TheExtraMile

Fund merger anxiety

Why professional networks pay off

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JULY 2001

ExtraMileThe

Fund merger anxiety

HOW BRADLEY ROULSTON, CFP, FOUND HISNICHE AND GOT HIS CAREER ON TRACK

HOW BRADLEY ROULSTON, CFP, FOUND HISNICHE AND GOT HIS CAREER ON TRACK

Investment policy statementsInvestment policy statements

42 HER MONEY

22 RIGHT ON TRACK

18 ANXIOUS ABOUT FUNDSINSIDE EDGE

7 Content KingEncourage clients to contribute to your newsletters and Web pages to add value to your communication.

LETTERS

8 Etiquette MessagesEntertaining only high-net-worth clients is an etiquette faux-pas.

TOOLBOX

15 Extra EffortBy developing an investment policy statement, you will better understand your clients.

INVESTMENTS

18 FUND ANXIETYAs mutual fund companies consolidate, new funds are created. With over4,000 products to choose from, the result is more confusion for advisorsand clients alike. By Harvey Schachter

COVER STORY / PROFILE

22 THE EXTRA MILEBradley Roulston, CFP, (right), embarked on the investment marathon,found his niche and is on his way to building his business.By Jennifer McLaughlin

PRACTICE MANAGEMENT

30 CIRCLE OF FRIENDSDeveloping strategic alliances with fellow professionals can make youmore credible in the eyes of your clients and help your bottom line.By Sheila Avari

YOUR BUSINESS

37 Still in HandThe RFP lives on to see another year as the decision to retire the designation is postponed.

38 Tax Break with Gena KatzJoin the club. Investment clubs can offer more choice for your clients and help diversify their portfolios.

39 Ask Julie with Julie LittlechildUsing satisfaction surveys can be an effective way to ask for referrals from your clients.

40 Marketing Frontlines with Dan Richards History offers valuable lessons.Take a look back and reflect on advice circa 1800.

41 Quest for Excellence with Nick MurrayAs you continue to build your business, here are three more tips to help you grow.

NEWSMAKER

42 Monique ClementClement, host of Her Money, (right), says women are less emotional when investing than men.

JULY 20015

July 2001 Volume 4, Number 7

Four times a year, my real estateagent sends me a “homeowner’snewsletter.” I look forward to receiv-ing it, though it’s not particularly wellwritten or clever in any way. In fact,it’s awful. I mean it is truly dreadfulby every measure. It’s so bad that Ifind reading it a form of macabreentertainment.

What makes it so bad is the content.An article on the perils of controllingdust bunnies comes to mind.

That said, the newsletter doesremind me that the agent is availableshould I decide to sell my house. Andwhile I have been amused by the inad-equacies of the newsletter, at the PeelInstitute Symposium in Toronto, sev-eral advisors recently reminded me thatalthough they recognize the benefits ofthese tools and even use them in theirpractices, they still wrestle witha common problem—finding goodcontent.

I sympathize. The most important,most challenging task undertaken bythe Advisor’s Edge and Advisor.ca edito-rial teams is making sure the two ser-vices deliver to you timely and relevantarticles, news, information and insight.

Content is king. It is the most

precious commodity of any clientcommunication strategy.

So for those of you who have asked,“Where can I get good content?” letme offer a few suggestions.

Let’s start with your friendlymutual fund wholesaler. On page 20of this issue, contributing editorHarvey Schachter looks at the confu-sion to investors and advisors alike inlight of the now 4,000 mutual fundsavailable in Canada. With so muchchoice, wholesalers are always lookingto bring some added value to their rela-tionship with you. Here’s one way theycan help. Ask them to supply articleson the benefits of diversification,tax-efficient investing or clone funds.Make it clear you don’t want a productpush—just an educational article withno reference to specific funds.

What about the other professionalswith whom you have built relation-ships? As assistant editor Sheila Avariexamines in “Circle of Friends” onpage 32, building alliances withaccountants, lawyers and other centresof influence can help grow your busi-ness through referrals. And they canalso help fill the pages of yournewsletter. Have them contribute

articles on their areas of expertise.Better yet, why not have one sharednewsletter that everyone contributesto and then gets mailed out to yourcombined client lists?

What about your clients? If youhave clients who are small businessowners, they might have a problem orsolution to share with your otherclients. This strategy works especiallywell when you have built yourbusiness around a specific niche. Inthis month’s cover story, startingon page 24, assistant editor JenniferMcLaughlin delves into one advisor’sapproach to niche marketing. If youtarget clients around a specific occu-pation or hobby then you know theymay be interested in each other’sexperiences.

Allow me to add one final sugges-tion. Take a look at the Content forClients section located on page 12. Ipromise you won’t find any articles ondust bunnies.

DARIN DIEHLCONTENT DIRECTORADVISOR SERVICES

advisorsedge@rmpublishing.com

JULY 20017

INSIDEEDGECONTENT KINGSpice up your newsletters and Web pages by asking clients or other professionals to contribute.

ETIQUETTEMESSAGES

I loved the article on client appreci-ation events (“In the Company ofClients,” May 2001, page 23). Why isit though that some advisors onlyappreciate high-net-worth clients?

We have a barbecue in a public parkto celebrate all of our clients! We playvolleyball, baseball, boche ball, have facepainting for the kids, enjoy lots of foodand have a great time interacting withall of our clients. You never know wherethat next referral is coming from.

Darlene Gunter, Personal Financial PlannerDMG Financial Planning Services Victoria

The contributors to the cliententertaining story had some goodadvice. But the cover illustration is send-ing several wrong messages on etiquette.For starters, both men are holding abottle and you do not drink out of abottle, ever. Secondly, the man in theforefront should not have his hand inhis jacket pocket because it will quicklylook rumpled with one side longer than

the other. Thirdly, the woman eating thesnack should always have a napkin athand to keep crumbs off lips. Lastly,the cork in the bottle on the table sendsa “do not drink” message to guests.

Peter M. Fedirchuk, Managing PartnerPeter M. Fedirchuk & AssociatesAlmonte, Ont.

THE BATTLECONTINUES

I am writing in support of the let-ter written by Neil Hughes (“Battle ofthe Standards,” March 2001, page 11).I have been in the financial servicesindustry for 31 years—17 as a bankerand 14 as a certified financial plannerbacked by a university degree, theInvestment Funds Institute of Canada,a branch manager’s designation, andcountless hours of always doing what isin the best interest of my client.

It irks me to have someone assumethat because an advisor is fee-only, heor she is unbiased. Which human beingin this world is totally unbiased?

I have seen bad and biased advicegiven by salaried bank employees, fee-

only advisors (supposedly non-biasedlawyers, accountants and financial plan-ners), commission-based advisors andfinancial planners. If the client is givenbad advice, the source is incidental.Oftentimes the fee-only planner isdriven by billable hours; the larger theclient, the larger the fees, but not nec-essarily the best advice. Also, what sub-sequent damage is done to the clientwho is billed for a plan that is neverproperly implemented?

Fee-only planners should be subject tothe same level of scrutiny and regulationthat is appropriate for any advisor.

If Julia Dublin of the CanadianSecurities Administrators believes “thatconsumers can’t be damaged by badadvice when there is no product imple-mentation,” then she is naïve at best.The vast majority of people working inthis industry are trying to help clientsoperate from integrity and put theirclients’ best interests first.

Ivan Burt, CFP, Branch ManagerBerkshire Investment Group Inc.Bedford, N.S.

LETTERS

Deanne N. Gage Managing Editor(416) 642-4729 (dgage@rmpublishing.com)

Jennifer McLaughlin Assistant Editor(416) 642-4944 (jmclaughlin@rmpublishing.com)

Sheila Avari Assistant Editor(416) 642-4862 (savari@rmpublishing.com)David J. Heath Art Director(416) 596-5059 (dheath@rmpublishing.com)

Contributing Editors: Harvey Schachter, PeterBoisseau and Bert Vandermoer

Darin Diehl Content Director(416) 642-4837 Advisor Services

(ddiehl@advisor.ca)Paul Williams Executive Publisher

(416) 642-4848 (pwilliams@rmpublishing.com)

Kori Kobzina Associate Publisher(416) 642-4846 (kkobzina@rmpublishing.com)Garth Thomas Account Manager

(416) 642-4851 (gthomas@rmpublishing.com)Marie Atkins Executive Assistant

(416) 596-5070 (matkins@rmpublishing.com)Adrian Valks Production Manager

(416) 596-5035 (avalks@rmpublishing.com)Denise Brearley Director of Circulation and

(416) 596-3470 Marketing ResearchNancy Matheson Marketing Manager

(416) 642-4943 (nmatheson@advisor.ca)Clodagh Rohan Promotions Manager

(416) 596-5937 (crohan@rmpublishing.com)Katisha Rasheed Promotions Coordinator

(416) 596-5043 (krasheed@rmpublishing.com)

Editorial Advisory BoardElaine Andrew Investors GroupJohn De Goey Assante Capital Management

Robert Fleischacker CAIFASandra Foster Headspring Consulting Inc.

