Welcome to the weekly roundup of news affecting you, as covered by Advisor.ca and our sister publication, Conseiller.ca. Read this section every week to catch up on the news you missed, or click here and subscribe to get regular updates sent to your inbox or Blackberry.
News stories we’ve covered this week include Dundee Wealth’s move to sell out of the MFDA business in Quebec and the bad news on fund performance and economic fronts (including Canadian mutual fund sales numbers). Insurance lobbyists have scored points in Alberta that might well have implications across Canada in the future, and the Independent Financial Brokers are taking the Mutual Fund Dealers Association to the Ontario Securities Commission over a new bylaw they say will deny advisors the right to due process in certain matters.
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The biggest news this week is clearly the election of a new world leader south of our border. Advisor.ca reporters this week talked to industry experts to find out what’s in store for Barack Obama, on the economic front at least, once he takes office. The general consensus is that his long, hard-fought campaign may soon seem like a vacation. His first priority, to sort out the economic train wreck in the country, might be more difficult than imagined — many believe that the fundamental drivers of our current economic situation are so strong that the cycle will need to take its own course.
In Canadian legal and regulatory matters, after nearly 40 years of industry lobbying, insurance contract laws received royal assent from Alberta’s provincial legislature, making Alberta the first province to use common law to adopt new updates to its life, accident and health insurance laws. The changes are expected to go into effect about a year from now.
The Independent Financial Brokers (IFB), meanwhile, is challenging the legality of Bylaw 1, pushed through by the Mutual Fund Dealers Association (MFDA) at the end of December 2006, just four days after the comment period closed. They say the bylaw is unfairly prejudicial, beyond the scope of the MFDA’s powers, and quashes an advisor’s fundamental right to defence and due process.
In August, the MFDA approved Bylaw 1, which allows a hearing panel to impose penalties, with or without notice, if an approved person is found to have mental incapacity issues.
In other regulatory matters, the MFDA announced this week that it is opening disciplinary hearings for two advisors, Michele and Jeffrey Longchamps, who are allegedly unable to account for a large chunk of more than $1.5 million they took from 22 clients.
In case you missed it, Dundee Wealth is exiting the MFDA and insurance business in Quebec, selling dealerships there that employ 410 advisors, to Investia Financial Services, a subsidiary of Industrial Alliance. Calling the sale a valuable new relationship, president and CEO David Goodman says the sale is a step toward strengthening Dundee’s relationship with the Quebec distributor. The sale makes IA the fifth largest mutual fund dealership in Canada. Dundee says it plans to keep its securities-focused Investment Industry Regulatory Organisation of Canada (IIROC)-registered advisors in the province.
Three western credit unions, home to more than 367,000 clients, have also announced their decision to merge operations and join forces in a "strategic amalgamation."
Countrywide and across different industries, the volume of mergers and acquisitions taking place has tapered off dramatically. According to Towers Perrin researchers, though, those deals that are going through are happening more quickly than ever before, with the average lag time between announced deal and transaction completion coming in at nearly half the amount of time it took to complete deals in 2007. The average is expected to fall even further before the end of the year.
In tax planning and economic news, the Canada Revenue Agency has increased the maximum pensionable earnings number for 2009 to $46,300, up from the $44,900 set for 2008. Basic exemptions and contribution rates remain unchanged.
People
Sprott Asset Management has reason to celebrate – the firm was recognized for its Sprott Offshore Fund, named the best long/short hedge fund by alternative investments journal, HFM Week. The company’s Opportunities Hedge Fund was also nominated for the award.
Wellington West announced it is hiring behavioural finance researcher and finance professor, Meir Statman of the Leavey School of Business at Santa Clara University in California, to work with the company’s chief investment officer to provide investment analysis and education to the firm’s advisors and clients.
What credit crisis? Manulife Financial managed to secure a $3 billion loan this week from Canada’s six largest banks, after posting its biggest profit decline in seven years. Global equities markets reportedly contributed to the company’s reduced earnings in the third quarter.
There was little comfort for the mutual fund industry this week as reports from both Morningstar Canada and the Investment Funds Institute of Canada (IFIC) showed that steep global market declines are affecting performance and that investors in those funds are pulling away from their long-term investment plans. IFIC announced October numbers that show industry-wide net redemptions ranging between $8.2 and $8.7 billion during the month, while Morningstar reports all but four of its indexes declined in October, with 20 down more than 10% on the month.
According to recent numbers reported by Statistics Canada, almost 6.3 million Canadians contributed to their RRSPs in 2007, a jump of 1.6% over numbers reported in 2006. Total contributions also jumped 5.3% to $34.1 billion during the year, led by Newfoundland and Labrador and Quebec. The number represents just 6% of total contribution room available to Canadians, down from 7% of contribution room used by investors in 2006.
