A well-established Edmonton portfolio management firm carries out considerable operational capacity with their small team. They offer high-touch service to clients across Canada and the US, who hold a minimum of $100,000 in household assets.
On a typical day, their portfolio managers take on duties like client trading, bulk trades, annual portfolio reviews, and ongoing duties for regulators. This is when they’re not liaising with referral agents, internal administration, compliance, or custodians. The process to onboard new clients was time-consuming and on occasion daunting, considering the time it can take to follow up with clients. Portfolio managers had to have a call with the investor to gather all of the information manually, and the administration had to spend time transposing or duplicating documents. Clients were left to print and sign forms by hand. Like many other portfolio management firms, their processes meant inefficient back and forths, printing, manual processes, and email follow-ups.
Since the firm began operating they’ve relied on manual processes. They knew they needed to be more tech-savvy and to develop a better experience for clients, who were looking to be served with features like e-signatures. They didn’t have any e-signing methods before because it would have required special certification or some kind of system to encrypt the data. The firm wanted a convenient way for their onboarding process to be streamlined for clients and staff, and to offer electronic forms throughout the process. Above everything else, it was important for them to increase efficiency.
The firm knew that there were already well-established solutions in the market, and they’d even tried a couple before coming to Mako. The other solutions they tried didn’t cover document preparation and were instead more suited for client relationship management or a portfolio management system. None were flexible, and for the firm, it meant trying them, only to see that they weren’t a fit. Even after exploring custom development, nothing stuck. They had specific needs and it was critical to find a system that could support that.
The firm chose Mako Fintech because it was more customizable than any other system. They were able to build automated processes that were exactly what they needed with the Mako team.
Mako Fintech takes a collaborative approach to client solutions. As such, this Edmonton firm was able to guide the Mako team to get a system designed to cater to their processes. For their regulators, their firm is required to provide a lot of documents. They appreciated being able to explain these processes and have automated workflows built around them, versus having to just see what they would get with an existing platform. Without having any say in the development, they knew they’d be left to have to figure out ongoing gaps on their own. As one Associate Portfolio Manager at the firm explains “it’s nice to be able to give that feedback and be part of what the next steps are and what the development is going to lead to, versus ‘what you get is what you get,’ and it’s not necessarily the system that the clients want.”
Here’s how the process worked for this Edmonton firm to get to the solution they always wanted:
Step 1: Business Process Review
The Mako team kicked off the collaborative business process review by analyzing the documents provided by the firm as well as their specific business requirements. Following the initial review, Mako Fintech’s team presented their recommendations to the firm.
Step 2: Validation & Final Scope
Mako’s analysis and recommendations included automating all of the account opening processes with custodians, developing a custom robo-advisor experience to guide investors through the onboarding process, secure PIN verification, and integrating real-time digital ID verification and AML. These were presented to the firm’s stakeholders for validation.
Step 3: Configuration & Implementation
Once all parties were in agreement, Mako’s Customer Success Engineers built out the client environment and configured the custom workflow automation, including all settings and parameters.
Step 4 Testing, Delivery & Launch
The last step was the Mako team providing access to the newly configured environment, after conducting tests on the system in collaboration with the firm in order to assess that all functionality was satisfactory.
The Mako team delivered a highly custom, scalable solution that fit the exact needs of the portfolio management business, with a white glove onboarding service, and an affordable subscription-based pricing model. Mako acted as a trusted advisor throughout the process, ensuring all necessary workflows, compliance requirements, and automatic audit trails were accounted for. Mako has continued to optimize the product to meet the customer’s wishes post-delivery.
