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Do your clients have savings? If so, they’re ahead of the rest, according to a survey from BMO Financial Group that found nearly 70% of respondents did not have a financial plan. Although this might be a prime marketing opportunity, the survey also found that 80% did not think economic uncertainty was enough incentive to get one. More than 40% do not have emergency funds stashed away. The Vanier Institute of the Family says it will take years for most households to recover from the effects of this recession. The survey also found that nearly two-thirds of Canadians say they will cut back on their spending, while more than 40% plan to adjust their current investment mix to better withstand economic pressures.
Despite the barrage of negative economic reports (StatsCan says the composite of leading indicators fell in December, led by declining equity and real estate markets; the Bank of Canada is issuing rather dire-sounding warnings about the economy and interest rates as well), a poll by TD Canada Trust has found that the majority of homeowners who had been planning home renovations are still going ahead with their projects. This survey found that 37% of Canadians planned to save more, while 33% were planning to pay down debt. Almost one-third said they had no plans to change their financial habits.
There are brighter spots to be found in the analysis this week, however. Canadian investors might benefit from a relatively new free trade agreement with India that appears to be in the works; separately, infrastructure fund managers say governments around the world are trying to stave off economic calamity by investing in infrastructure through public-private partnerships as a form of stimulus, which could lead to regulators and governments allowing infrastructure investors access to greater returns in the future. Finally, other managers are beginning to take a more bullish stance on oil and other commodities, saying the sell-off in commodities and the stock market in general may have been overdone.
Industry news
The asset-backed commercial paper saga is finally drawing to a close. The Pan-Canadian Investors Committee for Third-Party Structured Asset-Backed Commercial Paper announced it has fully implemented its restructuring plan, which should thaw about $32 billion in frozen third-party ABCP.
Under the plan, large investors holding the affected ABCP will have the frozen assets exchanged for longer-term notes with maturities matching those of the assets previously contained in the underlying conduits. These longer-term notes will be delivered within three business days via normal CDS book entry procedures. Smaller investors will receive cash.
In company-specific news this week, Barclays Global Investors announced it is not closing its trading and asset-management operations in Canada, as previously reported by other media outlets, but the company does say it plans to relocate some of its Toronto shop to the company’s San Francisco headquarters over the next few months.
BMO Capital Markets, meanwhile, continues to expand its Chicago office. This week the company announced it has appointed a new managing director for the Chicago-based U.S. industrials group. The news follows earlier announcements about the group’s plans to expand its mergers and acquisitions practice to take advantage of increased activity it anticipates in the corporate restructuring marketplace going forward. Last week BMO Financial Group also announced that it has acquired AIG Life of Canada to expand into the managing general agency channel in Canada.
This week, the troubled U.S. insurance giant found a buyer for its commodity index operations — it sold the AIG Financial Products subsidiary and AIG’s rights to the DJ-AIG Commodity Index, to UBS Investment Bank. UBS expects to pay $15 million up front and up to $135 million more over the next 18 months. The figures are based on future earnings of the asset. The transaction, which still requires regulatory approval, is expected to close by May 2009.
Regulatory news
Apparently Canadian advisors are not the only ones concerned about regulatory reform initiatives. In the U.K., the Financial Services Authority (FSA) launched the Retail Distribution Review (RDR) back in 2006. Those in the industry are worried that policies that come out of the process will reduce the number of independent financial advisors. The review suggests U.K. consumers need greater clarity about whether the advice they were receiving is independent or sales motivated.
In Canada, Ontario specifically, Advocis is trying to draw attention to the provincial budget, calling on the government to keep a closer eye on regulators. The group is especially concerned that investor protection measures could actually hinder an investor’s ability to choose qualified advice. Advocis president and CEO Greg Pollock says, "we are not asking for a handout or a subsidy. Our members simply want to do business in a regulatory environment that not only protects the public but also ensures that advisors and planners are not hampered by unnecessary and inefficient regulation."
