globeandmail.com
    Globe Advisor is moving, click here to see

Advisor Insights


Advisors expect to deal with several challenges in 2017

We spoke to some advisors about how they're planning for the year ahead, and what they're telling clients.

By: VIKRAM BARHAT

Date: January 3, 2017

It was a roller-coaster year for the financial services industry, marked by stock-market volatility, economic uncertainty and growing regulatory oversight. Things have been particularly challenging for financial advisors, who have had to juggle investor expectations, market reality and a growing scrutiny of their compensation.

Expecting these headwinds to remain unabated in 2017, the financial advisor community is bracing itself for another stormy year, yet many are taking steps to lessen any pain. We spoke to some advisors on how they’re preparing for the coming year.

Keep communicating with clients

Markets always climb a wall of worry, and this time is no different, assures Tina Tehranchian, a CFP based in Richmond Hill, Ontario. Advisors should always stay in regular contact with clients, but also make sure to reach out during jittery times and remind them about the rules of investing: Stay diversified and invest for the long term.

“As long as your portfolio is well diversified, is within your risk tolerance and has a long-term time horizon, the volatility that could be ahead should not worry you,” she says.

It’s also worth mentioning that while political instability and low interest rates are here to stay, the fundamentals of investing haven’t changed, says Marie DeLauretis, a Calgary-based CFP. Give clients a chance to review their risk tolerance, she adds.

“We are advising investors to stay the course and maintain a diversified portfolio of varying asset classes to maximize gains and minimize losses over the long term,” says Ms. DeLauretis. “We are advising them to evaluate their tolerance and capacity for investment risk, and to revisit their financial goals.”

Naturally, clients are concerned about how a Donald Trump presidency may impact the world and their investments. Cory Papineau, a Winnipeg-based financial advisor, says to stop worrying.

“There will be winners and losers no matter who’s in charge, so worrying about things you can’t control won’t help,” he says. “Stay diversified, don’t try to outsmart the market, stick with your plan.”

Manage expectations

Given the exhilarating years-long bull run on the stock market, managing client expectations has been important and will remain critical in 2017. Clients should know that it’s unlikely that performance over the next few years will be as strong as what we’ve seen coming out of the financial crisis, says Ms. Tehranchian.

The level of volatility, which has remained low over the last three years, will likely revert to historic norms, she says. In meetings and newsletters, she’s telling investors to brace for more volatility in their portfolios.

Mr. Papineau’s New Year’s message for investors is simple: Don’t take unnecessary risks.

“There is no reason to stretch for that eight-per-cent return – and all the added risk and volatility associated with it – when you only need four-per-cent returns to reach your goals,” he says.

Be aware of regulatory and industry changes

Financial advisors must also contend with industry’s ever-changing compliance rules and regulations intended for investor protection. The Client Relationship Model – Phase 2, or CRM2, appears to be flashing brightly on every advisor’s radar screen. With CRM2 arriving in a few weeks in the form of new statements, Mr. Papineau expects more turbulence and questions around the value of what financial advisors bring to the table.

“I have tried to show the cost of investing in a dollar figure for many years, but I honestly believe that once it is on paper there will be many people with questions no matter how good a job of communicating value has been done in the past,” he says. “If we can’t show our members the value we provide, we don’t deserve our members’ trust and business.”

Ms. DeLauretis has been busy informing clients of the changes that have occurred and those that will take place shortly as part of CRM2, but says she is “not sure all advisors and clients appreciate the magnitude of change that is about to happen.”

Ms. Tehranchian says that while she’s always showed her clients mutual-fund MERs and other fees they’re paying at each meeting, she is now “discussing fees in more detail [along with] the changes coming up with regards to dealer service fees being featured on dealer statements,” she says.

Intense competition and rapid technological innovation have also been forcing advisors to evaluate their practices, and that trend will continue. The challenge, says Ms. DeLauretis, is to “position our practice to stay viable in the future in the midst of existing competition, new competition such as robo-advisors, decreasing compensation structures from dealerships and new compliance issues.”

Despite the issues facing advisors and investors in 2017, for some planners, life isn’t all about returns, risks and regulations. Mr. Papineau, for instance, is planning to take time to appreciate his friends and family in the coming year, and suggests others do, too.

“A healthy work-life balance is very important in providing fantastic service to my members,” he says.

Advisor Insights

 

Institutional investors cautiously optimistic about the future Stop pre-paying the mortgage

powered by Globe Edge