Catherine Hurlburt CAFP, IFC Planning GroupGlenn Lightfoot RBC Life Insurance

Ian Niven BMO Harris InvestmentManagement Inc.

Dan Richards Consultant Jim Rogers The Rogers Group

Financial Advisors Ltd.Ralph Sommerfeld Raymond James Ltd.

Thane Stenner Merrill Lynch Canada Inc.Dan Thompson National Bank of Canada

Lynne Triffon T.E. FinancialShirley Webster Bank of Montreal

ADVISOR’S EDGE is published by Healthcare & FinancialPublishing, a division of Rogers Media Inc.

Rogers Media Inc.Anthony P. Viner President and CEO

PublishingBrian Segal President and CEO

Terry L. Malden Chief Operating Officer, Executive Vice-President

Healthcare & Financial PublishingJames O. Hall President, Medical

PublishingJohn Milne Senior Vice-President

Published in Canada by Rogers Media Inc. since June 1998. RogersMedia Inc., 777 Bay St., Toronto, Canada M5W 1A7, (416) 596-5000, fax (416) 596-5940. Offices: 1001 de Maisonneuve West,Montreal H3A 3E1, (514) 845-5141; Ste. 900, 1130 West PenderSt., Vancouver V6E 4A4, (604) 683-8254.Full subscription price: Canada $62 per year, 2 years: $102, 3 years:$132.00, USA/Foreign: $127.00 (one year only). Single copy: $15.Published 12 times a year. G.S.T. #137813424RT.ADVISOR’S EDGE is indexed by the Canadian Magazine Index byMicromedia Limited, and the Canadian Periodical Index. Canadianback copies are available in microform from Micromedia Limited, 20Victoria Street, Toronto, Ontario M5C 2N8. Indexed by the CanadianBusiness Index and available online in the Canadian Business & CurrentAffairs Database. Publications Mail Agreement Number 749990.Canada Post: Please return undeliverable address blocks to RogersMedia, 777 Bay St., Toronto, ON M5W 1A7. ISSN 0703-7732.Copyright © 2001 Rogers Media Inc.

July 2001, Volume 4, Number 7

FEEDBACKAdvisor’s Edge and Advisor.ca welcome your comments, story ideas and

inquiries. For Advisor’s Edge contact Deanne Gage at (416) 642-4729 or

e-mail dgage@rmpublishing.com. For Advisor.ca, contact Jim MacDonald

at jmacdonald@advisor.ca. Letters to the editor can be sent to

advisorsedge@rmpublishing.com or faxed to (416) 642-4949.

FRENCH CONTENTObjectif Conseiller, a sister publication of Advisor’s Edge, serves

financial advisors in the Quebec market. For editorial inquiries, contact

Yves Bonneau at (514) 843-2142 or e-mail ybono@lactualite.com.

DAILY NEWS

Advisor.ca offers daily A.M. and P.M. e-mail bulletins that feature news as it pertains to

you.To register, e-mail service@advisor.ca or contact Philip Kahn at (416) 596-5779.

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Want to show your clients articles on specific investment strategies? Articles that

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2001 ADVISOR FORUMSEarn education credits while learning from top money managers and the leading

practice management experts. In Halifax on Oct. 29 and 30;Toronto on Nov. 12 and 13;

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ADVISOR’S EDGE12

BUILD YOUR BUSINESS

JULY 200115

When meeting with clients forthe first time, the professional advisorwill want to get to know them as muchas possible. But the short know-your-client (KYC) form required by regula-tion may leave many unanswered ques-tions, resulting in a poorly startedclient-advisor relationship.

According to Kelly Rodgers ofRodgers Investment Consulting, somefirms and advisors prefer to use a KYCform rather than the more formalinvestment policy statement (IPS)because “the KYC is looser, whichmakes it more difficult for the dissat-isfied client to say: This isn’t what Ihired you to do.’ ” She adds that the tra-ditional KYC form is too general to bean effective tool. It doesn’t really statewhat the client wants you to do, nordoes it tell the client much about whatyou do, and how you will do it for them.After all, when a client checks off hisliquidity needs or risk tolerance, doeshe really understand what that means?

While the IPS has long been used byinvestment counsellors and professionalmoney managers, it is gaining accept-ance as one of the tools of the profes-sional financial advisor. The IPS to thefinancial advisor is like the blueprint tothe architect.

An IPS is, as it sounds, a statementthat outlines the client’s:• investment objectives; • desired asset mix;

• investing constraints; • guidelines for selecting, monitoring

and managing the investments;• the costs associated with the

investments; • review and reporting procedures;

and • any other details pertaining to the

job the client is hiring you to do. A key purpose of the IPSs produced

for clients by Richard Croft, presidentof the Toronto-based Croft FinancialGroup is “to assist the investor in effec-tively supervising, monitoring and eval-

uating the plan’s performanceand the performance of yourinvestment counsel team.”

Preparing an IPS There is a time commitmentinvolved in preparing an IPSfor a client. From a prag-matic point of view, someadvisors might argue that theclient’s account needs to belarge enough to justify takingthe time to prepare the IPS.

Indeed, a formal IPS maymake it harder for the finan-cial advisor to get the clientto invest. Consider theprocess involved in buying acar—the more paperwork apotential purchaser isrequired to review, considerand sign before the deal is

completed, the harder it may be for thatpurchaser to actually complete thetransaction.

But all the information in the IPSshould be part of the conversation anadvisor has with each client before mak-ing an investment. Instead of thinkingof the IPS as additional work, youcould think of it as documenting theresults of the conversations you arealready having with each client beforeyou recommend an investment for hisor her portfolio. An IPS should provide

TOOLBOXBy Sandra Foster

An investment policy statement may require more time than a KYCform, but it will help you understand your client’s goals better.

EXTRA EFFORT

Continued on page 16

Illustration by Carey S

ookocheff

you with a better understanding ofwhat the client expects. It will also pro-vide the client with a greater under-standing of what he or she is paying youto do. But with an IPS comes a higherlevel of accountability.

While the format of an IPS variesfrom firm to firm, it should documentall the information you use to build andmanage a portfolio. There is no requiredlength, but it must cover the followingthree areas:

1. Investment Objectives Simply put, this is a discussion of whatthe client’s money is for. Is the moneyfor retirement, education, a major pur-chase or to leave a legacy? The client’sobjectives, in turn, relate to their tar-geted return and risk level. For example,if a couple wants to retire in 10 yearsand wants to target a 7% return, theyneed to be prepared to take on the asso-ciated level of risk.

2. Asset MixThe client’s risk profile, targeted rate ofreturn, and the outlook of the variousfinancial markets are used to establishthe portfolio’s asset mix. After consid-ering which investments and asset

groups should be added to the portfo-lio, determine how much and why.When an upper limit has been definedfor each asset group, both the advisorand the client are less susceptible tochasing the top performing stock, sec-

tor or fund. Each investment decisionis tested against the IPS to determinewhether or not it fits the client’s needs.

3. Investment ConstraintsThe traditional investment constraintsfor the IPS include the client’s need forliquidity, time horizon, tax issues, rele-vant legal and regulatory issues, as well

as the client’s unique needs and prefer-ences. While the constraints on indi-vidual portfolios may be different fromthose on pension and mutual fundportfolios, they set very practical restric-tions on how the client’s money is to beinvested.

While your client’s eyes may glazeover when you ask about their liquid-ity requirements, you probably alreadyphrase this question to the client in per-sonal terms, such as “How muchmoney might you need from your port-folio over the next year, three years orlonger?” The client’s time horizon, orwhen they need their capital back,affects the investments you recommend.Aggressive equities or mutual fundswith a six-year deferred sales chargeschedule would not be appropriate fora client with a time horizon of onlythree years.

Other Considerations When setting up the guidelines aboutselecting investments, the client maywant the investment advisor to:• exclude certain types of investments

for ethical or moral reasons, (forexample, no tobacco companies);

• limit the types of investments topublicly traded securities or mutual

TOOLBOXContinued from page 15

[[

Instead of thinking

of the IPS as additional

work, you could think of it

as documenting the results

of the conversations you

are already having with

each client.

