Making a smooth transition

The longtime advisor with Wellington West Capital Inc.’s head office in Winnipeg had moved under the National Bank Financial Ltd. umbrella after NBF purchased the 83% of Wellington West it didn’t already own last year.

Houston’s clients have been receptive to his move for the most part, although some had to be reassured that Houston wasn’t planning to retire immediately.

“Stories were written in the papers every day that everybody was going to walk away with a big cheque,” Houston says. “I told them NBF had been the custodian of their accounts for years. Wellington West was [at the retail end], but their accounts – their RRSPs and cash – were administered by NBF.”

Clients had been informed of NBF’s role, Houston says, “but they forgot over time.”

Houston’s clients wanted to know how the change in ownership would affect them.

“I told them, ‘It’s just the logo on your statement that’s changing’,” Houston says. “There was a bit of pushback from some clients because National Bank was a Quebec-based firm that wasn’t well known in Western Canada. I told them it was [still] the Wellington West guys running the ship.”

Indeed, Wellington West founder Charlie Spiring had been appointed vice chairman and put in charge of overseeing NBF’s non-Quebec wealth-management assets. Dennis Stewner, chief financial officer at Wellington West, had been hired as NBF’s managing director of individual investor services. “[Those appointments] gave [clients] peace of mind,” Houston says. “Everybody was asking, ‘What’s Charlie going to do?’ Wellington West was identified by [Spiring] more than anything else.”

Houston has the rare distinction of having been hired by Spiring twice. Back in 1988, Spiring had asked Houston to join the Winnipeg branch of Midland Walwyn Inc. At the time, Houston was working for McLeod Young Weir, which was in the midst of being bought by Bank of Nova Scotia.

In 1993, Spiring left Midland to start Wellington West but was saddled with a two-year moratorium on contacting his former brokers. Days after that limitation expired, however, Spiring called Houston asking for a meeting.

“Charlie pulled out his business plan at the time,” Houston says, “which was written on the back of a napkin. We met again later that week and I said, ‘I’m in’.”

Houston took an indirect path into the financial advisory business after graduating from the University of Manitoba with a finance degree. After graduation, he was arranging loans at a bank. He didn’t see himself making a career in that area, so he taught himself about mortgages and RRSPs, passed the Canadian securities course and joined MYW. (He chose that firm over an offer from Midland, he says, because he had heard positive reports about MYW’s training program.)

Houston always has had a bent for numbers. “I love the balance-sheet stuff,” he says, “but not to the point at which I wanted to be an accountant. I was into stock analysis, company analysis and money flows around the world.”

The recent switch to NBF, Houston says, has satisfied his itch for research. “My entire time at Wellington West,” he says, “I had a good relationship with the research department. I’d listen to the morning conference calls. NBF had been our back office for the better part of 14 years, so the transition for me has been almost seamless. Now, I get more research. I’m getting reports from four or five companies instead of one or two.”

Houston believes the investment industry has come full circle, back to the days when dividend-paying stocks were king. When he started in the business, the focus was on balance sheets and income statements; mutual funds were just a blip on the radar. Clients had made their money from dividends and stock appreciation from the 1940s through to the ’70s, before growth became the new engine for appreciation in the ’80s and ’90s.

“People want to get paid,” Houston says. “They want a return on their invested dollar every year. [A dividend] also gives them downside protection. If you’re getting a 5% dividend yield, the market will spend more time picking on companies that don’t have a yield. In 2008, outside of financials, the [stocks] with the most attractive dividend yield went down the least.

“My philosophy,” he continues, “has always been ‘Pay us a dividend. Let me make the decision as to whether we buy more stock.’ If you look at some of the failures in North America, dividends haven’t been paid and management was trusted with tons of cash.”

Houston believes 80% of a client’s portfolio should be generating some kind of return. The remaining 20% can be put toward speculative investments. “The banks and financials here in Canada are pretty simple,” Houston says. “You can buy [shares in] any one of the banks, Great-West Lifeco [Inc.], Investors Group [Inc.] and Power Corp. and get paid 4%-5% in dividends to sit on it. I think we’re going back to the 1940s through the ’70s, when people got paid to wait.”

Houston also recommends his clients get some exposure to the oil and gas sector. His companies of choice are Suncor Energy Inc., Crescent Point Energy Corp. and Arc Resources Ltd. “If you’re paying $1.60 per litre at the pump,” he says, “you may as well get paid in your portfolio.”

Houston makes sure he shows his clients a little love, too. He invites some to participate in Spiring’s annual golf tournament and is sure to send everyone a gift at Christmas to show his appreciation for their business.

Through it all, Lisa Kerman has been beside Houston as his assistant for the past 23 years. Together, they have built up a book of about $100 million. Any new business comes from referrals. In fact, he can’t remember the last time he made a cold call.

Houston has been married to his wife, Karen, for 25 years. He spent much of his time in the ’90s and early 2000s coaching the soccer teams of their four daughters, now ranging in age from 16 to 23. The family enjoys skiing and winter vacations in Mexico. IE

 

There is no magic bullet for success as a financial advisor – unless that bullet is made of hard work, according to Ian Houston, an advisor with National Bank Financial Ltd. in Winnipeg.

That’s particularly true for advisors who are starting out in the industry.

“I’m up between 4 a.m. and 5 a.m. every morning,” Houston says. “I go to the gym and I’m at my desk at 8:15. I’ll work some nights, too. I don’t think there’s any magic here.”

If you’re selling mutual funds or stocks, he says, you have to develop a relationship with the fund portfolio managers.

“Outside of the banks, you want to spend a lot of time talking to CEOs, CFOs or fund managers,” he says. “I deal with three fund companies because I can have a conversation with the fund managers.”

And looking out for your clients’ best interests must be a top priority. For example, Houston doesn’t believe in leveraged investing. He would never recommend borrowing $100,000 to put into a mutual fund.

“If the market drops by 15%, that [investment] is down 15% to 30%,” he says. “[Leverage] always seems like a great pitch to a client. But when the market is down, they realize it wasn’t in their best interest. That’s when they might question your relationship.

“If you deal with them straight up and spell out the ups and downs,” he continues, “when things go sideways, they’ll say, ‘Yeah, we talked about that. I understand’.”

© 2012 Investment Executive. All rights reserved.