a little too optimistic. You learn the rules of investing essentially by taking hard knocks and losing money. The novice investor can have higher expectations than the market can deliver.”

Canada’s open and competitive investment community could be fuelling some of those outsized expectations, Mr. Kruzich says. “There is so much competition for clients, with advisors competing to bring in new assets, that some firms and individuals are maybe promising more than they deliver.”

But if novice investors aim too high, sometimes they will also aim too low and need to be encouraged to take a greater risk in order to maximize profits, advises Michael Himmelman of Citadel Securities in Halifax.

“There are different personality types that you’re going to run across in life. Some people are very conservative by nature. As a result, they may be just a little too conservative, and I could show them how to be slightly more aggressive: Take advantage of an RRSP, for instance. When [RRSPs] first came out, very few people had them. They were a tremendous tax savings vehicle and a way to grow money tax-free. But for that conservative personality, it was very difficult to get them to save their money inside the RRSP vehicle. Once, the dividend tax credit sounded very complicated. Even the sophisticated investor found it very hard to understand. These things sound simple today but they weren’t always simple to everyone.”

“People know what they want to hear,” Mr. Kruzich says. “And the expression is, ‘the client is always right.’ But the client isn’t always right. And sometimes, it’s what they don’t want to hear that’s going to save them money or make them the most money.” But advisors can’t shield their clients from all risk, especially when the client is feeling lucky.

“One of the worst things that a novice can do, especially if they have an aggressive personality, is to buy a speculative issue with perhaps more than they can afford to lose — and instead of losing, they make money,” Mr. Himmelman says.

“They turn their $5,000 into $10,000 or $20,000. Then if they repeat the process that’s a very dangerous thing, because I can assure you it won’t work the third time or the fourth time. And when it’s gone, it’s all gone. I’ve seen that happen on many many occasions: Confusing brains with a bull market; thinking that they might know something that others don’t when, actually, they don’t. They got lucky.”

An investor who is willing to collaborate fully can expect to be challenged by Mr. Himmelman when they’re on the brink of a decision with too much risk. “I’ll point out the pitfalls. I can give them a deeper understanding of the psychology of the market and who should invest and why they should invest or why they shouldn’t invest. And I can help you, guide you, in the complicated word of tax issues and corporate structures and income splitting and I can match the personality with an investment philosophy. Those are the things you can’t get on the internet. Applying knowledge and putting the whole picture together is completely different, and that’s what I can do.”

Expectations run both ways in a successful investment relationship, Mr. Himmelman says. “I’m pretty demanding. I want them to follow their accounts; I’d like them to know a little about the company they’re in; I’d like them to work with me. I’d like to get them to a point where if I walk out and get hit by a bus, they can do this themselves. That’s my ultimate goal. To make them a better, more knowledgeable investor.”

Mr. Kruzich expects his clients to communicate their needs and circumstances. “Pick up the phone,” he says. “It is important that you stay in touch. It’s very much like a marriage, very much like a relationship with a sibling. Sometimes you should call just to touch base or to check in. And not necessarily discuss what happens to be going on in the account, just to strengthen that relationship on a more personal level. Clients can do that as easily as an advisor. It’s a two-way street. Don’t expect your advisor to know that you might want to talk at any given time. Feel free to call whenever you think it’s appropriate.”

Clients who stay in touch are able to give their advisors the information they need to adjust financial positions as circumstances change, Mr. Kruzich says. “Life-changing events happen to our clients all the time. People always think it’s not going to happen to me: unexpected death, loss of employment, illnesses. These things happen to people more often than they think. So the portfolio has to be constantly evolving to be suitable and appropriate. Yes, we do talk about their goals and objectives, but people have to understand they might change and could change drastically, depending on certain life events.” After more than 35 years as an investment advisor, Mr. Himmelman’s clients have come to expect guidance on a range of issues. “One of the things someone with my experience can offer the novice investor is that I’m well-connected. I know many people who are successful, people who are unsuccessful, many professionals who are good in their fields; so I can quarterback them a bit. For that type of tax problem you should be talking to that person; for more knowledge on local mining you should be talking to that person; someone else will know more about the technical intricacies.”