Selling a book business? Tell people in a position to buy with a classified ad on Advisor.ca.

TO PLACE YOUR AD, call Philip Kahn at 416-596-5779, or send it by e-mail to service@advisor.ca

Advertise now on

Tell the RIGHT people what you’ve got!

funds; or • set limits on the maximum percent-

age of the portfolio that can be heldin any one stock or sector, to avoidoverexposure to a sector or company. Some clients could have stayed out of

trouble last year if they had had an upperlimit on the amount they held in thecommunication/high tech sector. Sup-pose your client’s upper limit was set at10% for this sector. If this client hadcalled to buy more Nortel, the suitabil-ity of that request would have been con-sidered in light of the IPS.

For a mutual fund portfolio, the IPScould specify that the investment port-folio was to be built using a collectionof mutual funds and to hold no morethan a maximum number of funds.

Measuring PerformanceAccording to the 2000 Canadian Mil-lionaire Survey conducted by the Toronto-based Taddingstone Consulting Group,Inc., only 15% of the 219 Canadianmillionaires surveyed measure the per-formance of their advisors or portfo-lio against pre-determined goals orbenchmarks. Twenty-nine per centmeasure the performance of their port-folio against publicly available data,while 32% measure it against some sortof informal measure.

Clients want to know how their port-folios are doing but many advisors do nottake the time to educate their clients onhow to evaluate performance. “If youdon’t give the client an appropriatebenchmark to measure their perform-ance, they will find a benchmark, and itwill often be an inappropriate one,” saysKelly Rodgers. By establishing bench-marks, the client has the appropriategauges to measure performance—andrealistic expectations. Clients really needtwo benchmarks for measuring per-

formance: First, how much they need tomake and second, how their portfolio isdoing.

Costs and AccountabilityIn addition to how the money will bemanaged, the IPS discusses the impactof fees and taxes on the portfolio. Areview and reporting section of the IPSwould document how often your clientcan expect to hear from you and in whatform (i.e. phone, e-mail, face-to-face,etc.) and how to address any problemsthat might occur. Also, the IPS canoutline the performance and servicelevel expected and if either falls belowthat level that the client could receive anautomatic review.

Preparing formal documents for yourclients adds accountability and profes-sionalism to your relationship. When

market conditions are negative or soft,clients will want to know what they aregetting and how they are doing.

The IPS documents the frameworkthat will be used to build, manage, mon-itor and evaluate the portfolio. It’s notjust an agreement between the advisorand the client. It’s a communication toolthat can be used to educate the clientabout the investment managementprocess, keep the investment decisionson track, and enhance your profession-alism and credibility.

Sandra Foster, CFP, RFP, FCSI, is thepresident of Headspring Consulting Inc. and theauthor of Who’s Minding Your Money?(John Wiley & Sons).

To learn how to develop an IPS,go to www.advisor.ca.

1No.

INTERNET LESSON How towrite agreatprospectingletter,fast.

1. Go to www.advisor.ca2. Log in by clicking on the “Log In” button.3. Click on “Practice Zone.”4. Look for Template Letters on the right navigational bar.5. Pull down and click on “To Prospects: RRSP Season.”6. If you are using Microsoft Word, click on “Open Letter in Word Format.”7. Make your changes and save the file.8. YOU’RE DONE.

Investments

One of the first funds I bought,back in the early 1990s, was the Bolton Tremblay Landmark Balanced Fund.I didn’t know anything about Bolton Tremblay, but my financial advisor recom-mended the fund, and soon it became like a friend to me, familiar from myquarterly statements.

Just as fans cheer for their favourite sports teams, investors cheer for theirfavourite mutual funds. But soon I was cheering for something new, because inMay 1994, Bolton Tremblay sold its funds to BPI Financial Corp. Now I was aproud supporter of the BPI Balanced Fund. About a year later, my statementschanged again and I had to adjust to a new moniker for the fund: The BPI Cana-dian Balanced Fund. Three years later, in July 1998, the BPI Canadian BalancedFund merged into BPI Income & Growth Fund. By now I had lost interest,irritated at four changes in five years.

But it wasn’t over. In August 1999, CI Mutual Funds Inc. bought BPI and inJuly 2000, when the merger officially took place, its Signature Canadian BalancedFund was merged with BPI Income & Growth Fund, which in turn was renamed theSignature Canadian Balanced Fund.

If you’re confused by the litany, so am I. What’s worse is that’s the non-confus-ing side of keeping track of funds these days. Consolidation, after all, reduces thenumber of funds, supposedly making it simpler for both advisors and investors. Butmutual fund expansion has dwarfed consolidation, as the fund companies create andmarket new funds by the bushel. There are over 4,000 Canadian mutual funds thatadvisors and their clients must sort through to pick winners.

By Harvey Schachter Illustration by Isabelle Cardinal

ADVISOR’S EDGE18

FundanxietyConsolidated funds do not necessarily ease

The result is fund anxiety. “It has to be confusing for clients—it’s confusing for me,” declares Thie Convery, a financial advisorwith Assante Capital Management Ltd. in Hamilton.

David Dunne, a professor of marketing at the Joseph L.Rotman School of Management at the University of Toronto,says 4,000 is a huge number of products to have to choose from.And with that much confusion, consumers inevitably becomecautious, afraid to take on something new. “They look for ashorthand. Typically, they look for a brand name,” he observes.

They also look for a person to guide them through the bliz-zard of choices. “Financial advisors can capitalize on the

confusion that exists by being the reliable buyer on their client’sbehalf,” Dunne notes. Or, as Toronto advisor Barb Garbensasserts: “It’s good for business. If there are tax changes, clientsneed you. If there are more funds, they need you.”

But that doesn’t make it easy to provide the service. As afee-only planner, Garbens doesn’t recommend funds but givesclients feedback on funds through the Paltrac mutual fundanalyzer. Then, to some extent, she relies on brand names andher experience with the fund companies.

Convery takes a more hard-line approach. She doesn’t look ata series of companies. She just looks at one. Three years ago, shedecided to cut back and deal with a single fund company, andonly a limited number of funds at that dealer. “Everything Iwant is there. Everything I need is there,” she says.

Convery concentrates on about eight funds, allowing her tobuild detailed knowledge, although occasionally she will strayto other funds at the same dealer. She has been able to cut backthe amount of time she spends researching funds, which usedto eat up as much as 20% of her time. “It’s neat and tidy. It freesme up to be spending more time with my clients. I’m not read-ing brochures. Instead, I’m building relationships,” she says.

And when a problem arises, she gets better service for herselfand her clients because she has forged a stronger relationship withher supplier. “There’s something to be said when I call the serv-ice representative and he knows my voice. I can’t put a price tagon it. But they really help you out. They know the nature of mypractice, the funds I use, and what I need. They’re like a part ofmy in-house team—and they’re not on the payroll,” she says.

Although few advisors are going to that extreme, many are cut-ting back on the number of funds they deal with. “People developdefence mechanisms when they are overwhelmed. For advisors,they are streamlining the number of fund families. There’s somuch information out there you can’t possibly deal with it intel-ligently so you don’t try,” says industry consultant Dan Richards.

Toronto-based Environics Research Group has found the aver-age number of load fund families advisors are selling has steadilydeclined in recent years, from 8.8 in 1997 to 6.2 in 2000—a25% shrinkage. “They are not allowing as many on the load fam-ily shelf. And that aisle in the mutual fund supermarket has got-ten shorter,” says Eric Lauzon, an Environics vice-president.

Environics’ figures also show that on average, advisors spendabout 9% of their time researching investments, which works outto about four hours a week. “So you are looking at many moreplayers and investment tools trying to get into that four-hourmental time slot. That is making it harder on everyone,” he says.

At Blundell, Malabar & Associates in Vancouver, about 80 to100 funds are followed, but they are split up among five advisors,

Continued on page 20

JULY 200119

advisor or client confusion.

ADVISOR’S EDGE20

making the task more manageable. But even holding the line isdifficult as new categories of funds emerge such as science andtechnology, healthcare, biotechnology, real estate trusts, and var-ious specialty funds. “I’m just looking at the computer screen:Altamira Leisure and Recreation Fund. How many of these canyou study?” asks Brian Blundell, senior partner at the firm.

But the fund companies argue that the true number of fundsisn’t as high as many people believe, since many are just offshootsof a basic fund, which today may need a segregated fund ver-sion, or an RRSP-eligible version, or some other variant, some-times quite esoteric. And they argue that choice simply respondsto the needs of Canadians. “It may be overwhelming for the aver-age advisor but choice is good for the average advisor and client,”says John Ciampaglia, vice-president product management at AIMFunds Management Inc. “In the last five or six years, the averageadvisor has become much more savvy and our market has deliv-ered a lot more complicated products. The type of niche prod-ucts has exploded. They don’t appeal to everyone but it allows anadvisor to drill down and deal with some specific client needs.”