Mako Fintech’s approach led to a complete digital transformation of the firm’s existing business processes. The outcome allowed them to adopt technology in a way that fit their needs without compromise, improve client experience, and significantly reduce the time spent administering new clients. The firm outlined a number of auxiliary benefits they experienced from automating their portfolio management processes, including:
Mako was able to take the firm’s existing risk categories and client risk assessment questionnaire and build them into the onboarding workflow. The questionnaire helps collect meaningful information on the client’s ability and willingness to take on risk, which helps the portfolio managers to have more insight when determining the client’s risk tolerance and implementing an investment plan. By having that information upfront, their portfolio managers can bring more value to that initial client interaction:
“Even before a call, just doing my prep, I could see what I needed to ask and what points would be the most important to discuss with the client when I hadn’t even spoken to them yet. That’s huge versus going and meeting a client for the first time and having no sense of who they are, or how they feel about investing. It helps us make a much better assessment.”
- Associate Portfolio Manager
With many stakeholders involved in client onboarding and management, there are ongoing exchanges between departments. The firm says it’s been really helpful to have a system where their client forms and the status of their onboarding is centralized for everyone.
Now that the firm has access to e-signatures, their clients have been commenting about how much better it is to go through onboarding because it’s so convenient. Even internally, signatures are now as simple as hopping on a link and e-signing.
The last couple of steps in the firm’s onboarding workflow are related to compliance. The Mako system gives the team the ability to go in and see everything they need to review in one space easily.
The firm finds that just being more digital offers them significant time savings. Forms that were previously filled out manually are now automatically generated. For their administration team, it’s been exceptional time-savings just not having to file all the documents and retype the information.
Today a typical day for the portfolio managers at this Edmonton firm looks drastically different than it used to. Without the burden of manual information exchange and data entry, the firm can focus on more value-added activities for clients, employee development and corporate strategy.
“Mako Fintech is a game-changer — we would highly recommend them.”
- Associate Portfolio Manager
Image Credits
Feature Image: Unsplash/Alex Pugliese
So in my view an appropriately diversified portfolio should have enough exposure to different asset classes, that its able to withstand a wide range of market disruptions. Usually, it’s some kind of negative or positive event… they’ll affect different asset classes differently. So by having your eggs in different baskets you’ll be well insulated from major risk. For example, there’s some kind of change in the housing market… both by having some exposure to it, you won’t miss out on the opportunity to make money. But if it’s something negative, you’re also not going to lose all your money if all of it were in the housing market for example. So at a high level, a properly diversified portfolio should grow in a growing market and yet not be at risk of major losses in a declining market.
You asked also about an efficiently diversified portfolio, and I would say that that’s a portfolio that achieves those goals with a minimum of different positions. There’s a lot of good reasons to have fewer positions in your portfolio. Being less complex means a portfolio is easier to rebalance and administer. Every time part of your portfolio goes up or down, you're going to need to rebalance it a little to make sure that it stays with the right allocations and the fewer positions you have, the easier it is to do that..the less trading fees you incur doing that.
There is a tradeoff between being completely diversified and being efficiently diversified. If you were completely diversified then you’d have a proportional segment of absolutely everything you could invest in under the sun, like shares of palm oil futures or something like that. I don’t think everyone should have palm oil futures in their portfolio but I’m not a wealth manager. I think it comes down to your portfolio and how large it is (probably the Canada Pension Plan has a proportion of palm oil futures in it). You’re going to have to talk to your advisor and choose a degree of complexity that’s right for your portfolio.
CN: Let’s just take a step back - what does a typical portfolio look like and has that changed over time?
RB: Yeah, so I'm not entirely sure what a typical portfolio looks like these days because it's actually changed quite a lot over time. I think common wisdom used to be that the classic balanced portfolio was 60% public stocks and 40% bonds. These days that's ancient history. Most would say that the bond allocation should be a lot lower these days in this age of unprecedented low-interest rates. These days it’s the stock portfolio that’s been driving a lot of the growth. I think a well-diversified portfolio in the modern era should absolutely include exposure to all kinds of alternative assets (that aren't even really that alternative but still kind of fall out of that traditional bucket). So you know I mentioned real estate, private companies, maybe for example commodities or other types of investments. So I think that there are a lot of things that you can invest in and your advisor can guide you on what’s appropriate for you.
