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wealth management

We're constantly being exposed to ads for the wealth-management divisions of the large institutions. And it seems they sponsor almost every arts function we attend. This shouldn't surprise us, as wealth management is the No. 1 growth initiative for all the banks.

The ads invariably portray stability, insight and teamwork. What they don't say is that picking between RBC Dominion Securities Inc., CIBC Wood Gundy, HollisWealth (Scotiabank), BMO Nesbitt Burns Inc. and other investment dealers is not too important a part of deciding on a wealth manager. It's the individual adviser or portfolio manager at these firms that's crucial.

I say this because the big institutions don't have one distinct investment philosophy. Indeed, they don't have an investment philosophy at all. They put every investment product known to man on their shelves and leave it up to the advisers and portfolio managers to choose how client portfolios are built. As a client, you'll be pursuing a strategy that reflects your adviser's investment philosophy.

Obviously, the strategies cover a wide range. An adviser might help clients buy individual stocks, funds and/or ETFs. She might have a dividend, resource or growth focus. She may go all Canada or be big on U.S. stocks.

The point is, your decision shouldn't be between firms, but rather between qualified individuals. The dealer platforms they work from are indistinguishable. It's the advisers who are the differentiators.

I contrast this with investment-management firms such as Mawer Investment Management Ltd., Leith Wheeler Investment Counsel Ltd., Burgundy Asset Management Ltd., Pembroke Private Wealth Management Ltd. and many others, including our firm, Steadyhand Investment Funds Inc. These managers also have capable client-service people, but contrary to the all-product firms, have an established investment philosophy. In each case, the returns and approach are those of the firm, rather than the adviser.

If you're thinking about making a change, don't do it without interviewing at least three advisers or portfolio managers. When I'm assessing candidates, I like to use a framework known in the industry as the "Six Ps".

People: It's important that you can see yourself working with the person or team for a long time. In addition to assessing their credentials, I suggest you hold them up to the flight test – is he or she someone you'd like to sit beside on the plane?

Parent: As noted earlier, the platform is less important, but you still want to make sure the adviser has the necessary resources available to meet your needs. You also want to understand how the corporate agenda (i.e. sales) will affect how your portfolio is constructed.

Philosophy: You don't have to be an expert on investing, but you need to understand how your portfolio is going to be managed. It's important to discuss lots of examples of past and current strategies, both good and bad. Indeed, exploring mistakes provides some useful insights into the thought process and how realistic the sales pitch is.

Process: You want to know how decisions are made and how they'll be reflected in your portfolio. And importantly, how will the adviser report back on how you're doing and what you're paying.

Performance: Clearly, whoever you hire has to have a record of generating wealth for their clients over the long term. The key here is long term.

Price: This can be a touchy subject, but you need to know how much you'll be paying and how the adviser is compensated.

In addition to covering the Six Ps, you should stay alert to what I call the deal breakers. I'm talking about advisers who tout their recent performance, recommend a strategy before understanding your situation, hesitate when asked about fees or betray the confidentiality of other clients – i.e. name drop.

It's also a deal breaker if the adviser appears to have never made a mistake. Someone who got it right during the tech bubble, 2008 crisis and bull market of the past six years is not well grounded in reality, or humility.

Clearly, there's no one right way to go when picking an investment professional to work with. It depends what you're looking for. It's important to recognize, however, that the ads you see are focused on the least important part of the equation. The people and investment approach are the biggies.

Tom Bradley is president of Steadyhand Investment Funds Inc.

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