Top-Shared Wealth Management Moments of 2021

December 14, 2021

2021 Recap: Top-Shared Moments in Canadian Wealth Management

2021 has been another eventful year for Canadian wealth managers, as they continued to adapt to the new norm brought about by the pandemic. However, plenty of other developments affected the industry over the last 12 months, many unrelated to COVID-19. As we approach the end of the year, we’re recapping some of the top news stories covering the Canadian wealth sector in 2021. Top stories were selected on the basis of being published by a mainstream media outlet, and having the most social media shares (Note: data was gathered using Buzzsumo that excludes LinkedIn).

Moment #1: Jim Pattison Speaks Out About Proposed Wealth Tax

Title:
Jim Pattison warns wealth tax will lead to Canadian capital exodus

Source:
BNN Bloomberg

Author:
David George-Cosh

Date Published:
16th September

Total Shares:
12,000

Jim Pattison, CEO of his eponymously named conglomerate and one of Canada’s wealthiest people, warned that proposals presented ahead of September’s elections to increase taxes on wealthy individuals could reduce investment in Canada. Mr. Pattison acknowledged the rich must pay their fair share, but he argued capital flows to countries with friendly tax regimes. Higher taxes could lead to an exodus, which wouldn’t just be bad news for the wealth management industry, it would also hinder the economic recovery from the pandemic and efforts to tackle labour shortages.

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Moment #2: Investor Appetite for Real Estate Recovers

Title:
Investors account for a fifth of home purchases in Canada. Are they driving up housing prices in a booming market?

Source:
The Globe and Mail

Author:
Rachelle Younglai

Date Published:
22nd June

Total Shares:
3,200

Investor appetite for real estate has recovered since the start of the pandemic according to data published by the Bank of Canada. Investors accounted for 20.1% of all purchases in 2020, lower than the record high of 21.7% in 2018 but above 2019 when the figure fell below 20%. With interest rates at historic lows, investors have been attracted by the potential for higher yields.

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Moment # 3: Bond Manager Helps Bay Street Give Back

Title:
How a bond fund manager and an occupational therapist harnessed the power of Bay Street to fund research into a rare illness

Source:
The Globe and Mail

Author:
Tim Shufelt

Date Published:
24th May

Total Shares:
236

After Paul and Cheryl Marcogliese’s sons were diagnosed with Niemann-Pick Disease, a rare genetic illness, they started to research drugs to help to manage the condition. They eventually found an experimental drug called VTS-270, but in early 2021 Mallinckrodt Pharmaceuticals stopped producing it because of the risks of side effects. As part of their efforts to explore alternatives, Paul and Cheryl took over the Canadian chapter of the Niemann-Pick Foundation. Scientists started to approach the foundation about new therapies to treat the disease, but they needed financial support. As a bond fund manager, Paul crunched the numbers and recognized the potential rewards, so he tapped into his contacts on Bay Street to fund further research. To date, the foundation has raised $2.7 million.

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Moment #4: BMO Appoints New Head of Wealth Management

Title:
BMO appoints Deland Kamanga as new head of wealth management

Source:
The Globe and Mail

Authors:
James Bradshaw and Clare O’Hara

Date Published:
28th October

Total Shares:
157

In October, Deland Kamanga was appointed Head of Wealth Management at BMO. Mr. Kamanga joined BMO in 2006 and has been Head of Global Markets since 2019. BMO CEO, Darryl White, praised his track record of delivering strong performance and leadership. Mr. Kamanga’s promotion also adds diversity to the senior leadership team at one of the country’s biggest financial institutions. Mr. Kamanga has strongly advocated for greater inclusivity at BMO, sitting on committees such as the BMO Black Professionals Network. Catalyst, a non-profit supporting women in business, recently recognized him as a business leader champion.

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Moment #5: Canada’s Open Banking Regime Announced

Title:
Report recommends new open banking regime for Canada to allow customers to share data between institutions

Source:
The Globe and Mail

Authors:
James Bradshawbanking and Vanmala Subramaniam

Date Published:
4th August

Total Shares:
137

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In early August, a federal advisory committee published a report on open banking in Canada, encouraging the government to work closely with the financial industry to launch a national standard within 18 months. Open banking puts consumers in control of their financial information, which boosts competition and innovation as switching providers becomes easier. However, open banking is just the first step- it could broaden to open finance which involves sharing other types of data such as investments and mortgages.

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We're saying goodbye to another year and remembering the most shareable moments in Canadian wealth management. From pandemic recovery, to new position appointments, and transformational regulatory framework, it certainly has been an eventful twelve months. With 2022 around the corner, we're wishing our readers a safe and happy New Year!

Image Credits

Feature Image: Unsplash/Valentin Balan

All screenshots taken by author, December 2021.

Image 1: Via Wikipedia

Image 2: Via Unsplash

Image 3: Via Unsplash

Image 4: Via Wikipedia

Image 5: Via Open Banking Initiative Canada

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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.
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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.
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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.
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CN: Let’s just take a step back - what does a typical portfolio look like and has that changed over time?
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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.
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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?
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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.

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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.
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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?
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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.
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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?
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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.
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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.
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RB: It’s my pleasure.

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