The paths to success

– Market mayhem

A little more than 25 years ago, Brian Walker, then a rookie advisor with Investors Group Inc. in Saint John, N.B., received a dramatic introduction to market realities. On Oct. 19, 1987, the Dow Jones industrial average plummeted by more than 500 points, a market massacre that became known as Black Monday.

Although Walker’s immediate thought was for the well-being of his new clients, the crisis taught him some valuable lessons about helping clients through market adversity, lessons that have held up during subsequent downturns.

“My first reaction [in 1987] was concern for the clients I had brought on and the impact it would have on them,” says Walker, who had been in the industry for only two years before the Oct. 19 crash. “But I survived [Black Monday], and [the experience] made every subsequent downturn easier to deal with.”

One of the major lessons Walker learned from Black Monday is that maintaining communications with clients during a crisis is of paramount importance.

Fast-forward to 2008 and the onset of the harshest global recession since the Great Depression of the 1930s.

One of Walker’s high net-worth clients, upset about the market’s stomach-churning downward trajectory, phoned when Walker was on the road. Walker knew that he needed to offer reassurance.

“I stopped my vehicle to return the call,” says Walker, 68, who manages $190 million on behalf of 900 individual clients. “It ended up being a 45-minute call, as [my client] was distraught over what he was hearing. The result was he stayed the course. And during our reviews since, his wife always reminds him of this call. I realized that downturns are about keeping your clients focused on the long-term aspects of their financial goals.

“In the good times it is easy to manage money,” adds Walker. “But in the tough times, we have to manage emotions, which, in my view, is of significant value to clients.”

Hillard MacBeth, a veteran investment advisor and portfolio manager in Edmonton with Toronto-based Richardson GMP Ltd., found that the Great Recession of 2008-09 had a profound emotional affect on his clients beyond what he had seen in other market downturns.

“In 2008-09, people were starting to question whether capitalism was finished,” says MacBeth, 61, who now manages more than $200 million for 200 client households. “Clients were calling in, worried about their portfolios.”

As in Walker’s experience, MacBeth found that ongoing communication was key in persuading his clients to stay the course. “We [had] a lot of face-to-face meetings,” MacBeth says, “and many clients were shocked to hear that their investments were doing much better than what the media was reporting – but it took fairly long meetings to convince them of that.”

Among the market crises of the past several decades, Black Monday brings back exceptionally strong memories for MacBeth. As the crisis unfolded during the weekend before the big crash on Oct. 19, MacBeth and 10 other advisors were on a reward trip to Las Vegas.

“The beginning of 1987 was a very prosperous year for many in the industry, and our branch manger wanted to reward us for our efforts,” says MacBeth. “It’s just unbelievable that it was that weekend we had booked to celebrate.”

Before leaving on the Friday evening before Black Monday, MacBeth knew something wicked was brewing. The market had already dropped by 100 points on the Friday.

“But we had no idea how bad it was going to get,” MacBeth. “It was so shocking what was happening. And, in those days, you had no way of getting in touch with your clients. There were two advisors back at the office answering phones, and they were so swamped they could only offer clients a maximum of two quotes per call. Fortunately, many people weren’t selling; they were just too stunned to do anything.”

– Technology

MacBeth prefers face-to-face meetings with his clients more than any other form of communication, but he has been quick to change with the times. During the past 25 years, technology has radically altered the way we communicate with each other.

“I think back to the days where we shared quote machines and spent eight hours a day on the phone with clients making trades,” says MacBeth. “It’s amazing to me that today the phone almost never rings.”

Walker remembers when he only had three ways to communicate – telephone, mail and face to face. “Technology has really been a driver of change,” he says. “Today, you have to think about email, text messaging, mobile phones and social media – and how they can [affect] how your clients prefer to be reached.”

Walker believes that advisors should embrace the new communication technologies: “We have to keep an optimistic view on these new technologies because they are business opportunities that can be phenomenal for an advisor.”

And as technology continues to drive mobile interaction, MacBeth realizes that the next generation of clients already is available to him. In the past few years, MacBeth has become an avid user of social media platforms LinkedIn and Twitter.

“In the old days, you got all your clients by the phone,” MacBeth says. “You would live and breathe by the phone, calling people constantly and asking them to invest with you right there on the phone. Now, all your clients come through referrals and social media.”