But as every company feels compelled to have a complete suiteof products, advisors wonder where it is going to end. Blundelltalks of clients who have one fund with Mackenzie FinancialCorp. and then get an annual report from the fund companythat lists about 150 funds, some that sound so much the samethat they can’t even tell which one they own. That’s amplified,he says, when the funds stray from their mandate, and adividend fund suddenly becomes a growth fund.

Of course, consolidation has been an attempt to reduce allthat confusion by reducing the number of funds. When the fundcompanies merge, they often find themselves with two fundsand managers covering the same acreage so they cut back. CIMutual Funds, for example, merged 22 funds when it took overBPI. “You don’t need two natural resource funds, especially ifthey are managed by the same manager. They ultimately lookthe same,” says Peter Anderson, CI’s president. The companies

inform all unitholders before changes are made as per the require-ment and keep advisors informed. “There will always be someconfusion as funds are consolidated. It’s the degree that youtry to control,” says Anderson.

Ken Wong, a professor of marketing at Queen’s University, isjaundiced about how the fund companies are faring in explain-ing the changes, arguing they are writing their information cir-culars in language suitable for Bay Street analysts rather than aver-age investors. Instead of being consumer-friendly, he feels fundcompanies are simply obeying the legal requirements to keep cus-tomers informed rather than the spirit of the law. “There’s noth-ing fancy involved. Just recognize the client’s needs,” he says.

Blundell says that it’s the advisors in the trenches who get stuckdoing the handholding with clients after consolidation, havingto explain the changes. That’s especially difficult with seniors,he says, who haven’t made any alterations in their portfolio butsuddenly receive notices of changes.

Given all the confusion, Richards believes the fund compa-nies will need to exercise self-control before starting new funds.They’ll need to set a higher bar and ask themselves what is thelikelihood of building a new fund up to, say, $100 million inassets in the first few years of the fund’s life. If that can’t beachieved, the idea may simply have to be abandoned. “We needmore discipline before launching funds. We also need more dis-cipline in closing funds,” he says.

Whether that can happen, however, remains to be seen. Theimpulse is to grow. And in a competitive environment, it’s dif-ficult for a fund family to not match a competitor’s offeringswith another niche product. For now, it seems like advisors—and clients—will have to continue coping with the confusionand the anxiety it provokes.

Harvey Schachter is a contributing editor of Advisor’s Edge.

‘‘ ’’Continued from page 19

It has to be confusing for clients—it’s confusing for me.

Thie Convery, financial advisorAssante Capital Management Ltd., Hamilton

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To see the mutual funds affected by consolidation,visit the product zone at www.advisor.ca.

ADVISOR’S EDGE22

Profile

If anything could ease prospectiveclients’ uncertainties about walking into a financial

advisor’s office, it might be to know that they had more

in common with the advisor than they expected.

That’s what happened when Julia Pereira walked into

Bradley Roulston’s office for the first time. Pereira, an

occupational therapist who enjoys all kinds of sports,was

looking for someone who could help with her immediate

insurance needs. Roulston, a benefits and financial

planner at Toronto-based LMS Prolink Ltd., enjoys all

types of sports too, including swimming,biking,squash and

long-distance running. He has his Boston Marathon

certificate displayed in his office to prove it.

MILE

Photography by Rob Waymen

Continued on page 25

THEEXTRA

JULY 200123

Bradley Roulston, CFP, starts off By Jennifer McLaughlin

on the right foot.

“It was a total icebreaker,” Pereira says of the certificate. “Iimmediately noticed it and asked ‘When did you do that?’ Itwas nice to see he shared similar interests. It put us on thesame level.”

Beside the marathon certificate was adocument that Pereira may not havenoticed, which Roulston says is themost important thing he’s completed.In June 2000, Roulston earned his cer-tified financial planner (CFP) designa-tion. At the time, he was 26 years oldand the accomplishment made him oneof a handful of CFPs under the ageof 30.

So it probably isn’t too surprisingthat the majority of his clients areyoung, between the ages of 26 and 35.But despite the fact that Roulston isat the start of his career, he’s alreadynarrowed his client base to threehealthcare professions: kinesiologists,occupational therapists and physio-therapists.

Roulston says he likes it that hisclients are up and coming. Most arejust getting their businesses started,some have wedding plans and arethinking about kids. Others may belooking at purchasing their first homes

or buying cottages. Many are just beginning their wealthaccumulation or paying off their student loans. “It’s anincredibly busy time in a young person’s life and that keepsit exciting for me,” says Roulston.

There are three ways to decide what your niche market

should be, says Bradley Roulston. Briefly, they are:

[The hobby approach] Ideally you want to be working with

people who share your interests and hobbies. Define

your hobbies and determine which groups of people

might share that hobby. For Roulston, it was his

sporting hobbies that led him to the Ontario

Kinesiology Association and the Ontario Society

of Occupational Therapy.

[The interests approach] What do you have in common

with your clients? For younger advisors, this could

be parenting young children, or entrepreneurial

aspirations. Brainstorm your interests and determine

how you want to spend your workday.

[The job approach] Some advisors may have a niche

market in mind, but nothing in common. In this case,

Roulston suggests learning as much as you can about

the profession, both inside and outside the office.

What does your client’s workday look like? What

about home life? The more you know your client,

the better.

Roulston suggests looking for groups of people to be

your niche market. Professional groups are better, he says,

because it’s likely that clients will have more in common

with each other. Recreational groups, on the other hand,

can attract people from various walks of life with one

common interest.That common interest might not be

strong enough to build your niche market.

—J.M.

DEVELOPING YOUR NICHE Tips you can use to develop your niche market

Continued on page 26

Continued from page 22

6No.INTERNET LESSON How to stay informed

on all the industry news and marketinformation—without spending allthat time flippingthrough the papers.

1. Go to www.advisor.ca2. Sign-up for the Advisor.ca e-mail bulletins.3. Click on Register.4. Fill out all fields on the registration form.5. Remember to select a box beside the A.M. and/or

P.M. Advisor.ca bulletins.

JULY 200125

The trade-off for now, anyway, is that Roulston’s clientsare only at the beginning of their careers and haven’t yetachieved high-net incomes. Most of his clients’ incomes arein the $40,000 to $60,000 range. “But they have the poten-tial to exceed $100,000,” says Roulston. For self-employedclients, he adds, the sky is the limit.

Roulston has a lot in common with his clients. “I actuallythought of attending McMaster University’s kinesiology pro-gram,” he says. “Human movements, physiology, that’s whatI like to read.”

But rather than kinesiology,Roulston pursued a degree inrecreation and leisure. In his sec-ond year, he realized it wasn’twhat he wanted to do, but com-pleted the degree, adding asmany business electives as hecould. When he graduated in1997, he immediately went to amajor insurance company, wherehe remained for one year.

“My boss at that time said:‘You will see anybody, anywhere, anytime,’ ” laughs Roulston. “If youhad to drive eight hours away tomeet a prospect, just to get thatmeeting, you did it. Everythingwas meetings.”He now knows hewas spinning his wheels. “Ienjoyed the actual planning partof the job, but I didn’t get to domuch of it.”

From there, Roulston wentto LMS Prolink, where he’sbeen for the last two and a half years. Now he’s able to com-bine his work with his interest in sports. “At the first com-pany, I was a hunter,” he says. On the prowl, if one meetingdidn’t pan out, he was on to the next. But at LMS Prolink, hesays he’s learned to be an effective trapper. “Rather than con-stantly looking for people, I set traps and people come to me,”Roulston explains. This includes writing articles for newslet-ters and participating in seminars. It also means he hasn’t hadto make a cold call in over two years.

Instead Roulston starts each day with a workout at his reg-ular health club. The workout involves either swimming orbiking and lasts a little longer than an hour. This gives himsome time to prepare for an 8 a.m. breakfast meeting at theclub with a client. By 9 a.m. he’s in the office responding to

e-mails and voice mails he received from clients in the evening. The rest of the morning is spent planning for upcoming

meetings with clients. Roulston usually plans one afternoonmeeting per day and adds about one or two clients per weekto his book. At lunch, he returns to the club—this time toplay squash with another client. At the end of the day Roul-ston writes e-mails to follow up with clients or prospects withnew proposals in their hands. On weekends, he may inviteclients to join him for a run in a park.