So when the novice investor asks about the core value in their relationship with a broker, Mr. Himmelman simply says: “Some companies make it and some companies don’t, and I help you find your way through that.”

Defining the Partnership

By David Chilton

You’re no longer a novice. You’re in your thirties to your fifties. You’ve been conscientious about saving regularly and have done some of your own or perhaps all of your financial planning. So let’s call you an intermediate investor, someone who’s enthusiastic and informed but not yet ready for elevation into the ranks of the financial sophisticate. You need, or want, you acknowledge, a financial advisor.

Finding prospective advisors won’t be hard. There’s word of mouth, personal recommendations, prior relationships and so on. But once you’ve settled on a few likely candidates, what, exactly, should you expect from them? Stephen Ison, principal, Canadian Advanced Training, at financial services firm Edward Jones in Mississauga, Ont., says the intermediate investor should expect an advisor to take the time and make the effort to understand him or her, their financial resources, their experience, their tolerance for risk and their goals. Further, Mr. Ison says, the advisor should also partner up with the client to ensure those objectives are smart and measurable. At that point, he says, the financial advisor should then start to act with the interests of the client in mind.

Mr. Ison’s colleague at Edward Jones, David A. Gunn, an area leader in financial advisor development, says the first thing an intermediate investor should expect and demand is the advisor’s registration with IIROC.

“That’s the best way to ensure high-quality standards are being met,” Mr. Gunn says. “You can then research the bac ground, the qualifications of the advisor and [see] if there’s been any disciplinary action.” Mr. Gunn also says he would expect a schedule from the advisor setting out how often he or she would meet the client, the issues to be covered, such as financial planning and estate planning, and how deep into the subject he or she would go.

Mr. Ison pegs referrals as one excellent way to avoid the missteps that can accompany the selection of a financial advisor. However, if that’s not possible he says another way to sort through those with and without potential is to watch for certain important clues at the beginning of the relationship. Clients must feel comfortable right from the start that there is full disclosure from the advisor, he says, noting all fees and other charges should be explained upfront. Further, every investment recommendation should come not just with a discussion of the possible benefits but also a conversation about the risks.

Personal recommendations are fine as far as they go, Mr. Gunn says, but he points out advisors are not going to suggest consulting unhappy clients.

Also, “I agree completely with [Mr. Ison] that a thorough explanation of fees is very important, and you as the client should not have to ask for that. That should be provided. If I [was] a new client in my first or second meeting I would be waiting to see that brought forward. And then if it wasn’t brought forward I would certainly address it.”

As a client sifting through new advisors Mr. Gunn would also expect the advisor to give him a risk-tolerance questionnaire to fill in. At Edward Jones it is recommended that each advisor offer all new clients a risk questionnaire.

“Someone’s belief in high risk may be different than another’s. I can remember back when I was an advisor someone said they wanted to be high risk but they would never accept losing money in a given year,” Mr. Gunn says.

What’s really at work here is the setting of clear expectations between client and advisor at the beginning of the relationship, Mr. Ison emphasizes, and it is another clue to look out for. He says if candor isn’t coming through loud and clear from the start then the budding relationship might not be the right one.

As for what the advisor requires from the intermediate investor, Mr. Gunn echoes his colleague’s opinion on the importance of candor. He says he would expect a client to tell him if he or she is feeling uncomfortable at any point in their relationship. Mr. Gunn would also expect an investor, even one who might be described as intermediate or beyond, to tell him if anything was unclear. The advisor should also require the client’s full disclosure of his or her assets, he continues. If that’s not forthcoming, then the planning process becomes difficult, Mr. Gunn points out, because advisors can only make recommendations based on the information in front of them.

“I’m just going to say the same thing [as Mr. Gunn] in a different way,” Mr. Ison says. “The client should probably be thinking about offering the same candid transparency and disclosure that they would expect from their advisor. The success of the venture, of partnering to meet these financial goals will really depend on that on both sides.”

