Transcript | Benefits Of Working With A Portfolio Manager

Sarah Widmeyer 0:16 

Welcome to conversations on wealth, a podcast dedicated to helping Canadians with your total financial picture. I’m Sarah Widmeyer, Director of Wealth Strategies at Richardson Wealth. And I would like to introduce to you today three terrific Richardson Wealth investment advisors who are also Portfolio Managers.

From our Winnipeg office. We have Valerie Wowryk. Welcome, Val. Marc Dalpe from the Dalpe Millette team in our Montreal office is also with us. Welcome, Mark. And last but not least, Rob Panes, a member of the MBP Sterling partners in Toronto. welcome, Rob. Thank you all for being here.

So a Portfolio Manager can add significant value to your total financial picture. I have some of the industry’s best with me today to talk about some of the key benefits of Portfolio Managers, and what clients should be considering when teaming up with a Portfolio Manager.

So Val we’re going to start with you. In this industry, investment advisor or financial advisor are often used interchangeably by clients. But what exactly is a Portfolio Manager? And how do they differ in their services to clients?

Valerie Wowryk 1:40 

Well, you know, Sarah, like many other professions, there are service delivery methods and practices that differ greatly in our business. There’s a lot of confusing titles in the industry. I think it’s less confusing at the Portfolio Manager level, although they are trying.

What is being used interchangeably is discretionary manager and Portfolio Manager. And let me just say that a Portfolio Manager is and has always been a discretionary manager, but a discretionary manager isn’t always a Portfolio Manager. And I’ve been a Portfolio Manager for over three decades, I’ve been called an investment officer at a Trust Company, and a Portfolio Manager at an investment counseling firm, and now here with Richardson Wealth. But the job I’ve done over those three decades is exactly the same.

I can define a Portfolio Manager from my perspective and practice. And again, it may differ from others, but my experience is there are a few key points in defining a Portfolio Manager. In general, Portfolio Managers are fully accredited investment professionals, possessing the highest level of industry related qualifications, whotake the direct responsibility for the investment of a portfolio or portfolios. Now this could be a Portfolio Manager that is responsible for say, investing one emerging market mutual fund for a fun company or as in our world, invest the portfolios on behalf of a select number of individuals, corporate accounts, foundations, endowments, pensions, trusts and family offices. Different from discretionary investment manager, a true Portfolio Manager will have developed a practice with a philosophy strategy and disciplines which can be accounted on to be followed with consistency. Different Portfolio Managers may have different investment management approaches and styles. But the key is consistency. And this philosophy and strategy that they’ve developed in their practice can be easily articulated to potential clients.

In addition to capital market and financial analysis knowledge, they would tend to have expertise in the area of investment policy, in either constructing of the policy, interpreting and certainly adhering to it. And the other thing that’s important I think, is as industry professionals, Portfolio Managers are held in the highest standards, and have a fiduciary responsibility and duty to act with care and in good faith and always in the best interests of clients. And of course, last but not least because the Portfolio Managers are the decision makers, they own the responsibility and are accountable for the performance for the clients’ accounts. That’s how I would describe my job and a Portfolio Manager in general.

Sarah Widmeyer 4:41 

Thank you. So I’m going to ask Marc a question next, but before I do that, you brought up the word fiduciary. And I think it’s a really, really important word, because that is something Richardson Wealth is and has which is different than other Financial Institutions on the street that our listeners may be considering. Val can you spend a moment just telling me a little bit more breaking it really down into common language? Why is being a fiduciary so important?

Valerie Wowryk 5:14 

Well, it sets a standard of behavior for the investment professional, you are held in the highest regard in that you make a commitment and you take an oath to practice in the best interest of the client. And it’s a given in the institutional world, any institutional account would never even consider not bringing on somebody as a Portfolio Manager who didn’t have the fiduciary obligation to either the beneficiaries or the constituents of that account. And I think have that standard available to the private client, I’m not even sure why anybody would consider going anywhere else, not taking advantage of it right now, to become a fiduciary, you’ve already taken on view of your profession and want to be the best, you are highly accredited because you’ve spent years taking additional courses, whether that’s a CFA charter holder, or any of the, you know, other portfolio management courses that are available, you’ve made that commitment, and the fiduciary duty is just one step further, and it’s recognizable. It is a standard definition, duty of care integrity, client’s best interest, and that is that’s the common ground.

Sarah Widmeyer 6:35 

Awesome. Thank you so much. So Marc. As our industry becomes more technologically advanced, we’ve also noticed that the expertise and level of service that our clients depend on from our Portfolio Managers cannot be automated. Tell us about what the human aspect of portfolio management offers to clients, and how it can be a great complement to technology.

Marc Dalpe 7:01 

Thank you, Sarah. Indeed, technology improvements have been numerous in the past 25 years or so in all sectors of activity, including the financial industry, and in particular, in the money management business. But one must realize that those advancements have been imagined by the minds of men and women for the purpose of helping them become better at what you do, and become more productive. Of course, technology has helped the individual investor manage more easily its own portfolio, but it has also helped their professional Portfolio Manager. I’m pretty sure hammers are better than they were 50 years ago. But this improvement has helped the carpenter way more than it has helped me on my occasional weekend renovation work around the house.