A recent Investors Group poll of more than 3,100 Canadians found that 67% of those with RRSPs plan to contribute the same amount or more this year, despite the global economic crisis.
Even the once-mighty hedge funds are falling. Once powerful players that made big returns to help investors get rich, today the $16 billion Citadel Investment Group was asked by a number of major banks to put up more cash to cover major investment losses. The British-based Man Group saw its share price plummet after announcing it lost $6.6 billion in just over a month, and it’s the hedge fund world fielding the brunt of investor blame for the market sell-off.
If gross domestic product numbers are any indication, though, things could still get worse before they get better. The latest word from the Conference Board of Canada is somewhat bleak, with the think-tank cutting its forecast for 2009 GDP growth to just 1.5%, down from 2.2%. It says high resource prices have bolstered real income for Canadians for six years. Although growth will continue, the economy in general is slowing along with the world economy, thanks to the drag of U.S. real estate problems and the 500% increase in oil prices since 2002.
Product news
Unity Life of Canada, Russell and BMO were on the list of companies with new product announcements this week. Unity announced it is adding a whole life and deferred annuity to its product lineup and Russell Investments Canada launched a new corporate class structure for those interested in tax efficient switching. The biggest news, though, came from BMO Financial. The bank announced it is scrapping the Guardian Group of Funds (GGOF) brand, replacing it with the new BMO Guardian handle. At the same time, it announced the company was rolling out an expanded fund offering for independent advisors. The lineup includes 25 new funds, a new corporate class structure for 23 funds and a life-cycle fund lineup as well. To manage the products, BMO has also hired six new sub-advisory firms.
ScotiaMcLeod has also decided to swap out a few portfolio advisors — the company announced it was hiring two new firms, starting January 6, to replace managers handling assets in the Pinnacle International Equity and the Pinnacle Canadian Value Equity funds.
Franklin Templeton meanwhile announced late last week that it plans to close the Bissett Canadian Core Plus Bond Fund, as of December 30, saying advisors can replicate the fund on their own.
On the Tax-Free Savings Account front, CIBC is the latest institution to join the ranks of those like Invesco Trimark and Standard Life, who have jumped into the game of accepting applications ahead of the January 2009 launch date for new TSFA accounts in Canada.
Finally, iShares says exchange-traded funds are enjoying a record influx of new investment – $2.1 billion in September and October — while mutual funds suffered record sell-offs. South of the boarder, ETF inflows reached $41 billion, while American mutual fund sell-offs topped $47 billion.
News from Quebec
Our sister publication Conseiller.ca, reports this week that the majority of Quebec economists surveyed by Leger Marketing are pessimistic about the province’s short-term prospects. Roughly 75% told the firm they expect economic activity will worsen in the next six months.
The Quebec Minister of finance and government services, meanwhile, released a statement saying the government would keep its word and balance the 2008-2009 and 2009-2010 provincial budgets, despite pronounced slowdown in the economy. Also, despite the current state of economic slowdown, the Greater Montréal Real Estate Board is being optimistic, saying in its most recent press release that the greater Montreal market is still active, with existing home sales declining only 2% this year.
In the financial services sector specifically, the Caisse de dépôt et placement du Québec suffered a significant blow when top-ranking executive Yvon Gaudreau reportedly left the firm to go work for ING Canada. Sources say three other fund managers are also defecting from the firm.
For more news from our sister publication, click here/clic ici, to subscribe to Conseiller.ca or sign up for our French language e-mail service.
New features this week:
Ahead of the pack: Tax tips for 2008
The focus for investors this time of year should be on tax – realizing capital gains, filing tax returns, donating to charity – but the volatile markets have probably forced your clients to worry about their stocks. Even though your clients may be wondering whether to buy or sell, it’s important to remind them that tax season is coming regardless of how well the country’s economy is faring. With that in mind, Advisor.ca has compiled its annual tax package, where we outline everything you need to know about the 2008 tax year. Read more.
Print this package: Compliance roundup
There was a lot going on during the summer: new do-not-call rules and money laundering legislation went through earlier this year, not to mention updates related to registration reform, point of sale and more. We’ve created a printer-friendly edition of this special report so you can take it with you or save it to your computer for easier future reference. Click here for more.
Coping mechanisms for tough times
You can’t deliver emotional stability to your clients unless you are feeling emotionally stable. So before taking any action, take your own emotional temperature. Here are seven strategies to help you get into the best mental shape. Click here for more.
Filed by Kate McCaffery, Advisor.ca. kate.mccaffery@advisor.rogers.com
(11/07/08)