So, once you’ve settled on an advisor, what next? One thing that will happen is that the relationship will deepen, but only as far as the client wants it to deepen. Mr. Ison says he felt privileged and was more than happy to act as an advisor to family and friends; he even felt an obligation to do so because finding an advisor that they could trust was no small matter. “This [investments] is an intimate subject. It’s one that can cause an awful lot of anxiety for some people,” he says.

Dealing with friends and family represents a further level of expectation, Mr. Gunn says. It can mean disaster for a friendship or for a family relationship, he continues, so a couple of pieces of business need to be addressed right away: First, that all shared information will remain confidential. Second, just because an advisor has a family member as a client the family member should not be uncomfortable to be straight forward about expectations and progress with the advisor. It is, after all, a business relationship with clearly stated financial goals, Mr. Gunn says.

As for the intermediate investor accumulating further financial sophistication, it depends on the amount of time available to him or her to take the Canadian Securities or other courses and to conduct research, Mr. Gunn says. When he was advising, he says, most of the intermediate clients he had were busy in their peak earning years and didn’t have the time to manage their own accounts. Further, Mr. Ison says, financial sophistication is not necessarily a good indicator that investors actually want to handle their own affairs.

“There are very few people that I can think of where I would classify them either by their age or their experience as intermediate investors who at some point later chose to become sophisticated do-it-yourselfers.”

Ask the Expert

Selecting a financial advisor

A Q&A with Nadine De Palma, financial advisor:

Q How do I select an advisor to help me with my long-term financial needs?

A As you navigate the often-complex financial world, you may need help. When you interview possible financial professionals, consider asking questions such as these:

• Do you have experience working with people like me? Ideally, you’d like to work with someone who has helped people in your situation, with similar income and asset levels, family situations and long-term goals. ￿ How often will you communicate with me? You deserve regular communication on how you’re doing and what changes you may need to make.
• Will you be my primary contact? You’ll want a financial professional to be your main contact.
• What services do you offer? You’ll need someone with access to the full range of investment and money management products and services appropriate for your needs.
• important to develop a solid relationship with a qualified financial professional — so start asking the right questions soon.

Q How regularly should I sit down with my advisor?

A Everything changes over time, and your financial situation is no different. That’s why you and your advisor should conduct a comprehensive portfolio review at least once a year. You can discuss your goals and see if your investment mix is still aligned with what you want to achieve. It’s possible you may need to make slight changes to stay on track. Your advisor should also review the diversification of your investments to ensure you don’t have “all your eggs in one basket.”

In addition to this financial review, you and your advisor will most likely communicate throughout the year. It could be related to a specific investment opportunity, changes to something you already own, reminders about contributions, etc. A professional relationship should include ongoing discussion.

And remember, the yearly review is just a guideline. You may need to conduct a thorough review more frequently if you experience a major change in your life or goals or if the market has gone through a particularly rough period.

By exploring these and other topics during your financial review, you can help make sure you’re making progress toward your key financial goals.

The Learning Curve

By David Chilton

A description of an advanced investor, much like that of an advanced driver or an advanced scholar, will differ from observer to observer, but some similarities emerge nevertheless.

Rob Peters, vice-president and investment advisor at Wellington West Capital in Halifax, says broadly speaking, advanced investors have acquired investment acumen through their own choices over time and have been involved with public companies or in financial education during their careers. Advanced investors are not necessarily measured by the amount of money they have, Mr. Peters says.

Jolene Laing, an associate portfolio manager at Scotia McLeod in White Rock, B.C., says for her an advanced investor would be a client with more than $1-million or more in investable assets.

“Generally those types of people have had more experience over the years with investment advisors, the stock market in general, the taxation issues around it and so on,” Ms. Laing says, citing as an example a number of her clients who worked for one of Canada’s Big Five banks.

This sketch of what constitutes the advanced investor informs the relationship between client and advisor and leads to the question of what they can expect from each other. Mr. Peters says at the core of the relationship are some important principles that the client has every right to demand.

