For many Canadians, the Bre-X Minerals scandal was merely one more salacious newspaper story to pore over. The company's claims about an Indonesian gold find turned out to be fake, and the massive fraud cost investors hundreds of millions of dollars.
Laura Chanin was one of them. It was that gut-wrenching experience that prompted the Winnipeg native to become an investment adviser and certified financial planner.
"I lost a third of what I had contributed, plus all the gains," she says. "I didn't want that to happen again, or for it to happen to anyone else."
Pursuing a career in the financial field came naturally to Ms. Chanin, who's now based in Vancouver. While she was working as a product manager for the B.C. Ministry of Advanced Education, she logged hours at her "hobby job" as a part-time tax preparer. It was a pastime that eventually led her to teach tax-preparation courses to others.
"I always loved math," says the mother of two. "I love numbers and spreadsheets. When I was working part time at H&R Block I realized I actually really liked helping people with money."
Given her experience with Bre-X, she describes herself as a balanced investment adviser. When planning what type of investments would suit a client, she considers factors such as liquidity, fees, transparency, and the type of income a particular vehicle pays, such as the dividend rate.
At the top of the list, however, are risk management and capital preservation.
"If you lose 50 per cent, you need to earn 100 per cent just to get back to your starting point and break even," she says. "It's a concept known as negative compounding, and many investors don't realize just how difficult it is to make up that loss."
From there, Ms. Chanin takes a two-pronged approach to investing. Her first focus is on asset allocation.
"What is the breakdown between fixed income and stocks, Canadian versus the rest of the world, as well as alternative assets like infrastructure and real estate?" she says. "I do use managed money – for instance, mutual funds, ETFs and mortgage investments – as well as solid stocks that are consistent dividend-payers.
"Earnings growth and dividends drive shareholder returns, and they come from a single source: cash flow," she adds. "We focus on companies that are growing free cash flow and allocating it intelligently.
"Reinvesting cash flows in internal projects or acquisitions is preferred when those actions will generate returns above the cost of capital," she says. "Otherwise, we believe company managements should return excess cash to shareholders through dividends, share buybacks or debt repayments, collectively known as shareholder yield."
Ms. Chanin – whose clients include business owners and professionals, many of them women, generally between the ages of 45 and 75 – says her second focus is a HollisWealth program called Diversiflex, which she describes as a rules-based approach to direct investment into the strongest asset classes and away from the weaker ones.
"Rather than a simple buy-and-hold approach, the Diversiflex portfolios will actively move from asset class to asset class, using a highly disciplined and totally rules-based approach," she says. "The approach also signals when to exit an asset class that is weakening."
That rules-based approach also takes emotions such as fear and greed out of the investment process. "Emotion does not belong in an investment process," she says. "Emotion drives bias. Removing bias without a process like this is very difficult and frequently not effective."
Because of recent market volatility, Ms. Chanin says her investment strategy has become slightly more defensive, with more fixed-income funds, mortgage investments and infrastructure. She is fond of health sciences because of the demographics of the aging population, and she emphasizes global diversity rather than being overweighted in Canadian funds.
It all goes back to being balanced – a philosophy that's central to her lifestyle just as much as her investing style. A breast-cancer survivor, Ms. Chanin says she is very aware that people's needs today have to be harmonized with what may come tomorrow.
"Having cancer definitely makes you reassess your life balance," she says. "As a balanced investor, it's all about enjoying living today but planning for the future, not one or the other. I like to work with people who appreciate financial advice for the big picture, not just for their investments."