Performance figures for each account are calculated using time weighted rate of returns on a daily basis. The Composite returns are calculated based on the asset-weighted monthly composite constituents based on beginning of month asset mix and include the reinvestment of all earnings as of the payment date. Composite returns are as follows:

FORUM’s 2011 Game Changers

By Kira Vermond


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The Fee-Based CEO: John Nicola

Back in 1974, a 22-year-old John Nicola found himself at a crossroads. He and his best friend had just quit their rock band and needed jobs. Soon Nicola’s friend landed one at Metropolitan Life, but Nicola could not find a way in. The company had already rejected him twice, so he tried once more, after investing his last 50 bucks in special professional testing.

“The manager felt sorry for me. He said, ‘Anyone who is stupid enough to spend their last $50 trying to get this job probably deserves this job,’” recalls Nicola today.

The gamble paid off. Within six months, he was the top earning salesperson at the Burnaby, B.C. branch.

Fast-forward to 2011. Nicola is now the chief executive officer and chair of Nicola Wealth Management, advising high-net-worth client families at its offices in Kelowna and Vancouver. As one of the first fee-based investment firms in the country, it started with just seven staff members and $80-million in assets back when it launched in 1994. The firm has since grown to include nearly 75 employees and $1.6 billion in assets.

Yet Nicola says there’s no way the firm could have seen that level of growth without going fee-based in 1999. Although the company was predominantly insurance-based in the beginning, it did handle a fair amount of money for clients’ retirement.

Then a light bulb went on. As the firm began dealing with wealthier and wealthier clients, Nicola realized his true competition were other holistic firms such as MD Management, not other insurance advisors.

“The bottom line is these firms are fee-based and not commission-based or transaction-oriented. Our model had to look like that if we wanted to play in that environment,” says Nicola.

Clients now pay 1.25 per cent on the first $1 million, 1 per cent on the next, 0.75 per cent on the next $2 million, and half a per cent on amounts over $4 million, with a total fee calculated as a blended rate.

While Nicola Wealth Management’s growth over the years is, in part, based on their move to a fee-based platform, Nicola also attributes his firm’s success to factors such as the high caliber of its employees – advisors and staff – and the planning-based approach it offers its self-employed professional and business-owner clients. Much of the investment world offers no planning at all.

Another reason for the company’s success, says Nicola, is that over the last 11 years, Nicola Wealth Management has outperformed its competition and major benchmarks by a wide margin by focusing on a more diversified asset allocation model, one that generates most of its returns from cash flow, as opposed to capital gains.

“Since January 2000, our average client has netted a return of just under seven per cent per year after fees,” says Nicola. “So, planning and results have been just as important to our success as being fee-based.”

Despite what some advisors think, a fee-based system can actually be more lucrative than one based on commission, particularly when working with large pots of money, says Nicola. This is not because the client is paying more, but because the fee-based firm is more likely to manage a greater portion of a client’s portfolio, as well as attract wealthier clients. And with a sliding fee scale, it’s much more lucrative (and easier) to convince clients to invest, say, another $7 million with you than it is to go after four families with $1 million each.

“On average, our clients are paying a weighted fee of about .85 per cent and we often negotiate lower costs for third-party managers. So all in, we estimate our clients are paying about 50 basis points less per year than would be the case with A-class mutual funds with trailers. For a $2,000,000 account, that’s a savings of about $10,000 per year,” Nicola explains.

Then there’s the issue of transparency. Many clients simply like to know how their money actually pays for their advisors. The idea is gaining traction around the world. Fee disclosure and transparency is a hot topic with regulators as countries such as Australia and the U.K. make moves to ban all commissions on financial investment products over the next two years. Ponzi schemes and other questionable practices during the financial crisis have also added fuel to the fire.

“It makes a big difference if I say to you, ‘We don’t sell you investments, we buy investments for you.’ That means we’re on the same side of the table,” he says.

Fees make sense for another reason too: they can offer an advisor more freedom to make decisions that work.

“If I’m going to make recommendations for a client, I don’t want any limitations about what I can invest in. If a security makes more sense than a mutual fund, I’m going to choose it. I don’t want to be in a situation where someone says, ‘You can’t buy that investment because it doesn’t pay commission,’” says Nicola, who sees more of the industry going the fee-based route as more non-commission investment funds are offered and the more dealers like Fundex offer it as a platform.