For many advisors, particularly those of the baby boom and older generations, the idea of using mobile devices and social media can be overwhelming. MacBeth, who enjoys heli-skiing and mountain climbing in his spare time, knew that he was up for the extreme challenge of modern communications technology, but admits there was a huge learning curve for him before he became comfortable on those platforms.

“Even those cold calls I used to make didn’t come naturally to me,” MacBeth says. “But the successful people force themselves to do it. And the minute you have a little bit of success, and feel the high that comes along with that success, you can push yourself to reach new goals.”

– Brokerage consolidation

Major changes began to ripple through the brokerage channel about 25 years ago, largely spurred by the collapse of the so-called “four pillars” of financial services, which gave financial services firms the opportunity to move into each other’s lines of business. As well, the consolidation among the independents that continues today also began around the same time.

These changes brought a flurry of acquisitions, with the banks aggressively scooping up many independent brokerages.

This had a direct impact on MacBeth, who prefers to work for an independent firm. The trend led to a series of career moves as he struggled to stay ahead of the merger tide. “I was under the impression that banks were bad for the brokerage [channel],” he says, “and I didn’t want to get caught up being owned by a bank.”

What appealed to MacBeth about working independents is their entrepreneurial spirit, as well as the potential for taking on equity ownership: “The partnership culture means quite a bit to me. And rather than taking a big cheque to be one of a thousand brokers at a bank, I took shares to be a part of a great team at Richardson GMP.”

Over the course of MacBeth’s career, he has worked at several independent shops, including Pitfield Mackay Ross Ltd., Wood Gundy & Co. and Richardson Greenshields of Canada Ltd., all of which were acquired by the banks.

“It just seemed every time I moved,” says MacBeth, “the banks were at my heels.”

Although MacBeth admits the bank culture isn’t for him, he notes that the banks, which have come to dominate the brokerage business, have provided a space for many successful advisory practices: “Now, when I speak to some old colleagues who are still at those bank-owned firms, they do complain about bureaucracy, excessive regulations and compliance. But it isn’t like they haven’t done well.”

– Compliance

The growth of regulation focusing on client/advisor relationships, culminating in the recent client relationship model (CRM) and its second phase (CRM2), has been a huge issue for advisors. Among other things, CRM2 requires advisors to disclose fees and investment performance information to clients on a regular basis.

“This was a huge change in the [investment] industry because of the pressure it puts on both the individual and the organization,” says Walker. “The disclosure requirements and documenting of client activity can create a lot of work to comply with the rules. But we have come to accept that is part of the transparency world we look at.”

After the introduction of the CRM, Walker began to reinforce the value of his services to his clients. He continues to communicate his value proposition during client meetings.

“Today, you have to continue to work on that value and how your clients perceive that value,” says Walker, an ice-fishing devotee who regularly includes both clients and colleagues in weekend ice-fishing excursions on the Kennebecasis River, a tributary of the Saint John River in southern New Brunswick.

– Expansion of the advisor’s role

With the crumbling of the pillars in the financial services sector in the 1990s and the big banks’ subsequent entrance into the brokerage business, MacBeth saw major expansion in the role of financial advisors. At the banks, clients were able to access myriad financial services under one roof, he says: “Clients were now being offered everything in a one-stop shop, and advisors needed to up the ante.”

But MacBeth, upon joining Richardson Partners in 2005, noticed that the firm also offered several support services to both advisors and their clients, such as investment and risk management, tax and estate planning, insurance strategies, philanthropic giving and succession planning for businesses.

“I realized there was a whole world I hadn’t discovered,” says MacBeth. “When I introduced [these services] to my clients, they loved [them] because now I was not just talking to them about their money, but also about their lives and their families and that went beyond just investment planning.”

MacBeth offers his clients full financial planning services and now runs a discretionary platform with another investment advisor plus an associate.

Walker also expanded his practice to offer his clients full financial planning services, including tax, estate and insurance planning. He also has adopted a team-based approach; today, his team consists of four advisors and three support staff.

With succession planning becoming much more prevalent, Walker decided it was important to ensure his clients are comfortable dealing with his entire team rather than with a single advisor. Each client meets face to face with two advisors during client meetings; and as one advisor begins to move out of the business, the other continues to work with the client. To date, three advisors have exited the business without affecting client accounts.

“I changed my way of thinking after a number of years in the business,” says Walker, “when I realized that having a team can provide our clients with a stable environment and also provide the advisor with a successful succession plan.”

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