What is a Portfolio Manager?

June 14, 2019 | Fiduciary, Investing, Guest Post

What is a Portfolio Manager?
Contributed by Scott Tomenson, Managing Partner & Chief Investment Strategist - High Rock Capital Management

According to the Portfolio Management Association of Canada (PMAC), of which High Rock Capital Management Inc. is now a member (application approved!) : "Portfolio managers are firms and people who manage investment portfolios on behalf of private clients, foundations, endowments, and pensions. Portfolio managers differ from mass-market or retail investment managers because they manage large amounts of money for fewer clients. This often results in lower management fees."

Is a Portfolio Manager Right For You?

If you are reading this, there is a good chance that you are already a High Rock Private Client and hopefully you will celebrate with us, that we not only are licensed by the Ontario Securities Commission (B.C. and Alberta too) and therefore already held to a higher degree of accountability for our clients, but that we have also been accepted into the elite group of portfolio managers that make up PMAC. If, for no other reason than, there is a high level of credibility that goes with that, we are thrilled.

But we are also thrilled with our membership because we now have resources at our finger tips to continue to progress and maintain the advanced standards necessary to be a part of this association:

What are the benefits of working with a portfolio manager?:

1) Fiduciary Responsibility:

According to PMAC: "Portfolio managers and their firms have a fiduciary duty to act with care, honesty and good faith, always in the best interest of their clients. Investment decisions must be independent, free of bias and what is right for you".

If you have not recently visited our website and reminded yourselves of our commitment to you, you can always head over and read (re-read) our High Rock Code of Conduct.

In regular conversations with clients, I am often asked about a specific and reasonably well-known blogger/advisor (not a portfolio manager) and his/her opinions on financial markets and investment matters. It's just noise and hype, but like all journalists, he/she has something to sell and like all folks with something to sell, there is bias, without doing the necessary homework to determine what is really "right for you". He/she may make grand pronouncements about what he/she thinks is "right for you" (what one astute client referred to as "blow-hard"), but it is just not possible. The cookie-cutter, one portfolio for all, is not part of good portfolio management. Everybody has unique circumstances and that should determine the appropriate investment strategy. Often there is a failure, implied or not, to include the disclaimer: "past performance is not a guarantee of future returns".

As a member of PMAC we have a higher standard to live up to.

2) Professional Qualifications:

"As fiduciaries, securities regulations require the highest level of education and experience in the investment industry".

Paul is a Chartered Financial Analyst (CFA), Bianca is a Certified Financial Planning (CFP) professional, I am a Chartered Investment Manager (CIM), so our High Rock Team has all the knowledge (and plenty of experience) to offer independent, unbiased advice.

3) Investment Policy Statement:

"Your IPS is the basis upon which your portfolio manager selects an appropriate mix of investments and makes discretionary adjustments to your portfolio."

4) Personalized management of your portfolios: 

"Your investments are managed based on the personalized objectives and risk tolerance outlined in your IPS. Typically, you give discretionary authority to your portfolio manager to make investment decisions without getting prior approval from you for each transaction".

In the "above and beyond" category, High Rock's CFP prepares a Wealth Forecast (financial plan), which outlines the goals and time horizon's to achieve those goals. This is how we prepare the IPS for each of our clients. While most CFP's who offer fee-for-service financial planning will charge between $2500 and $4000 for a plan, High Rock includes the cost of this plan in the 1% management fees (which includes semi-annual reviews and updates). Or, if you wish, you can pay for a financial plan upfront and if you wish to eventually have us manage your portfolio, have a reduced management fee when you become a full-time client.

I have said it many times in this blog: you cannot have an appropriate investment strategy without a plan first. Whatever advice you receive, one size does not necessarily fit all. Period. End of conversation!

5) Fees:

"Portfolio managers charge a percentage of the investments they manage. This fee is transparent and generally much less than retail management and distribution costs. Fees are fully transparent on client statements and typically go down as a percentage of your portfolio as your assets grow. Fees are not paid by commission based on volume of buying or selling investments and are significantly lower than typical mutual fund fees."

At High Rock: 1% management fee under $2mm AUM plus the Raymond James Correspondent Services (RJCS) fee which is .15%. All tax deductible in a non-registered account. 

Retail management and distribution costs (Mutual fund MER's) are not.

Fees can considerably dent an investment portfolio over time, it is so very important to know what you are paying and why!

6) Safekeeping of Assets:

"Your money resides with a third party bank or other financial institution (known as a custodian) who is responsible for the safekeeping of your assets. This provides an extra layer of protection and safety for a small additional fee."

For more on RJCS, click here. 

7) Registration:

"Both the firm and the individual who is managing your investments are registered as portfolio managers with provincial securities commissions".

High Rock is currently licensed in Ontario, B.C. and Alberta, but if we are able to get a critical mass of clients in any other jurisdiction to cover the licensing fees, we would be thrilled to take on those clients that reside in other provinces (or states).

8) Legal requirements of firms:

"Firms registered as portfolio managers must meet strict financial reporting, capital and insurance requirements to further protect your investments."

High Rock is compliant with all the requirements.

We are excited to part of PMAC, to be held to the higher standards that we know that our clients expect and deserve, but hopefully it also adds a layer of confidence and trust that you are not just going to be treated as just another "number" as you may in a bank or other large financial institution.

In this world of technology substituting the human experience, we can stand out and offer a true relationship for helping you to steward your wealth.

Danny MacKay is the founder of SeekAdvisor, a former Bay Street Executive and Industry Insider turned Investor Advocate.  If you have any questions or comments about this article, please feel free to reach out - info@seekadvisor.ca