CN: Yeah that makes a lot of sense. Talking about alternative investments, we’ve heard a lot this year about ESGs, impact investing, alternative investments… do you think there’s more of an appetite today for these types of investments than in the last ten years?
RB: Yeah that’s a topic that’s close to my heart having previously started an impact investment company. It’s definitely been a gigantic increase in interest. I think when I started my previous company we were speaking to large wealth managers and having them say “we’re barely getting a grip on early ideas.” Like not including gun manufacturers or tobacco companies, and now these same companies are launching impact portfolios and marketing this aggressively. So there’s definitely been a seat change, it’s a real industry, and there’s a lot of studies out there and data showing that ESG or impact investing can equal or outperform non-impact investments. So I think it’s a huge part of the market these days. That said, one of the things that’s driving it is people’s interest in it. I think that one of the stories of the investment industry has been the personalization of it. People’s portfolios are being tailored to their own needs and circumstances. Impact investing is definitely a piece of that. People are environmentalists, but an institution is not an environmentalist. It doesn’t live and breathe the impact on the environment the way an individual does. The person who is active in the David Suzuki Foundation for example is going to be active as an impact investor and it’s appropriate for them to be.
That’s a great question. I think there's a lot of advantages and you gain a lot with an automated platform. For me, it's a lot easier to manage. I have some of my money in one of these platforms and I barely think about it. It's being rebalanced all the time. The costs are much lower in terms of expense ratio for the same kind of rebalancing. Again you're missing a lot with that, but on just the mechanical portfolio rebalancing you're getting a great deal there. I would say that two other advantages are up-to-the-minute reporting, so you always have that login where you can see your position, see how your portfolio is doing historically. And finally, this is an advantage for me and anyone who doesn't love doing taxes, but typically they’ll take care of your tax forms for you, and end up with much simpler tax forms, so it kind of works out what your cost basis was and how much you have to report.
CN: So let's talk about the other side of the coin then...what are the risks of not having a seasoned professional managing your money?
RB: I wouldn’t exactly phrase the question that way. You know it's more what’s the benefits of having a real wealth manager? Some of the clients of robo advisory firms may not even be aware that they're missing out. A wealth manager isn't just balancing your stocks and bonds, that's kind of the very lowest mechanical level of what you get out of the wealth manager. Really they're your advisor on your life. Intimately intertwined with you because you're thinking about retirement planning, on planning for college for your kids, when is the right time to buy a house, and when should you get life insurance, for example. An advisor can help you with all of those decisions and they can connect you with service providers like a mortgage broker when you may be in need of one. So I think that you get a lot of value out of having one of these advisers, particularly when you get to a stage in life when these kinds of services are more about the long-term and your life circumstances are far more critical.
CN: There are clearly pros and cons and two sides of the story depending on who you're asking. Like you said, what stage of their life they’re in ...but do you think the platforms that we’re seeing emerging like to Qtrade, Wealthsimple, and all the rest will ever become status quo?
RB: Yeah, I do actually. I think that similarly to how you know we’re using online platforms to automate everything for us (I can’t think of the last time I used to travel for example), everything you’re going to be trying to do with your money is going to be automated, and it’s going to be appropriate to be handled by one of these one of these platforms. In particular, for most people at an early stage in their lives that have few assets to manage, not a lot of complexity, not a very extended personal family circumstance, it’s gonna make a lot of sense to have a low fee robo worry about it. But at some point their life circumstances are going to get more complex and you’re gonna get married, or maybe you’re not, or you may have other objectives that you may want some advice on and at that point it may make sense to either supplement the robo advisory portion of your portfolio, or graduate to a more holistic wealth management view.
CN: Thank you so much Raph, these answers were great. It’s always insightful chatting with you so thanks for sharing those answers with us today.
RB: It’s my pleasure.