“There has to be the principle of mutual trust,” he says, noting that it may take two to five years for complete trust to develop between a client and an advisor. “That’s really extremely key. There has to be honesty in the relationship between the advisor and the client, and there has to be — particularly on the part of the advisor— a very, very high degree of ethical behaviour.”

Ms. Laing, while not wanting to slip into stereotype, suggests male and female advisors have different approaches, and although clients must insist on honesty and trust from them, there’s another quality she thinks women bring to the advisor’s desk: “One of the biggest parts of my job is more emotional than financial, [so] in times like 2008 and 2009, when the markets had declined 50% in a matter of months, they [clients] should be able to expect emotional support from their advisor. If we had a plan at the outset – you know what you bought, you know why you bought it – then I’m fully expecting that when [a stock] falls from $55 to $25, we will have a conversation, hold their hands a bit, give them the buying background again.”

Beyond handholding, Ms Laing, whose branch staff is split just about 50/50 male to female, says her clients can also expect a “holistic” engagement from her. As an example, she recalls one client who at age 74 had no will or no estate planning in place, and when he died he would leave behind three children, one of them a disabled 43-year old. So, Ms. Laing says, a couple of years ago she got her client’s will and estate planning fixed and set up trusts for the disabled son.

Just as an advanced – or any – investor has the right to expect from his or her advisor that suite of qualities that might be called professional competence, the advisor can also require clients to bring more than just a signed cheque to the office. Mr. Peters says that he expects his clients to let him know how he can reach them at all times because it’s in the interest of their financial health. He also has clients who are adamant that they want more than one financial advisor, he says. “In that case we’re pretty demanding that we’re aware of what they’re doing with their other financial advisor so as not to get too great a concentration in any one sector, any one asset class.” In other words, Mr. Peters says, he needs full disclosure from his clients – their financial assets, their tolerance for risk and their income expectations and requirements in the future. “It’s a demanding process but it’s one where the trust, the knowledge, the discipline, the patience, all of these things, overlay every part of it,” he says.

Like her colleague at the other end of the country, Ms. Laing also expects candid communication from her clients – and gets it. She says with fairly high net-worth people, which comprise most of her 140-clientele list, they tend to lay everything out for examination. Most are professionals, as well, so they understand the value of professional advice when they need it, Ms. Laing adds. “My expectations come down to having open communication with them if situations are changing, if there is downsizing going on in their corporations and they’re at risk – that’s something I need to know to change their risk profile.”

Ms. Laing also expects to have direct contact, with her clients’ permission, of other professionals such as accountants and lawyers who work for them. Rarely, she says, do her clients have another financial advisor whom she needs to reach.

Given the candour between advisor and advanced investor and the length of time some clients remain with one firm – Mr. Peters and Ms. Laing both have fourth-generation households on their books – it’s hardly surprising that relationships intensify. Mr. Peters says for him the relationships are pretty deep and his clients have become his friends. “I probably know as much about their lives as anyone outside their immediate family. And I know generally a great deal about their children and I often know a great deal about their parents.” He says his clients talk to him more than they do any other advisor in their lives Sometimes he and his clients will confer a couple of times a week, and in almost every case no less than quarterly, Mr. Peters says.

“Very few people see their doctor that often, or their accountant or their lawyer or any other professional that they may deal with.”

Ms. Laing, who’s worked as a financial advisor for 12 years, also allows that the relationship between her and her clients goes deep, but it’s a different sort of depth. Where it comes in, she feels, is for those advanced investors who require someone to deal with their estate planning, wills, trusts and even overseas affairs, and who forms part of professional team. “These people [clients] are not looking for a friend; they are looking for a professional money manager,” she says.

The IIAC Interview

The Goal: Giving Clients Their Best

Advisor Pledge

Emphasis is on quality service, partnerships

By Paul Brent

When Richardson GMP president and chief executive officer Andrew Marsh talks about the importance of the advisor-client relationship to his business, he is not just another Bay Street executive mouthing nice-sounding platitudes.

“I spent 15 years as an advisor myself,” says Mr. Marsh, who became president of the Toronto-based investment firm in 2010.