To understand the extent of the impact of technology on the work of the Portfolio Manager, one must understand what a Portfolio Manager does, it all starts with forging and portfolio structure for an individual investor, commonly known as strategy portfolio structure. This takes into account financial consideration. such elements are typically included in a financial plan that exceeds the unique choice of financial instruments and includes capacity to generate savings, retirement timeframe, access to liquidity and income generation taxes and etc.

But also the psychological mindset of an investor is very important. Markets change and volatility is a given the portfolio profile must match the psychological profile of the investor. Technology can surely help a Portfolio Manager better grasp the financial and psychological aspects of setting up and managing a portfolio. But human communication with clients, Vester, based on talent and experience is the most important driver of this humans talking, not machines. Warren Buffett once said that the most important quality for an investor is temperament, not intellect. This is a very big part of what a Portfolio Manager brings to the table. A client relationship. machines can help clients manage this but human Portfolio Managers can.

Managing portfolios is basically finding attractive investments that will provide the desired result, whether it’s income or plus value, at an acceptable level of risk or volatility. My personal belief is that financial markets in particular the stock markets do not create value. The markets are there for investors to buy or sell investments. They don’t create value per se. It’s the same as buying great tomatoes in your local store. The satisfaction or value comes from eating the tomato, not really buying it at the store. enterprise value is created by entrepreneurs and managers That are talented, committed and work hard at growing their companies over time. Of course, technology also helps those entrepreneurs achieving better results. But it’s not the technology tools they employ, you’re buying when investing in their stock. It’s their mind. And it’s just the same with Portfolio Managers. It’s the skill and experience are the one that client investors are after. Not it’s toolkit.

Sarah Widmeyer 10:24 

Right, so taking from what Marc has just said about the importance of the human element in investing, and the work that we do as Portfolio Managers is so key. I’d like now, Rob, for you to talk about what are some of those human characteristics? What are some of those characteristics thatgoodPortfolio Managers, such as yourself who I would consider one of the best. How does this impact how you and your team work with clients, those human elements?

Rob Panes 10:57 

I think we would all agree on this panel, it’s extremely important to understand your client. And a lot of what we do revolves around having clients that are committed to an investment plan, and a strategy for the long term. If they’re not committed to the strategy, they tend to make mistakes at the wrong time. So we need to understand our client, we need to understand their risk tolerance, we need to understand their financial goals, we need to understand that it is their portfolio, not ours, and we need to manage it to them. It’s extremely important that we educate our clients in the methodology that we use in our portfolio management strategy, our commitment to what we do. And I think that if they don’t understand that there is a very strong process to what we’re doing, and that we’ve seen it all before, they could make mistakes at the wrong time. What I mean by that is selling stocks when they should be buying stocks like last March. So it’s very important that they understand our process, they don’t need to understand exactly how the process works. But they need to understand that it’s a process that is tried and true. And that has been used for many years, very successfully. So you have to have a portfolio that is from a risk standpoint aligned with the client’s risk tolerance. And a good Portfolio Manager will have a very defined repeatable methodology to what they do. And they’re able to communicate this to their clients, they need to demonstrate a strong discipline in the way they manage money. And they have to ensure that the client doesn’t waver from that strategy.

Sarah Widmeyer 12:43 

So it almost feels like an extra set of hands on the steering wheel, the transparency, I’m hearing, high degree of client understanding communication, these are themes that I’m hearing from all of you, again, who I would consider among the industry’s absolute best. I think one of the things that clients I hear from clients that they’re concerned about working with the Portfolio Manager is that they’ll be cut out of the process, they won’t have the transparency into what is going on. But that’s not at all what I’m hearing from the three of you. What I’m hearing instead, is more communication, more transparency, more understanding, more education. And that is, I think, very reassuring for our listeners to hear. Val, I’m going to ask you the question about fees, clients want to know how much will this cost, and they get quite worked up about it. So let’s talk about fees, and how the benefits of working with a Portfolio Manager will actually be well worth what they’re paying in fees.

Valerie Wowryk 13:45 

You know, I’ve heard clients get worked up about it. But in 30 years, I’ve never had that experience. Because, again, it goes to understanding and delivering a consistent service that you can articulate to clients so they can understand the value of that service. But portfolio management again, and I stress this, it’s a professional service. Unlike other professional services, accounting, legal, audit, there is amanagement fee. And because the relationship with the PM is a direct relationship to the client, no middleman fees tend to be lower, not higher. So fees may vary depending on the size of the account, their professional fees, they are transparent, and they are tax deductible for tax accounts. So I think maybe there’s a miscommunication out there, somewhere. I don’t see it a lot in my practice I never have. But again, maybe that’s confusion in the market as to what a Portfolio Manager is versus other titles. But that’s all I can share from my experience, if you articulate what you’re going to do if you have the right client in the first place that you were dealing with and they understand the value. It really isn’t an issue because it’s a professional service like others that they have on their team.