Establishing an AttachmentLMS Prolink has hundreds ofestablished relationships withassociations, says Joe McCabe,president of the company.“When Brad arrived at LMSProlink, he was paired with theinformation technology (IT)associations,” he explains.McCabe says the company hashad tremendous success withthese associations and it gaveRoulston the opportunity tolearn.

For a young advisor in1999, it may have seemed per-fect. “Y2K was coming, ITprofessionals were giving uptheir full-time jobs and theirbenefits to take high-payingcontracts,” Roulston says. “Iwas learning what was impor-tant to them and getting toknow their lingo. But it wasn’tan exact fit for me.” Their

interests weren’t the same as his, he says, and their hobbies,which mostly revolved around computers, did not appeal tohim. After only a few months, McCabe introduced Roulstonto the Ontario Kinesiology Association (OKA).

John Gray, president-elect of the OKA, says LMSProlink helped his organization develop its professional lia-bility insurance for its members and it was through thatprocess that the association learned of Roulston’s services.“Bradley has really gone the extra step,” he says. “He’s goneto different events and introduced himself to our membersand said: ‘I’m from the company that handles your liabilitycoverage, but I also do all these other things, and you haveto be thinking about them as well.’ Really, we utilize him toprovide those services to our members.”

ADVISOR’S EDGE26

Continued from page 25

‘‘ ’’When you leave an employer to pursue self-employment, what doyou do with a half-started pension?Brad’s providing a written resource.

Christine Brenchley, Executive DirectorOntario Society of Occupational Therapists

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Gray adds that Roulston is extremely supportive of theassociation, going the extra mile in a lot of ways. “I met himat a YMCA fun-run. It’s a 20-kilometre race, a 5-kilometrerelay for four people. The OKA put a couple of teams in andhe came to that event,” explains Gray. “He actually puts inmore effort than some of our members. He’s been great atproviding information.”

Their symbiotic relationship works like this: the associationsthat Roulston works with promote his efforts to attract mem-bers to his client base, while Roulston waives his fees for anyonein good standing at the associations [mem-bers without outstanding dues]. “It’s def-initely a win-win situation,”Roulston says.“If someone wants access to my time, itmay cost the same amount of money tojoin the association than it does to meetwith me. Joining the association gets themother benefits and waives my fee, so whynot just join the association?”

Roulston also contributes to associa-tions’ newsletters and launched seminarsthat have been tremendous at helpingmembers grow their practices, saysChristie Brenchley, executive director ofthe Ontario Society of OccupationalTherapists (OSOT), another associationthat works with Roulston. “He wroteone article on transferring out of pen-sion plans when you leave [an employer]to pursue self-employment,” she explains.“Many of our members begin theircareers at hospitals and end up with half-started pensions. What do you do withit? We [OSOT] had no idea how torespond. Brad’s providing a writtenresource for our Web site.” Brenchley saysRoulston was an untapped resource, andsays when she first met him, he surprisedher with how freely he could speak ofOSOT’s members. “He’d already beenable to develop quite a clientele.”

Of Roulston’s 171 clients, 82% arethe kinesiologists, occupational therapistsand physiotherapists. About half arefemale and many are self-employed. In fact,most of his clients are attracted to hisoffice because they are considering self-employment and have insurance needs.After insurance and benefits are settled,

Roulston also asks about the client’s finances, which he mayphrase as, “What about your RRSPs? Do you want to begin aplan for that?”

When Pereira met with him to discuss her insuranceoptions, she decided he should be her financial advisor as well.“I had been dealing with someone who works with multi-millionaire clients. I was only a number in that setting,” sheexplains. “With Brad, even from the first day I met him, hewas very straightforward about everything. He really put effort

Continued on page 29

and attention into what I was asking.”When Pereira mentioned that it was

her first year as a self-employed occu-pational therapist and that she wouldhave complicated taxes, Roulstonimmediately said he would be able tohelp her with that. “He made it veryindividual. He showed me what wouldwork for me, not what worked for thelast 10 people he saw. With my otheradvisor, it was strictly business and itwas high-powered. I was afraid to askquestions, just because I felt like I waswasting his time.”

Superior Service Catering to specific client groups isnot a foreign concept in any industry.Dr. Terry Curran, a Vernon, B.C.-based neurologist, says his own per-sonal interest in finance promptedhim to write two books for doctorsand dentists because he believes thatmarket hadn’t been tapped.

Healthcare professionals, he says, areextremely busy individuals. “Most ofthem don’t have the time to check theirinvestments. Most of them don’t havetime to shop,” he says. Because of theirhigh cash flows, they can afford manythings. But, he explains, they don’t startmaking the big bucks until they are 30to 35, because of their prior schooling.By that time, they need help sorting outtheir debt and future financial goals. Cur-ran adds that an advisor who caters to aspecific profession can really add value.

“The only patients I see haveParkinson’s or dementia. I give crèmede la crème service for those people,”he notes. “I don’t want to seemigraines, I don’t want to see multi-ple sclerosis. I could, but my focusand attention is on Parkinson’s anddementia and it makes me an expertin those areas.”

But calling yourself a specialist,Curran says, is not enough. “You

have to be able to offer somethingmore. There’s a guy [in BritishColumbia] who claims he is a finan-cial advisor for doctors and I thinkhe’s a shyster. All he does is sells wrapaccounts at three per cent.”

Joe McCabe says when Roulstonfirst arrived at LMS Prolink, hequickly found that working withpeople who are like-minded is themost fun. “I recognized and believethat in the insurance and financialbusiness, while it is great to be a mas-ter of your product, it’s even morefun to be working with clients thatyou really enjoy being with,” saysMcCabe. Those that you share themost similarities with are likely thoseyou will befriend, he adds.

For now, Roulston says he’s happyto be able to combine work with hisactive lifestyle. He also recently joinedthe Toronto board of directors of theCanadian Association of Insuranceand Financial Advisors (CAIFA) asthe public relations and special eventsdirector.

His next plan is to begin a formalrelationship with physiotherapy asso-ciations, but long-term plans, he says,are hard to predict. “I started in thisbusiness when I was 23, so I’m in myfourth year now. If I plan to retire at65, I’ll be in the workforce for 42years. Well, a marathon is 42 kilo-metres. When I look at it that way,I’m only in my fourth kilometre ofmy worklife,” he reasons. “I haven’teven really gotten into my stride. Ihaven’t hit the first water stop. Thecrowd is still big and I’m still lookingfor my position. It’s really hard to tellhow this race is going to unfold.”

Nonetheless, it seems he’s had a verygood start.

Jennifer McLaughlin is assistant editorof Advisor’s Edge.jmclaughlin@rmpublishing.com

Continued from page 27

DAN LONEY SAYS A SURE WAY TO BUILDyour business is to develop a centre of influence (COI).

And the Langley, B.C.-based financial planner speaks fromexperience. Loney began his independent financial planning practice

in 1989 and while business wasn’t bad, he knew there was huge poten-tial for it to be better. Six years later, he created alliances with COIs and

watched his business grow by 20% a year.If that isn’t reason enough for establishing a COI, check out these other

benefits. Loney’s business is now 100% referral so he doesn’t have to do anyadvertising. And while not all of the clients are shared between each COI,

“there is a pool of future business to draw from,” Loney explains. “We sharemore clients and meet more clients.”

Loney’s professional network consists of six lawyers, five chartered account-ants (one of whom is also an American tax accountant) and four support staff.But COIs can also include estate planners, financial advisors, insurance rep-

resentatives and mutual fund representatives.Each firm in Loney’s network operates under their individualcompany name but is located in the same building. The law firmMacCallum McIntyre occupies two floors, while the accounting firmLemieux, Deck, Millard & Bond Chartered Accountants (LDMB)and Loney Financial Corp. share another.

Developing a professional network is becoming more vital intoday’s marketplace, as client needs evolve beyond the standard stock

trade or RRSP contribution. Clients need all sorts of financial advice—so it’s handy to provide all sorts of services in a one-stop shop. Toronto-

based Advisor Impact surveyed 531 financial advisors and found that68% of them believe saving taxes and tax planning are their clients’

Practice Management

Circle

Aligningyour services with

fellow professionalscan make you

more influentialwith clients.

offriends

BySheila Avari

Illustration by

Luc Latulippe

ADVISOR’S EDGE30

Continued on page 32

ADVISOR’S EDGE32

top priority. Thirty-nine per cent believe estate planning isimportant to clients, while 34% said retirement planning. Mostlikely your clients want or will eventually want advice on all three.

