A prescription for continued success

Despite the financial circumstances of those years, Butler Philbrick’s assets under administration has almost doubled to more than $140 million. In addition, their discretionary business has come to generate $2.4 million in annual revenue.

The growth in their practice is not unlike the growth they’ve seen at Macquarie, whose parent firm, Australia-based financial services giant Macquarie Group, expanded into the Canadian brokerage business when it acquired Blackmont Capital Inc.’s retail brokerage from Toronto-based CI Financial Corp.

As Macquarie’s latest recruits, the team was won over by the firm’s leadership and how it governs its advisors.

“[Macquarie] bought Black-mont during the depths of the financial crisis,” says Butler, senior vice president and a chartered financial analyst. “And from there, it has manifested even more momentum in the marketplace, both on the asset-gathering side and in recruiting new advisor teams.”

In addition, the Butler Philbrick team was drawn to Macquarie’s corporate culture, says Philbrick, Butler’s business partner and co-senior vice president: “They decentralize decision-making. Once a business is empowered and put in place, they don’t micromanage it from the head office.”

In that sense, Butler and Phil-brick have the freedom to run their business under Macquarie’s “strong captain” approach vs a “weak lieutenant” one, says Philbrick: “[At Macquarie], you can set sail in your own ship. You’re responsible for making a profitable enterprise and bringing some of those profits home to the mother ship. The ‘weak lieutenant’ model is one in which you get put in an office, you’re given your rank and you’re told what to do.”

This entrepreneurial spirit fits with the team’s approach to running their business, says Butler: “Our practice and investment process are non-conventional, so we needed a firm that can embrace bold differences. And we find Macquarie is a very willing partner in our endeavours.”

What makes this team’s business “non-conventional” is their niche: focusing on providing financial services to medical professionals.

These clients have unique needs that need to be considered, says Butler, a native of Newfoundland and Labrador who was raised by his father, a practising dentist for 30 years, and his mother, a now-retired nurse. Butler, in talking to his family’s colleagues and friends at cocktail parties and holiday functions, took note of their particular financial concerns.

“They really need our help,” he says, adding that many of his clients start their careers later in life because of the duration of their schooling. “Quite often, they have a lot of educational-related debt on exit [from school]. Then, upon graduating, they unleash a storm of consumption.”

Typical clients either buy an existing practice — common among dentists and health-care specialists — or they build one from scratch and need to purchase equipment. For the fresh graduate, that could mean a start-up investment of $100,000 or more.

As a result, Butler says, many clients won’t start saving for their retirement until they reach their 40s: “The mathematics of traditional retirement planning make it very difficult for this person.”

Philbrick adds there’s a psychological factor that also drains their clients’ starting income. He sees many bending under the pressure of living up to a “benchmark lifestyle” modelled after successful colleagues: “There’s a tendency in this community to want pretty lavish things. I understand they feel they deserve it after working extremely hard, so long as they’re conscious of the huge liability that exists 30-odd years down the road when they want to retire.”

This is where Butler and Philbrick step in. The key is to show enough empathy so clients don’t feel they’re being talked down to. Says Butler: “We start at the emotional level, and try to drive it into priorities — the things that make them happy now are likely to run contrary to what makes them happy later. Excessive consumption leads to a pretty miserable retirement.”

Cutting back could be as simple as advising a dentist client not to go on vacation right after graduating, but to save up for one instead.

As part of the team’s interaction with clients, providing a reality check on their spending is usually accompanied by a lesson in behavioural finance — what the partners call “gestalt architecture.” By showing the long-term history and data analysis of real market and investment performances, they hope to dispel their clients’ misconceptions and worries early on.

“We try to reconcile the reality that the actual returns inves-tors get over long periods of time are nowhere near the returns they would expect to get if they invested simply in the major indices,” says Butler. “But when they’re under pressure, when there are high levels of fear and anxiety, people rarely act rationally. And they rarely think about the odds.”

To drive this home, Philbrick, a certified investment manager, asks his clients to picture a cobra sealed in a glass box. “If I were to put that on the table in front of us and [the snake] lashed out, they’d react by jumping back — even though they know they’re safe,” he says. “That’s the stress — the greed and fear — that makes investors make suboptimal decisions.”

It’s important to educate their clients on these behavioural dynamics, as this knowledge can help empower their investment decisions and retirement plans.

“Doctors and other health professionals are expected, in their jobs, to be confident and always have the answer,” Butler says. “So, there’s a sense that if they understand these behavioural flaws exist, then they can short-circuit them.” IE