He has found that his years on the investment front lines influence every aspect of how he runs the company.

“As I work with my partners internally but also meet and try and recruit new partners, I’m looking through the filter of the school of hard knocks from the challenges and opportunities that came from having good relationships with clients,” Mr. Marsh says.

The advisor-turned-CEO takes an advisor-first approach to running his firm with the expectation that the main beneficiary will be clients.

“Everything we do, I think because of my experience as an advisor, is done with full consideration as to how a certain policy or change we are working on will affect advisors and how it might change the way they work with clients,” he says. “The strength of our relationships is really at the core of our entire business, and the trust and integrity within those relationships is everything.”

Mr. Marsh acknowledges that measuring the health of the relationship between Richardson GMP advisors and their clients is an inexact science at best.

“That is a tough one, because so many advisors interact with their clients and run their business in so many different ways,” he says.

The firm uses a team approach featuring 110 teams of advisors when dealing with client needs. A team typically includes a portfolio manager who is responsible for managing client portfolios and advisors who manage the client relationships, holistically oversee a family’s financial situation and often delegate investment management to specialists.

“Our focus is really to empower our teams to work with their clients the way that each of those teams want to as a business owner as opposed to trying to fit everyone into one style or one template,” he says.

“Because we are more of an entrepreneurial firm, our entire focus as a head office group is to simply empower the best advisors in determining how they want to market themselves and work with clients and supporting them as best they can.”

The Richardson GMP entrepreneurial approach means that attracting and retaining an all-star group of advisors is paramount to maintaining top drawer client relationships.

“If you have been around awhile and have built up a good practice you have typically figured out a lot of things along the way,” he says. “We don’t hire rookies, we don’t have anyone here who is new to the business. We have the benefit of working with seasoned and experienced professionals, so a lot of times my job is just to get out of the way.”

Despite that hands-off approach, Mr. Marsh says client relationships are top-of-mind at his firm.

“Relationships are at the core of entire business,” he says. “As an advisor, I had clients that I was absolutely on the same wavelength with and I had clients that I was absolutely on the wrong wave-length with.”

The stark reality that some client-advisor relationships are not operating in a proper fashion means that either remedial action needs to be taken or, in some cases, the relationships needs to end.

“The best client and advisor relationships I see occur when there is a clear understanding and there is a well-specified, what I call rules of engagement. That specifies how communications will be carried out, how you want your port- folio performance reported to you and what service levels you should be expecting from me, the advisor.

“As long as those are fairly clear, and that is what I mean by being on the same wave-length, that it is a positive experience.”

Mr. Marsh stresses that a high-performance advisor-client partnership is a two-way street and while clients feel angst during times such as turbulent markets, an experienced advisor will actively listen and draw out the concerns of the client, address them and keep them focused on their long term goals and objectives. Taking this time with clients keeps the relationship solid and gives the client confidence.

Mr. Marsh has some hard-earned advice for investors looking for a new advisor or simply trying to assess the relationship that they are in currently.

“Every advisor will have a sales pitch but through the course of an existing relationship or searching for a new relationship, a client should ask themselves, ‘Is this a good advisor or this a good salesperson?’ ”

Good advisors should be able to clearly outline their investment and risk management process as well as their service model, he says.

“As those conversations happen, it will be clear in a client’s mind whether the person is a very good salesperson or whether someone is truly a very good professional advisor. Because there is a difference.”

Mr. Marsh observes that the role of an advisor has changed dramatically from the 1990s, when the chief function seemed to be the selling of investment products to investors.

“It is not about products any more, it is about the process of wealth management,” he says.

“It is about managing risk, it is about taking a holistic view of the family, which includes intergenerational advice, business succession, elder care and divorce. So advisors of the future who will have the most success with clients are those who embrace the process of wealth management and don’t focus on the sale of the product.”

‘Same view of the world'

By Paul Brent

The 15-year relationship between investment advisor Angus Watt and clients Ken and Elaine Bokenfohr is so strong that the Edmonton-area couple was featured in a commercial for Mr. Watt’s group.