Sarah Widmeyer 15:11 

Yeah, yeah. Awesome. Okay. Thank you, Marc. So then, how would clients ensure that they’re receiving fair value when they team up with a Portfolio Manager? And what questions should they be asking? Well, this

Marc Dalpe 15:26 

Well this is a hard one to answer, Portfolio Managers have a track record of performance. Therefore, we can easily measure their impact on value creation, how an individual would have fared if he’d be going on his own is impossible to do. But odds are that the seasoned professional would be doing a better job than the occasional amateur track record of past results of Portfolio Managers can be compared between themselves. And also versus benchmark or indices, each Portfolio Manager as a background experience, and history that can be evaluated. But they also have a style, or a way of doing things that can be inquired about. Some have a macro or top-down approach out there is a bottom-up approach mostly focused on stock selection, some favour equities of larger corporations, other smaller, fast-growing companies, some are focused on North America, others have an international scope, to each his own. An individual investor should be comfortable with the Portfolio Manager’s result as much as with  the style. Also, good communication between the client investor and the Portfolio Manager is extremely important, paramount. The client should inquire about what the manager has in place to deliver on good and irregular communications.

Sarah Widmeyer 16:52 

Great, thank you. So Rob, then, if I may ask you. So if we have a listener, thinking about the sounds pretty good, I think I would like to work with a Portfolio Manager? How can one get started? And how can one find the one that’s right for them?

Rob Panes 17:13 

Great question. The traditional way is they ask their friends, who do you deal with? But be specific. Is the person who you’re dealing with a discretionary Portfolio Manager? Do they have a process that’sdefined that they’ve communicated to you, and this might yield the name or two. But in addition, if it were me, here’s what I would do. I might call the manager of the local brokerage firm that’s near me or a brokerage firm who I want to deal with. And I would describe who I am in terms of an investor, I would describe my investment goals, I would describe my risk tolerance. And I would ask that manager for names of three Portfolio Managers who might fit the bill. The managers generally know the Portfolio Managers who they’re working for very well, they know their style, they understand how they deal with markets, with clients, what their process is. So I would start with that, and I would speak to three people. And what you’d need to do is I would take a half an hour or 45 minutes with each person asking questions, you know, there’s an old line in our industry that says people will spend more time looking for a new suit, than they will making a $50,000 investment decision. So spend the time, speak to the PMs, they’ll be more than happy to speak to you. And then find somebody who understands you, someone who you feel that you’re comfortable working with. And you have to understand this analogy of the suit by this is a five probably a five to ten year commitment you’re about to make, don’t make it lightly. Make sure that you get it right. Ask the Portfolio Manager about their investment style, and about how often they will communicate with you. So that when you finally do make your decision, you’re really comfortable with the person that you are talking to. I would say on Val’s point about fees, I think that the fee question is one of the least important in this whole decision making process. The way you work with your PM is much more important than whether an extra quarter of 1% or not is cut off the price of the service and is much more valuable in the long run. What is that line about? People remember the value long after they’ve forgotten the price. Those are the steps that I would take to find a Portfolio Manager.

Sarah Widmeyer 19:40 

Yeah, that’s great advice. And just echoing all of your comments I would say in the absence of value, fee becomes cost becomes an issue. If you feel like you’re being well served, well understood, and it’s a good fit for you and you’re getting good value, then fee is not a concern.

Sarah Widmeyer 20:08 

As we close out, we’re going to do a quick round table, and Val, I feel like I’m always starting with you, but I know you can take it. So, in one sentence, please sum up the value of working with a Portfolio Manager. Over to you.

Valerie Wowryk 20:23 

Okay, because the Portfolio Manager can articulate their investment philosophy and the client understands that right from the start of the relationship, you and your client are aligned. Now, the only thing that Portfolio Manager has to do after that is consistently deliver that, and it’s a good relationship.

Sarah Widmeyer 20:47 

Awesome, thank you, Marc?

Marc Dalpe 20:49 

It would be the same reason someone would give for a heart surgeon, a car mechanic, or at construction entrepreneur. This is what we do. We are trained for this. We spent 10 hours a day doing it. And I’ve been doing it for 1020 or 20 years, very little individual investors of our knowledge and experience. Amateurs want to go fast. Portfolio Managers want to go far.

Sarah Widmeyer 21:16 

Awesome. And Rob?

Rob Panes 21:19 

I like their answers. But I will say that there’s values very strong value in finding someone who will act as a fiduciary on your behalf, will find the proper financial solution for you. And we’ll help you to meet your needs and achieve your goals and your financial aspirations.

Sarah Widmeyer 21:39

Thank you. So as we’ve heard, there are many benefits to partnering with a Portfolio Manager. For some, it means peace of mind when it comes to their wealth, and often it can turn into a decade’s long relationship if done well. If you’re interested in learning more about the number of wonderful Portfolio Managers at Richardson Wealth, please visit our website. And remember to follow Richardson Wealth on LinkedIn for the latest and wealth strategies. Conversations on Wealth is available wherever you get your podcasts. Thank you all for listening today. Thank you to my guests, Val, Marc and Rob and please join me again, until next time.