Until then, Nicola, who recently moved with his wife from Richmond to Vancouver, will keep working with his clients to give them what they want and enjoy the company’s impressive referral and retention rates.

“This business creates some critical mass, but if you’re providing good service, clients will refer you,” he says.

The Risk Tracker: Natasha Sharpe

As most bleary-eyed Canadians reach for their morning cup of coffee, Natasha Sharpe’s brain is already working overtime. Between feeding her infant son and prepping for the day, she checks the overseas markets, looking for emerging trends that will help her determine how to assess short- and long-term credit risks.

Sharpe is the chief credit risk officer for Sun Life Financial, a position she took on in early 2010 after spending a decade at the Bank of Montreal working in corporate finance and credit risk. At 39, she also recently managed to crack Canada’s Top 40 Under 40 list, published by the Globe and Mail.

She says while the accolades are welcome, she’s the first to admit she’s more focused on helping her employer uncover risks and opportunities in an era like no other in history. It’s no small job, considering the Sun Life portfolio includes $110 billion in managed assets.

“It’s a fascinating time. This is probably one of the most interesting credit markets that we will have in a generation,” she says.

She rhymes off a list of events to make her point: Canada is coming off of one of the worst recessions in decades. There’s still a massive amount of market volatility, including an ongoing housing and credit crisis in the U.S., Canada’s largest trading partner. The euro is in trouble, and countries such as Greece are struggling to stay afloat. Plus, we’re seeing inflation in China tied into some pullback in both that country and India, both of which have recently been driving economic demand around the world.

Still, Sharpe doesn’t see it as all bad news. With decline comes opportunity — if you know where to look.

Sharpe’s own opportunity at Sun Life arrived after travelling an unconventional education and career road. Before attaining her MBA, while working on the lending side, she earned PhDs in epidemiology and community health from the University of Toronto. But rather than join her parents in academia, she opted for the financial industry.

Sharpe, who lives in Toronto, admits her age might play a factor in her risk assessment success. After all, unlike an advisor who remembers years of relatively smooth markets, as someone under 40, she knows only the unstable market that spawned the IT bubble of the late 90s, the 9/11 aftermath and the recent global credit crisis.

“In some ways I’m part of a generation that’s going to be more conservative than [following generations],” she predicts.

Sharpe’s job isn’t only about going the conservative route. She must walk the tightrope between risk and reward, one that becomes more complex each year as markets become increasingly global. Her ability to see the big picture and look for opportunities sets her apart as an innovator in a traditionally conservative industry.

“If you want to stay in front of events taking place, you have to be very good at processing information quickly,” she says. “There is so much coming in. What’s important? What’s going to shape events going forward? What can I use to stay ahead?”

Sharpe, who is also chair of the board at Kensington Health Centre, a 350-bed long-term care facility in downtown Toronto, says pushing forward means reassessing everything we know about the financial markets and then looking at the global picture.

“Five years ago, it was pretty easy to say that safe havens are, say, U.S. treasuries and bank stocks . . . [but] people don’t believe that anymore,” she says. “So you have to start taking a more global view.”

The Financial Therapist: Amanda Mills

In 2001, before any of us ever thought to use “Google” as a verb, Amanda Mills hopped online to do an Internet search on the term “financial therapist.” The pickings were slim.

As it turned out, only three other people on the planet seemed to use the term to describe what they were attempting to do professionally: help clients come to terms with their money bugaboos in a safe environment. Debt problems, overspending, money hoarding — they were all fair game.

Still, only a few were making a solid connection between emotion and money — and even fewer were offering a service to address the issue.

Mills knew from experience there was a gap to be filled, as she wrestled with her own personal debt and could find no therapist who would talk money.

“I felt entitled and for years was spending $500 more a month than I was making. I thought it was my parents’ fault,” says Mills.

She even had the numbers to prove it. After they died, Mills calculated how much money she’d spent on therapy versus how much debt she had. The two numbers came out pretty much even. “But the problem was that five years later, I was right back there in debt — and with no therapy costs.”

But it wasn’t until two back-to-back clients came to see her company, Artbooks, for tax services in 1999 that she had her “Eureka!” moment. They were both sculptors who made roughly $60,000 a year. One had paid $12,000 in taxes and expected to receive $4,000 back. The other had to pay $4,000, which was yet unpaid. The first was elated, the second in despair. While Mills could see how getting money back was more fun than owing money, she found it amazing that the sculptor paying twice as much tax was actually happier than the other. Money isn’t just about the money, she realized.