Ken Bokenfohr, who is a chartered accountant during the winter months and farms 1,700 acres during the summer, says he and his wife get along so well with Mr. Watt, managing director Individual Investor Services, National Bank Financial Ltd., and his two associates because they all share the same investment mindset. “I think we all have the same view of the world,” he says.

The Bokenfohrs first contacted Mr. Watt after hearing his regular radio spots concerning the stock market and the economy years back and decided at that time that he was the advisor for them. “From an economic point of view and a political point of view I think we have a lot of the same thought processes,” says Mr. Bokenfohr, who describes he and his wife as conservative investors. “When we started we wanted to make sure that we match inflation and maybe grow a bit but our big thing is we don’t want our capital pool to decrease in purchase power. We are a little ways to retirement, so we don’t want to go backwards.”

The chartered accountant-farmer says that the vast majority of the time Mr. Watt and two associates present them with investment ideas and that “75% or 80% of the time we say yes. That is why we have them — because I don’t have the time to research a whole bunch of material looking for investment opportunities.”

Steady and strong communication on the part of Mr. Watt and his associates is what has made the bond of trust so strong between the advisors and the Bokenfohrs. Mr. Watt’s team evaluates the couple’s finances three times per month as part of their review system, sends a monthly report on their account and typically contacts them at least once a month. “We take a look at that, their investment objectives, their portfolio and whether something should be changed and if so we give them a call with our recommendation,” Mr. Watt says.

While Ken Bokenfohr is the most involved in investment and product strategy, his wife Elaine, who works as a part-time dental assistant, is also quite involved. “She has an interest and she follows it. She was also part of the TV commercial,” Mr. Watt says. “From my perspective they are great, because as a couple they are both involved and they have participated in our events.”

Mr. Watt says the interaction with the Bokenfohrs is no different than the other 900 families he and his team deal with, even though they may have a unique situation. “I wouldn’t say it is more complicated, it is just part of the package. Whether you have a working farm which is taxed a certain way, a corporation, other people have an IPP. You may have different asset groups, piles of money that have different interests and risks,” he says.

In the case of the Bokenfohrs, their investment objectives have remained pretty steady, both advisor and clients agree, but they have faced their own set of chal- lenges. “As farmers, which is no different from business people, there are no guarantees in life,” Mr. Watt says. “Last year, we were well aware that they were getting to the point that they were not sure whether they were going to plant or not. That is important to them and it is important to us.”

The Edmonton couple and Mr. Watt’s team also cruised through the financial crisis and market crash pretty much unscathed, Mr. Bokenfohr says. “We didn’t end up changing a whole lot of the portfolio. We were positioned before the market correction happened because we were worried about some issues."

He recalls his family’s portfolio performed far better than his most of his pals on his old-timer hockey team.

“I didn’t say anything at hockey and came home and said to my wife, ‘we are down about half of everyone else.’ But percentages aren’t everything. We got a little more cash-intensive and just sort of waited on the side.”

Today, Mr. Bokenfohr cannot remember precisely whether it was his advisors or he and his wife who originally decided to trim the risk out of their portfolio, which stood them in such good stead during the financial crisis.

“I’m sure it came from them to start with and us saying ‘Yes, that is a bit of a concern.’ If I remember the discussion didn’t start with U.S. real estate but that it was time to take a breather and step back a bit.”

The Bokenfohrs are ideal clients because they are involved and engaged. They regularly attend educational events put on by the Angus Watt Advisory Group, something that not all investors do, Mr. Watt notes. “We used to do a lot of educational events, thinking that everyone wanted to learn, but sometimes people are just too busy in this world today and they say, ‘That is why we deal with you, we trust you.’ ”

Mr. Watt considers a good advisor-client relationship a two-way street, which in the Bokenfohrs’ case goes beyond attending meetings. “If we show them something, especially if its new, such as an income trust product or something, they will take it, digest it, discuss it and come back and say yes or no or have some questions.

“Some people would just say, ‘Whatever, if you think it is going to work.’ ”