|· Financial Design
· Our Credo
· