Provisus Wealth Management says it has a solution for life-licensed-only advisors who want to kick their businesses up a notch. Life insurance advisors can now offer their clients stocks, bonds and exchange-traded funds through Provisus’s separately managed account (SMA) program.
“We train the advisor to discuss our services with their clients,” Christopher Ambridge, Provisus’s President and Chief Investment Officer, said in an interview at the company’s headquarters in downtown Toronto. “And we take over the work and the risk.”Licensed as an investment counsellor and portfolio manager, Provisus takes care of the back-office details, and advisors also get help with opening accounts and documentation. “They get a service that lets them focus on what they’re already doing best in their businesses, whether it’s creating financial plans or estate plans, and cement their client relationships,” Mr. Ambridge said.
Referral arrangements
Five MGAs have already signed referral arrangements with Provisus, which is registered in Alberta, British Columbia, Manitoba, Nova Scotia, Ontario, Quebec and Saskatchewan. “And we want more,” Mr. Ambridge said.
His company turns four years old in January, and he’s aiming to double its business every year for the next few years. Provisus currently has 50 referral arrangements across Canada, and Mr. Ambridge believes that the key to its growth is bringing life-only and MFDA advisors into the fold. “We’re looking to compete with our IIROC brethren,” he said.
Provisus was launched in January 2007, rising from the ashes of its predecessor company, First Asset Advisory Services Inc., which pioneered SMAs for the Canadian market in 2002. “It was a big, complex animal that had 10 white-label programs, compared with Provisus’s single program, and quite a few inefficiencies,” said Mr. Ambridge, who joined First Asset in 2004 as its head of investments.
In the next two years, First Asset went through two takeovers, both of which kept its name. “Then, in the fall of 2006, the final owner wanted to exit the separately managed accounts business,” Mr. Ambridge said. “The staff was either terminated or given six months’ notice to migrate the assets elsewhere.”
He decided to start a new, streamlined company based on First Asset’s strengths, to help advisors and clients displaced by the closing of First Assets, and with the intention of serving the smaller MFDA/IIROC financial planning community. “We started with zero assets, and we’re coming up to $150 million in assets under management. Advisors are starting to entrust their more valued clients to us,” Mr. Ambridge said. “The longer we’re in business, the more comfortable they are with us.”
He calls his firm’s Transcend Managed Accounts Program “a Cadillac of investment services,” that will allow the firm to grow its current client base of about 900 accounts, representing about 400 households, at lightning speed. “We could quadruple our caseload without having to add to the staff [of nine] here,” he said.
Minimum assets are $150,000 for discretionary managed accounts, although the company has ETF mandates that start lower than that. “This means older, high-net-worth clients. Our average client account size is $450,000,” Mr. Ambridge said.
“Many people in their 50s and 60s have multiple accounts,” he added, “and with multiple managers, clients are getting the efficiencies and complete transparency. We offer the opportunity to consolidate the diverse account types they have gathered over their lifetimes. This will simplify life for both the client and the advisor.”
The Transcend program has multiple managers – 13 institutional money managers, some of which are household names like Guardian Capital and Beutel Goodman, and others that are niche or regional managers with special skill sets – but with Provisus acting as the consolidator.
“In total, they offer us 60 different portfolios, ranging from straight Canadian equities, international equities, balanced funds, ETF and bond portfolios,” Mr. Ambridge said. “From these, we select the ideal combination of managers and portfolios to build a portfolio tailored to the individual client’s risk profile, needs and goals in the most tax-efficient way possible. Every client has a unique portfolio.”
Mark Winson, a financial advisor at Oakville, Ont.-based Wise Riddell Financial Group, works with Provisus and five other investment counsellors for the extra resources they provide him with for serving his clients. “They allow us to customize our client accounts,” he said. “Many of our clients are doctors, and we can tell Provisus that they don’t want to hold tobacco stocks. Or another client may not want bank stocks.”
The majority of Mr. Winson’s clients are over the age of 50 and they’re concerned about protecting their investments. Downside protection is the first thing Provisus looks at in building client portfolios. “Then we look at upside gains,” Mr. Ambridge said. “You can’t replicate 40 years of earnings going forward. We want to protect clients’ assets today while building more for the future generation.”
This strategy resulted in Provisus’s clients being well-sheltered in the market downturn of 2008. “Our average balanced client was down between 8.5% and 12% that year, compared with a 33% drop in the TSX and the U.S. stock market, which was down 22.8% in Canadian dollar terms. And every one of our clients has recouped their 2008 losses.”
Fee-only firms like Provisus have a vested interest in protecting client assets, Mr. Winson noted. “If client assets are shrinking, they’re hurting,” he said.
Clients who have built up considerable wealth are also looking for tax advantages that SMAs provide. Clients own specific stocks and bonds rather than a pool of securities as mutual fund holders do, and this means:
The ability to realize tax-loss selling on an individual security basis. “We buy individual securities in the clients’ own names, so they are entitled to their own gains or losses,” Mr. Ambridge said.
Tax deductible
The fees on non-registered accounts are tax deductible. And there are no embedded unrealized capital gains in these investments that investors who buy mutual fund must accept.
The maximum client fee is 2.5%, plus applicable provincial taxes such as the HST, and fees decrease as accounts grow. “That includes the advisor’s fee and our administrative fee,” Mr. Ambridge said. “There are no other fees, no trading charges. The client knows exactly what he’s getting.”
Mr. Winson maintains that working with an investment counsellor is a more profitable model than managing a mutual fund book of business. His firm manages about $80 million in client assets. About half of this is the firm’s mutual fund book, which takes three individuals to run. “The investment counsellors do all the work for the other assets,” he said.
The cornerstone of Provisus, Mr. Ambridge said, is complete transparency. “Being a fee-only company is the only way to make clients aware of the full cost of their investments.”
Clients are further protected by the fact that Montreal-based Laurentian Bank of Canada is the custodian of all Provisus client assets, he added. “It is the only party that has access to funds for trading, distribution and fee payments. Neither the advisor nor Provisus can touch them. Assets are held in the client’s name, not co-mingled. All cheques and disbursements are made to Laurentian Bank into the owner’s own account. And we offer full liquidity with one day’s notification from the client.”