Take Loney’s client Linda Francis. In the process of settlinga divorce, she required a gamut of advice, including rewritingher will and tax planning. Francis says Loney came into her pathat the right time. His network of lawyers and accountants meantshe could have all her questions answered in one place. “Danwas referred to me by a [trustworthy] friend, therefore I trustDan,” she says. “Because he is someone whom I trust, I can thentransfer my trust to the accountant and lawyer that he hasreferred me to.”

Setting Up ShopWhen you decide to build a COI, the first step is identifyingthe people with whom you want to work. Because clients havemore than one financial need, Loney sought out lawyers spe-cializing in estate, corporate and family law. In 1998, Loneyspread the word that he and the law firm wanted to add account-ants to their team. They interviewed three or four differentaccounting firms before selecting LDMB. Some of Loney’sclients are professional athletes and some of LDMB’s clientswere top NHL players. Also, Loney says he and the account-ants had a good rapport from the start.

Each of Loney’s COIs operates independently with no offi-cial agreement. Instead the three firms have a verbal under-standing, Loney explains. None of the lawyers, accountants orLoney receive commissions for referring clients. And clientsare not forced to work with Loney’s network. For example,Linda Francis has a separate divorce lawyer with whom heraccountant (Loney’s referral) works.

But not all approaches to building COIs are the same. LouisSapi, co-CEO of Affinity Financial in Toronto hired 30 pro-fessionals, including MBAs, lawyers, certified financial analysts,certified life underwriters, certified financial planners andchartered accountants to work in-house as salaried employees

for his company. Sapi stresses that his staff is not a strategicalliance, but a personalized team made available to his high-net-worth clients.

For example, one of Sapi’s clients needed tax, business, estateplanning and insurance advice. The client had just sold his busi-ness for $15 million. In a two-step process, Affinity advisorsmet with the client to outline his financial goals and priorities.Then a specialized team of an estate lawyer, tax accountant andfinancial planner was assembled to create a roadmap for the clientto reach his goals.

Because the financial needs of affluent clients can be com-plex, Cindy Thiessen, a financial planner with Scotia McLeodin Vancouver, developed a COI to help her get in the door withthese clients. Under the Bank of Nova Scotia umbrella, she hasaccess to bank representatives, brokers and trust officers. Butto help her business grow, Thiessen actively recruited lawyersand accountants. Some of her professional contacts were referredto her, others she met at seminars and speaker sessions in theVancouver area. Her COI is also based on a verbal understand-ing. There are no formalities to refer clients and no commissionsare kicked back to her. She says it is all a matter of being theperson who knows the right lawyer for the right client and know-ing a good personality fit.

Thiessen recalls a married couple with a net worth of$2 million, who had a concern about their will, which wasdrawn up by their notary. In the event of death, the will statedthat the couple’s seven-year-old child would receive the $2million in one lump sum. Thiessen saw this gap and explainedthe inadequacies to her clients. Then she referred them to anestate lawyer who was able to make appropriate changes tothe clients’ will.

Thiessen says her professional network has done more thangrow her book of business. “It’s a matter of putting a fencearound my clients,” she says. “There’s a lot of financial plannersout there, not necessarily providing the full package.”The chancesof a client leaving are slim after you have worked with them on

Continued from page 30

Continued on page 34

‘‘’’

There is a pool of futurebusiness to draw from. Weshare more clients andmeet more clients.

Dan Loney, presidentLoney Financial Corp., Langley, B.C.

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12345Each month Advisor’s Edge delves deep into the issues that impact your business—practice managementideas, wealth management strategies and marketing suggestions, plus insights from our expertcolumnists, such as Nick Murray, Sandra Foster and Dan Richards.

But that’s just one of the ways in which we demonstrate our commitment to advisors nationwide. Stepbeyond these glossy pages and you’ll find more unique content to help you satisfy your clients and build abetter business. Combined, Advisor Services offer you a wealth of opportunities to gain knowledge, impartwisdom and source inspiration.To discover more about Advisor Services, visit us today at www.advisor.ca.

In print, online and face-to-face—we’re here to serve your needs.

How do we love thee? Let us

countthe ways.

ADVISOR’S EDGE34

drawing up a will, managing their assets and insurance, she adds,because they don’t want to repeat that lengthy process. “Forme the professional network has helped the bottom line hugely,”she explains. “It solidifies my sale. In that way [the professionalnetwork] has raised the bar.”

Confidential AdviceThe road to building a COI is not always smooth, so com-munication is key. A client who receives advice from heraccountant that conflicts with the advice from her financialplanner may be unsure how to proceed. Thiessen developed areporting practice between her accountants and lawyers sothey can work together on what each is doing for the client.The practice of reporting back to Thiessen is not an obliga-tion, but a matter of due diligence and professionalism. But,she adds, it is a nice bonus when clients tell her what is goingon with their lawyer and accountant so she can plan accord-ingly and without conflict.

Clients generally aren’t very sophisticated when it comes to

telling their advisor what their lawyers and accountants are advis-ing, Sapi explains. They may not necessarily know who is pro-viding the best advice and they will be confused because eachprofessional has his or her own turf to protect, he adds. “[Whenclients] are targeted by so many different advisors, it’s hard whenyou’ve got an insurance person saying ‘do this,’ which may notmake sense from what the investment person is saying and withwhat the lawyer and accountant want to accomplish with anestate plan,” he explains. “So you’ve got all these advisors whoare not always on the same page. They’re not always rowing theboat at the same speed in the same direction.”

With so many advisors on the same case, clients may alsofeel uncertain about confidentiality. Loney and his networkedcolleagues each signed a confidentiality agreement before join-ing. And because most of Thiessen’s clients (450 households)are shared between two brokers, two accountants, and threetrust officers—not to mention lawyers and accountants out-side of Scotia McLeod—trust is a major factor. Clients wantto see the group as a cohesive team, so try selecting profes-sionals who are like-minded and share the same businessphilosophy, she advises.

Professional networks can also be a huge time commitmentthat doesn’t always pay off. “We’ve invited lawyers [in the past]to come and speak to our clients [to try to develop a network]and nothing’s come of it,”Thiessen says. (See “Building yourCOI,” left.)

Getting InvolvedThiessen suggests attending seminars and business luncheons asa great way to meet new people for your COI. Actively listento speakers and meet them afterward to exchange numbers. Orjoin associations and clubs such as the Hong Kong BusinessAssociation, Chambers of Commerce, Canadian Institute ofChartered Accountants or the Law Society of Upper Canada.She also suggests talking to colleagues to find out whom theyare using and why. Or you could try sending a client to a lawyeror accountant (with whom you may want to work) and get themto provide feedback.

Loney says the professional network gives him a competitiveedge and it is one of the best business moves he has made. “Thisis something that gives us an advantage above independent advi-sors,” he explains. “If I am sitting in the boardroom andmeeting with a client, and that client has a tax question, I’ll walkdown the hallway and ask the accountant if he can join us. In amatter of a few minutes, we can solve the problem. That’s atremendous advantage to the client. And it’s an advantage forme, to have those resources at my fingertips.”

Sheila Avari is assistant editor of Advisor’s Edge. savari@rmpublishing.com

❶ Give a lot before you expect to receive.“I have been working with Scotia Trust for 16 months

and it took a good 10 months before I got my first refer-

ral out of them,” says Cindy Thiessen, a financial planner

with Scotia McLeod in Vancouver.“And they were getting

five or six referrals a month from me.”

❷ Make sure the people in your network share your philosophy.“Look for lawyers and accountants who appreciate and

know what you do,”Thiessen advises. “In my case, I want

to work with lawyers who uncover the need for insurance,

and bring me on board to help the client.”

❸ Be accountable.“If the law firm brings me a client, there’s a real account-

ability on my part that I do a good job to represent the

lawyer and help the client,” says Dan Loney, a financial

planner in Langley, B.C.

❹ Build relationships and trust over time.“The trust level now [with a professional network in

place] is so much different,”Thiessen says.“I have to do

only half the work as when I am talking to a client off the

street.” —S.A.

Building your COIHere are four tips

to get your network started.

Continued from page 32

The registered financial plan-ner (RFP) designation lives to fightanother year. In a surprise move atthe annual general meeting of theCanadian Association of FinancialPlanners (CAFP) in Montreal, themotion to retire the RFP was tableduntil next year’s meeting.

Outgoing CAFP chair CatherineHurlburt allowed the unlikely out-come of deferring the RFP decisionuntil May 2002. She says losing thevote on the Board of Directors’motion to retire the RFP was notworth risking its Financial PlannersStandard Council (FPSC) member-ship. In October 2000, the FPSCpassed a motion that restricts boardmembership to organizations thatonly promote the certified financialplanner (CFP) designation.

