• Wed. Apr 24th, 2024

Why more portfolio managers are offering financial planning as part of their services

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While the wealth management industry is evolving to include more holistic financial planning, some firms are moving toward fiduciary and discretionary portfolio management, one expert says.utah778/iStockPhoto / Getty Images

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Why are so many advisors working as both financial planners and portfolio managers? It generally comes down to client demand for services, says Christopher Keeley, founder and chief investment officer of Inukshuk Capital Management Inc., in Toronto.

When he first started in the financial services industry 27 years ago, Mr. Keeley’s job was all about investment management. But as more of his boomer clients got older, they began looking for help with retirement planning. Some inherited large sums and needed to know what to do with it all. Others sold businesses and suddenly had substantial assets.

Mr. Keeley, who has both the certified financial planner (CFP) and chartered financial analyst (CFA) designations, noticed similar patterns happening industry-wide. Within the past 10 years, in particular, he has seen an evolution unfold not only for his job but in Canada’s wealth management industry as a whole.

“It’s no longer about putting money into a portfolio every year and rebalancing,” he explains. “It’s very fair to say that planning has become a much bigger part of the conversation.”

On the other hand, Katie Walmsley, president of the Portfolio Management Association of Canada in Toronto, says while the wealth management industry is evolving to include more holistic financial planning, some firms are moving toward fiduciary and discretionary portfolio management. Advisors may want to stand out from the crowd and land high-net-worth clients.

“The gold standard in the industry is still the CFA,” she says. “You’re managing people’s life savings or you’re managing a pension plan. You want professionals – experts who have the skills and experience to select specific securities in different asset classes and countries. They’re providing a very personalized management of portfolios on behalf of their clients.”

For John Woodfield, senior wealth advisor and portfolio manager with SWAN Wealth Management at Raymond James Ltd., in Kelowna, B.C., working with Canadian and American cross-border clients means he relies on his portfolio management training and experience daily. His clients have complex investment and tax requirements.

Even so, most clients don’t pay attention to the work he’s doing under the hood on the investment side. Instead, he says they’re more likely to remember his planning for retirement. That is, at least, until the markets dip.

“You don’t think a doctor is relevant until you get sick,” says Mr. Woodfield, who has his CFA. “When the markets turn, then people are very interested in what we’re doing and how we’re protecting on the downside.”

Portfolio management versus financial planning

While financial planning takes care of daily maintenance, ensuring clients are saving enough and drawing down only what they need, his portfolio management skills kick in for more specific issues that pop up. For example, a Canadian client might, say, want cash flow and Mr. Woodfield’s team then uses Canadian dividend stocks to get the dividend tax credit.

Rob McClelland, vice-president, co-branch owner and senior financial planning advisor with The McClelland Financial Group at Assante Capital Management Ltd., in Thornhill, Ont., has taken a completely new approach when it comes to focusing on managing clients’ money.

“There used to be an expression, ‘Stop playing with your optimizer. It’s not doing you any good,’” Mr. McClelland says.

While he spent most of his time as an active manager optimizing clients’ portfolios and trying to get the highest level of return using an expensive rebalancing program 20 years ago, that’s not the case today. Instead, he’s gone all in on passive investing. Set and forget. Low-fee global equity index funds that rebalance themselves automatically are the place to be, he says.

“I don’t predict the future for my clients,” Mr. McClelland says. “Advisors who have been around understand the way this works and have given up worrying about asset management a long time ago.”

Instead, he spends time on what clients are coming to him for – a financial plan. If he has only two hours to sit with clients once or twice a year, does it make sense to spend 45 minutes of those meetings worrying about whether the client has too much in U.S. equity?

Whether it makes sense to specialize in portfolio management comes down to what advisors want to do with their careers, Mr. Keeley notes. Do they want to work with average Canadians or the ultra-wealthy – everyone is different, he adds.

For him, it’s an advantage to wear both hats: Be adept at building a balanced portfolio with robust diversification and able to lean into the softer skills by asking plenty of questions and getting to know the clients’ hopes and dreams.

“We believe in integrated wealth management,” he says. “You can’t do one really well without the other.”

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