In British Columbia, the BCSC has imposed a 15-year ban from trading securities against an accountant who failed to file insider trading reports and distributed millions of dollars in debentures to investors in seven provinces. Henry Jung also faces a $70,000 fine. The regulatory panel found that he was a de facto director of Bright Star Ventures Ltd. securities, despite his claim that he was simply the office manager.
Products
CIBC Mellon is the latest to come out with a tax-free savings account option — this time for public companies who want to offer TFSAs as part of their employee share purchase plans. The services are also available to investment fund companies offering TFSAs to clients. Scotiabank, meanwhile, announced that it has enlisted the help of Gordon Pape to explain the benefits of the TFSA to Canadians. The bank and Pape will produce a video for clients and hold a seminar at the Toronto headquarters of Scotia’s recently acquired online brokerage, E*Trade Canada.
ScotiaFunds is also on the list of companies making product announcements this week. The company launched a new managed portfolio program for investors with $50,000 or more; Hartford Investments launched a new portfolio program with four investment mandates, and sticking with the portfolio solution theme, AGF Funds announced that it plans to add 10 new managers to its Harmony Managed Asset program.
Not to be outdone, Dynamic Funds announced this week that it has added a whole new investment approach to its lineup — an institutional style of asset management that is new to the company. The "Dynamic Aurion" approach will be applied to two funds, launched this week, which will be managed by sub-advisor Aurion Capital Management.
Quick links: Advisor.ca news, January 19-23, 2009.
New columns and features this week:
The future of distribution: In a special videotaped commentary featured at the Advisor Group’s fall Mutual Fund Dealer’s conference held in Collingwood, Ont., Mark Tibergien, president and CEO of Pershing Advisor Solutions, explored the future of distribution in the financial services industry, and talked about what successful dealers are doing to maximize workflow and profitability. He also addressed compliance issues, recruiting and retention of top advisors, and how the liquidity crisis will affect firms’ future profitability. Watch the video now.
Shawn O’Brien: Clients might not be calling you to complain, but this doesn’t mean they aren’t concerned about their portfolios and financial plans. People hate being a burden. At the same time, they hate being in a state of conflict. What steps can we take to start restoring our clients’ trust and confidence? Have a governing philosophy in place so you don’t start making emotional decisions, and make contact — consistently, predictably and continually. Read more.
Features:
Cancer, the underwriter’s view (an insurance case study): Do you sometimes wonder why underwriters make certain decisions? Need insight into the different claims processes or help explaining things to clients? This mini-series from Munich Re will hopefully provide some of the answers. In part one of this series, Munich Re expert Hélène Michaud discusses cancer, family histories, their application and their relevance in the underwriting process. Read more.
Cheap U.S. vacation property = big estate tax consequences: Lower United States property values and a stronger Canadian dollar have led many Canadians to consider purchasing their dream vacation properties in the southern U.S. However, while owning U.S. vacation property provides a great escape from the often harsh winters of the great white north, it also exposes Canadians to the U.S. estate regime that eliminates a number of estate tax planning options once the purchase is complete. Read more.
Innovative branding paths: While many dealers and advisors have chosen to go back to their roots, with town-hall meetings, seminars and more face-to-face meetings, to establish their expertise status, there are a few individuals and companies choosing to forge the unknown road. Read more.
Our free CE courses are back: The Advisor.ca continuing education corner is back in business. Thanks for your patience while we worked through the process of getting our material re-accredited. If you’re interested in getting a jump-start on your CE requirements for the current cycle, log in, review the lessons, take our exam and print off your certificates – it’s that easy. Read more.
TFSAs and estate planning: Much has been written about the new tax-free savings accounts: the accumulation of tax-free income, the ability to re-contribute withdrawals and the capacity to access funds without impact to federally sponsored benefits. But what happens to the TFSA on death of the TFSA holder? Read more.
(01/23/09)