A two-thirds, or 66%, majorityvote from the RFP members wasneeded to retire the RFP designa-tion. While Hurlburt believes thatmore than 60% of RFP memberssupported the retirement, whetherthe motion would have carried wastoo close to call. Had the RFP mem-bers decided to keep the designation,it could have caused a divide inthe association, says Terry Taylor,president of the CAFP. As aresult, the future of the association

could be uncertain. In the interim, the CAFP’s Board

of Regents has stopped granting anynew RFPs to those not yet in theprocess of obtaining one. Taylor saysthe decision is in line with the FPSCmotion.

But at least one CAFP memberfelt disappointed with the decisionto defer the vote. “I’m annoyed thatmy vote didn’t matter today,” RFPmember Jim Rogers of Vancouvertold Advisor’s Edge and Advisor.ca afterthe meeting. “The CAFP does notshare a common vision at themoment, and in my view, will nevershare a common vision under thecurrent governance model becauseyou have the few driving the agendafor the many,” added Rogers, who isalso chairman of the Canadian Asso-ciation of Insurance and FinancialAdvisors.

But Taylor believes the motion toretire the RFP is on the right track.“We want to do it in such a way thatwe can get most or all of the mem-bers with us, rather than divide andgo our separate ways. I think that’simportant.”

Illustration by Devon B

owm

an

Wealth and practice management strategies

BUSINESSYOUR

Investment clubs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38

How to generate referrals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39

How to become a successful advice-giver . . . . . . . . . . . . . . . . . . . . . . . . . . 40

Nick Murray . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41

STILL IN HANDThe RFP designation lives to fight another year.

By Advisor’s Edge and Advisor.ca staff

JULY 200137

Do you have a comment about the RFP designation? Visit the Talvest Town Hall onwww.advisor.ca to make yourcomments.

ADVISOR’S EDGE38

BUSINESSYOUR

Investment clubs give clientswith common investment goals anopportunity to pool and invest theircapital. By pooling funds, it may bepossible to gain access to invest-ments that are not available to singleinvestors who have less money toinvest. It also gives a group of indi-viduals an opportunity to shareinvestment expertise, administrationand, of course, success and failure.

There are four possible ownershipstructures for investment clubs: cor-porations, trusts, partnerships andjoint ownership arrangements.

As a corporation, an investmentclub is a separate legal and taxableentity. Income and capital gainsfrom the investments are initiallytaxed at the corporate level. Whencorporate earnings are distributed toshareholders, the total tax liability(combined corporate and personal)will be approximately equal to thetax payable by an individual (subjectto tax at the top marginal rate) whoholds investments directly.

Trusts are also taxable entitiessubject to tax at the top personalmarginal rate. However, as long asthe net trust income is distributedannually, it is the individual investoror beneficiary who will pay the taxon the income at his or her marginalrate. Note: capital gains and taxableCanadian dividends retain their char-acter and thus their preferential tax

treatment when flowed out of atrust. If the trust realizes a net losson investments for the year, thelosses cannot be allocated to benefi-ciaries. However, these losses can becarried forward (or back) in the trustto reduce income available fordistribution in other years.

Partnerships are legal entities butnot taxable. Individual partners wouldreport their share of investment part-nership income based on the partner-ship agreement. Partnership incomeretains its character when reported bypartners and losses can be flowed outof a partnership.

Most investment clubs are jointownership arrangements in whicheach member owns an undividedinterest in each security or other assetheld by the club. Although individ-ual investors can report gains, lossesand income on an undivided interestbasis (that is they report their share ofeach investment transaction, includingdispositions and acquisitions that arisefrom incoming and outgoing mem-bers), this reporting becomes verycomplex when there are frequenttrades, changes in the club member-ship or if individual investors con-tribute unequal amounts.

In this case, the club can elect tobe treated as a partnership for taxpurposes. This means gains, lossesand other investment income aredetermined at the club level, and

then allocated on a reasonable basisamong the members. The election,made in writing in a letter to the dis-trict taxation office, must be signedby all club members. As new mem-bers are admitted, additional lettersmust be filed.

As a partnership, each member’sinterest has an adjusted cost base(ACB), and these ACBs must betracked for purposes of determiningany gain or loss on redemption orsale of a member’s club interest. TheACB will include capital contribu-tions (including units acquired fromother members), allocation of gainsand investment income. The ACBwill be reduced by withdrawals andthe allocation of capital losses orother investment losses.

Where an investment club haselected to be treated as a partnershipand has more than five members,Federal Tax Form T5013 (the part-nership reporting form) must befiled annually to report the club’sincome and the allocation of thisincome to investors. The T5013 canalso be used for smaller membershipclubs, but if it is not used, eachmember must file a complete set ofclub financial statements with his orher tax return.

Gena Katz, CA, CFP, is a senior principalwith Ernst & Young’s National TaxPractice in Toronto.

Investment clubs pool clients’ money and provideaccess to more investments. By Gena Katz

JOIN THE CLUB

TAX BREAK

BUSINESSYOUR

ASK JULIE

I’m uncomfortable asking for

referrals. Is there an effective way

to ask?

According to our research,about 42% of advisors ask directlyfor referrals. You’ll be more effectivewhen you feel comfortable so targetclients who have a predisposition tosay “yes.”

How do you identify thoseclients? In your next satisfaction sur-vey, include this statement with aone to five rating scale (where five isstrongly agree and one is stronglydisagree): “I would recommend theservices of my advisor to family,friends or colleagues.” Those whoselect a ‘4’ or ‘5’ are your targetgroup. The next time you meet withthose clients, you have the perfectopening.

Try this: “John, thanks for com-pleting our satisfaction survey. It’s allworthwhile when I see clients whoare willing to provide referrals. Weare trying to grow the practice andsince you have indicated a willing-ness, could I take a few minutes tolet you know about the kind ofclients we are hoping to attract?”

How should I target my market-

ing efforts?

The most helpful thing you cando is to drop the word “marketing”

and replace it with “positioning.”Target marketing is about bringingyour existing business to a group ofindividuals. Target positioning isabout building a business aroundclients in your target market that isspecifically designed to meet theirunique needs.

Let’s assume you are targetingretirees. What would your practicelook like? It would be more than justthe list you bought from the CanadianAssociation of Retired Persons. Itwould look and feel like a real resourcefor retirees. Your waiting room wouldbe comfortable with leisure maga-zines. Your receptionist would haveoutstanding people skills and be will-ing and able to chat with your clients.The type on your communicationswould be larger. You might sponsorluncheon meetings and your Web sitewould contain links on topics such astravel, security, grandparenting, etc. Inshort, you would have a practice thatwas designed entirely for this groupand that design would be your callingcard.

Your first step is practice designand you can start by answering a fewkey questions. What are the uniqueneeds of my target audience? Whatare their common interests? Wheredo they look for information andnews? What aspects of my officeenvironment could reflect my focuson this group?

Take that plan to a few clientsthat represent your target groupand get their feedback. Armed withthat design, you’ll be in a perfectposition to develop meaningfulmarketing campaigns for your tar-get audience.

Julie Littlechild is the president of Toronto-based Advisor Impact. Send your questionsto askjulie@rmpublishing.com.

Satisfaction surveys make it easier to attract referrals. By Julie Littlechild

COMFORT ZONE

A

Q

Q

A

Mark your calendarAugust 7 to 10CICA The Small Business andTechnology ConferenceLaurel Point Inn VictoriaHosted by the Canadian Instituteof Chartered Accountants, thisconference is designed with thesmall business advisor in mind.For more details and to registervisit www.cica.ca.

September 13 to 16Success Forum 2001FPA’s Annual Convention & Exposition San Diego Convention Center San DiegoThe Financial Planning Associa-tion presents “Success Forum.”The forum offers educational sessions for all levels of financialplanners. For more information,visit www.fpanet.org.

October 20 to 23CAIFA 2001National Conference Sheraton Centre Hotel TorontoFor more information,e-mail info@caifa.com or call 1-800-307-0206.

JULY 200139

BUSINESSYOUR

MARKETING FRONTLINES

Going forward, what will ittake for you to prosper? To answerthat question, it’s useful to reflect onwhat advisors have done in the past.

Historically, most “advisors” weresalespeople by another name, push-ing product and aiming for the closefrom the start of every conversation.Exhibit A depicts the traits of suc-cessful salespeople from time imme-morial—for purposes of simplicity,I’ve used the year 1800 as our start-ing point.

As a salesperson in 1800, youneeded good selling skills. You hadto be able to engage a prospect, putyour case forward effectively, over-come objections and get a positivedecision. Selling skills were criti-cal—hence a long line for sellingskills in Exhibit A.