And now it seems the times have finally caught up with that realization. In the past year, the new Financial Therapy Association has sprung up in the U.S., a conference is in the works…and Google? Search the term now and be prepared to get over 122,000,000 hits — with Mills’s company, Loose Change Financial Therapy, which she launched in 2001, holding down the top ranking.

“This is something I’ve been doing now for 10 years without it being a ‘thing,’” she says with a laugh. “Now it is.”

Today, Loose Change sees roughly 100 clients a year who pay a fee to sit with Amanda for an hour and a half to dish their personal dirt around money. She also runs workshops and sees everything from people who can’t seem to part with their pay cheque to those who can’t get rid of it fast enough.

“I have women clients who run big organizations — and run them beautifully — and cannot figure out their own bank statements. That’s a common story,” she says.

Although Mills was unable to offer much direction while the new Financial Therapy Association was launched (she was contending with two knee replacements at the time), she has always been available to planners or others interested in getting into the newly minted profession. Still, she admits not everyone is cut out for the job.

A financial therapist doesn’t simply offer sympathy or offer a laundry list of to-dos to cast out clients’ emotional demons. Mills is convinced a good financial therapist requires empathy.

“The problem is, if someone has a really good relationship with money, he or she can’t do this [job]. I mean it. That person just does not get why her clients wouldn’t handle their money properly,” contends Mills. “It’s important to have a chink in your own armour too.”

The Consolidator: Jim Virtue

Ask Jim Virtue to count all the companies he has either bought or merged with since 2000 and he needs a moment to think.

“I’m not sure of the exact number,” he answers at last, “but I think it’s about 15.”

Virtue is president and CEO of PPI Financial, a managing general agency (MGA) with offices across the country. And he can be forgiven for not remembering each and every union. The past eight years in particular have been beyond busy since merging with Financial Management, a sizable MGA with offices in Calgary and Vancouver, in 2003.

“It was from there that I looked out over the horizon of MGAs in Canada and thought, ‘This is a good business,’” he says now.

It was also one that needed to change. For most of today’s MGAs, sales margins are so thin that few can afford to offer agents anything beyond barebones services, let alone administrative offerings, marketing materials, training or technical backup. And software tools to keep brokers competitive? Out of the question. Instead, many MGAs find themselves competing by paying the highest compensation and trying to live on their service fees.

But consolidation within the industry can change all that, says Virtue. In other words, scale rules.

“If you’re going to do things to assist your advisors, you need better technology and better marketing resources,” he says. “It’s easier to pay for those things if you have more size.”

In order to build that growth and offer a solidified front and national profile, Toronto-based PPI acquired a 50 per cent stake in Virtue’s Financial Management Group of Cos. Inc. last year. Since then, all of Virtue’s companies, with offices in every province except Quebec, have been rebranded as PPI Solutions. In conjunction with the purchase by PPI, PPI Solutions has now opened an office in Montreal.

Indeed, with PPI in the fold, Virtue says he’s now looking forward to offering its 2,000 brokers who write active business with the newly formed company a new marketing solutions toolkit, to make sales and marketing easier and more cohesive. Using the toolkit, brokers can make more professional presentations to clients or do a more accurate needs analysis.

It’s a good business model. As brokers get out and sell more and better products, PPI reaps benefits — and funds — too. It’s in PPI’s best interest to see its brokers prosper.

“Our success is really dependant upon being able to help our advisors be more successful, do a better job for clients and write more quality business,” says Virtue. “We’re successful if they’re successful.”

So now that the company has offices in 12 cities, expansion is next. Under Virtue’s leadership, PPI is expected to continue to expand, with a focus on central Canada.

Until then, Virtue, who lives in Calgary, will be hopping planes and stockpiling air miles, some of which will go to visiting his two children, who are studying at the University of Victoria, and Queens University in Kingston, Ontario.

When he’s not travelling, the former president of the Advocis Calgary chapter and current trustee of The Institute for Advanced Financial Education (formerly known as The CLU Institute) will continue to find ways to make a difference in the financial services industry in Canada.

“Our industry is important,” he says. “What we do is valuable to the country and we need people to pitch in.”

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