Newsmaker: IFIC’s educator

Peters has gained experience in a variety of investment industry roles since he began as a stockbroker 34 years ago. As IFIC’s chairman since November 2013, Peters is leading the industry through a period of changing rules that focus on enhanced disclosure of mutual fund fees and performance.

“My 34 years in the industry have given me a good background and perspective on both the advice side and the asset-management side of the investment business,” says Peters. “Advisors play a key role in the success, or lack thereof, of any product.”

Peters’ exposure to the investment business began when he was a boy. His father was a stockbroker and there was a lot of discussion at the kitchen table about the stock market. Of the four siblings in Peters’ family, three went into the investment business.

Peters, in addition to his duties for IFIC, also has a full-time job as president and CEO of Ottawa-based CMA Holdings Inc., the organization that provides financial planning advice and investment products to Canada’s physicians through eight subsidiaries branded under the name of MD Physician Services Inc. Peters previously was head of Royal Bank of Canada’s U.S.-based wealth-management/brokerage division, and he also has held a variety of jobs on the retail side with RBC Dominion Securities Inc., from sales to management, in locations such as London, Ont., and Saint John, N.B.

Peters has tried various investment strategies as both an investor and an advisor, and has come to the conclusion that some simple concepts work.

“Start as early as you can and develop a good discipline around savings, and don’t spend every cent you make,” he says. “Put your money in a diversified, well-managed vehicle, such as a [mutual] fund, and don’t try to time the market, take extraordinary risks or speculate. I’ve come to the realization that financial planning has a lot of value, and clients are well served by the wisdom of investment structures.”

Peters cites research that found that 62% of investors have holdings in mutual funds.

“The financial advisor only has so much time and attention to give to each client,” Peters says. “It became clear to me as I moved from sales to management that I could help advisors with training and investment philosophy, but there are advantages to delegating the investment management to professional [portfolio] managers.”

Peters took the reins at IFIC as leader of the fund industry just a short time before IFIC-member firms’ assets under management (AUM) crossed the $1- trillion threshold. He points out that the investment fund industry has grown 40-fold since 1990, when its AUM was $25 billion. Now, the industry makes a large contribution to the Canadian economy, being responsible for an estimated 63,000 direct jobs, 192,600 supported jobs and $17 billion in economic activity.

“Unfortunately, the return that investors make is not necessarily the same as the return actually generated by the product,” Peters says. “The client’s return is affected by whether they sell at the bottom or buy high. Advisors can play an important role in helping investors manage their emotions and reactions to market. Clients who work with advisors make higher returns than [investors] who don’t.”

Peters acknowledges that advisors who sell mutual funds are adjusting to new rules, including a requirement to disclose the actual dollar amount of compensation they receive for individual accounts. This compensation includes trailer fees, which historically have been imbedded in a fund’s management fees and thus less visible to unitholders.

“There’s a growing awareness of fees,” he says, “More so [now] than in a higher-return environment, when people weren’t paying as much attention. Advisors need to have the proper conversations about costs and what clients are getting for what they pay. Any business model that is hiding behind opaqueness is not a long-standing or resilient model.”

Peters believes funds units sold with trailer fees should continue to be an option for investors, and he is against any ban by regulators on that form of advisor compensation: “Trailer fees are a choice. And eliminating choice is not a good thing. There is nothing wrong with the fees, properly disclosed.”

Among Peters’ goals during his time at IFIC is the continuation of a project to promote financial literacy among the public.

“We have all kinds of products to encourage savings, such as RRSPs, [registered education savings plans] and [tax-free savings accounts,” he says. “Many Canadians need to recognize they are not saving enough for retirement or other goals, and [that they] should take advantage of some of these products.”

Peters’ role will include supporting government initiatives and working with educational institutions to get financial planning onto schools’ curricula. Peters also has been involved in educational programs with MD Physician Services.

“At MD, we have a program for medical students to learn about personal finances,” Peters says. “And we work with medical schools to get [the subject] on their curriculum. IFIC can help increase awareness and demystify investing.”

Peters believes the pervasiveness of technology and social media will create new opportunities for distributing investment information and access to products and advice.

“Social media is an opportunity to bring more people into the conversation and help them understand the principles of investment success,” Peters says. “Investment firms, on both the asset- management and the distribution side, need to figure out their strategy for social media and how to give investors information in the manner they would like to receive it.”

Peters expects to see more innovation to help retirees derive income from investments. And he foresees a role for long-term, less liquid assets held in investment funds that might have pre-set maturity dates rather than daily liquidity. In the same way that pension funds invest in alternative asset classes or hold direct interests in income-producing assets such as toll roads or airports, he says, investors could hold a portion of their assets in such funds.

Despite the demands of Peters’ new role at IFIC on his time, he also sits on the board of Opportunity International Canada, an organization that provides small-business loans to people in the developing world.

Peters also is polishing his golf game, a sport he took up less than five years ago but in which he nevertheless manages to break 90 occasionally on his scorecard.

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