Motivation was another must-have trait. You had to hustle, have astrong work ethic, bounce back fromdisappointment and stay positive inthe face of rejection.

You also had to have a minimumlevel of knowledge—not a hugeamount, necessarily, but more thanyour prospect. Until recently, know-ing more than consumers did wasnot difficult, hence a relatively shortline for knowledge in Exhibit A.

Two things are worth notingabout Exhibit A. First, this modelremained unchanged for a long time,arguably right through the mid-

1990s. And second, this modelreflected not just the reality of sell-ing financial products but applied tomost sales roles.

Compare that to today’s environ-ment, which is marked by radicalincreases in client expectations, easyaccess to information and the inten-sity of competition. Take a look atExhibit B.

Two historical requirements forsuccess continue to apply—sellingskills and motivation, with long linesrepresenting their continuing impor-tance. But knowledge and profes-sionalism become more crucial thanbefore. The knowledge/profession-alism line has grown to the samelength as selling skills and motiva-tion, reflecting the rise in consumerknowledge and the need to be the

source of superior advice. And evenbeing knowledgeable and offeringgood advice is not enough; you alsohave to be seen as operating with ahigh standard of integrity and pro-fessionalism.

Differentiation is the next key. Inthe past, when prospects were undis-cerning, the key to success was beingthe first to talk to them. While beingfirst in the door is certainly anadvantage, what’s ultimately criticaltoday is being differentiated fromyour competitors. You need to bepositioned as among the very bestsolutions for their specific needs.

The last requirement for today’sadvice-givers is client experiencemanagement. In the old world oftransactions, few worried aboutmanaging the after-sale experience—the first sale was the only one thatmattered. In the new world of on-going relationships, word of mouthand repeat sales, managing theongoing client experience is absol-utely essential, especially in the faceof clients who are becoming increas-ingly militant and demanding.

In future columns, I’ll be dealingwith each of these five successfactors, focusing on what you needto do to position yourself forsuccess going forward.

Dan Richards is a well-known consultantand speaker to the investment industry.

How to become a successful advice-giverkeeps evolving with time. By Dan Richards

ADVISOR DEFINED

ADVISOR’S EDGE40

Knowledge

Selling Skills Motivation

Differentiation

Kno

wle

dge

&P

rofe

ssio

nalis

mC

lient Experience

Managem

ent

Selling Skills Motivation

Exhibit A:The Old Success Model

Exhibit B:The New Success Model

JULY 200141

BUSINESSYOUR

QUEST FOR EXCELLENCE

We’re ticking through a list of20 suggestions for repairing yourbelief/behaviour systems, as youcontinue to build/rebuild your busi-ness. The countdown continues:❹ Appoint yourself “Captain Noah.”

If you think of yourself as justanother, not singularly talented,indifferentiable financial advisoramong thousands, hoping almostagainst hope that a prospect willchoose you, then you’ll sound like…just another, not singularly etc. etc.Let’s try it another way.

I begin with the perception that,regardless of how much money theprospect sitting across from me has,he and his family are financiallydoomed. Almost certainly withintwo generations, and probablywithin the prospect’s and hisspouse’s lifetimes, they’re eithergoing to lose and/or run out ofmost if not all of their money.

(They’ll lose it by taking on toomuch risk without realizing it, andthen being unable to deal with theconsequences, à la the technologybubble of 1999-2001. And/orthey’ll run out of it by taking too lit-tle risk, investing for yield instead offor total return, and trying to fighttheir way through 30 years of risingliving costs in retirement with afixed-income investment strategy.More than a few will do both, insequence.)

In other words, when the rains

come, my prospect family is going todrown, unless I give them one of the250 staterooms on The Ark. Yousee, I’m Captain Noah; I’ve decidedI can only save 250 families… andI’m interviewing my prospect to see ifhe deserves me.

Who appointed, anointed orcommissioned me Captain Noah?Why, I did, of course. I found thatI couldn’t change people at all, butI could change my own attitudecompletely, and pretty much at will.So I did. And rather suddenly foundmy prospecting efforts going muchbetter, as more people reacted appro-priately to my new attitude of (rel-atively) quiet self-confidence.

I stopped pitching, started askingmore and better questions—and gotvery different, much better answers.I also began flushing marginalprospects faster and more ruthlessly,which released the energy and self-esteem I needed to go after betterprospects. (Moral: it changes whenyou change.)

Where did the number 250 (asin: number of staterooms on TheArk) come from? I made it up. It justseemed like a nice, manageable spanof control. I always hated the 80/20rule (actually, I always hated com-missions, which bred the 80/20rule); I thought it was stupid. Wherewas it written that I could only havetwo lions, two tigers and two ele-phants on my Ark, and everything

else had to be marsupials androdents? Why couldn’t I have 250families with a minimum of, say,$400,000 (across up to three gener-ations)? Well, as it turned out, Icould. Took a little longer (althoughnot that much longer), but, hey: wasI going someplace?❺ Invest in my book The Excellent

Investment Advisor; read chapters

four and five 50 times, or until you

completely stop fighting them. These42 pages contain everything I’velearned about prospecting in a thirdof a century. (Forgive me, but this isno time for false modesty: it’s at leastpossible that these 42 pages containjust about everything that can belearned about prospecting. There; I’vesaid it.) You can read the rest of thebook, too, of course, but in the con-text of this extended inquiry intoprospecting, these two chapters aremission critical.➏ Get back in touch with gratitude.

You and I (a) have no externallyimposed limit on our earnings, (b)have no real boss, in the sense ofsomeone whose orders we have tofollow all day, and (c) are blessedwith the ability to do well for our-selves by doing good for others.Give thanks aloud for these threethings every day. Gratitude is the ulti-mate attitude adjustment.

© 2001 Nick Murray. All rights reserved.Visit www.nickmurray.com.

By Nick Murray

CRUEL NECESSITY,PART FIVE

How did Her Money get started?

When I first entered the financial indus-try, I was a victim of poor investment-knowledge. I was a successful business-woman but after a divorce, I was leftbasically penniless. The main reason forthat was that I trusted somebody to doinvesting for me because I didn’t know any-thing about it. And of course, I never sawany of that money again. So I decided toget smart and not ever let anything like thathappen to me again. I took courses andstarted in the investment industry.

I wanted to just get the word out. Iwanted women to care for themselves.I started on the seminar circuit in Mon-treal and I was giving lectures practicallyevery day. At the end of the seminars,

invariably, women would come up tome and ask, “Is there anything outthere, a video I could watch that couldgive me more information?” So I cameup with the idea of a television show.

What purpose does Her Money serve?

Nobody is going to care for women butthemselves. We know nowadays thatmarriages don’t necessarily last. We out-live men. We still earn less than men.Fewer of us have good jobs with pen-sion plans. When you look at all thesefacts, it really is difficult if you are awoman to just plan on someone else. Butwhen I first started conducting seminars,I found that women were very uninter-ested in graphs and in returns of differ-

ent products. The moment I spoke aboutthe effect of finances on a person’s life,women listened. Women want to feel safe.So if you look at investing and finance astools to feel safe, and to better control thequality of your life, then you have thecomplete female viewership.

How do male and female investors differ?

Women will ask a lot of questions butonce you satisfy them, they will beextremely loyal. Right now, the financialindustry is trying very hard to go afterfemale investors. In the past, women havebeen known to invest with safety in mind,and because of their lack of financialeducation and their need for safety, theywere the number one investor in guaran-teed investment vehicles. Now, women’sinvestment groups are actually outper-forming men.

Why do you think that is?

Women tend to do more research, andbuy and hold. So they are actually lessemotional when investing than men. Mentie their self-worth as human beings tonet worth. So when the markets take atumble, men generally react. Womenspend more time doing research and oncethey decide to do something, they followthrough with their plans.

Finish this sentence for me:“If your client

is a woman...”

Treat her with respect. Women still feelthat the financial industry is a good oldboys’ club. They crave respect in an areawhere they didn’t have it for a long time.

When she first became a financial advisor, Monique Clement noticed that womenwere not interested in products or returns. Women were interested in the effectmoney had on their lives. On her television show, Her Money, which appears weeklyon the Women’s Television Network, Clement profiles a woman, her financialchallenge and how she overcame it.

NEWSMAKERBy Jennifer McLaughlin

MONIQUE CLEMENTThe host of Her Money teaches women

to better control the quality of their lives.

ADVISOR’S EDGE42

Photography by S

pyros Bourboulis

To read the full interviewwith Monique Clement, go towww.advisor.ca.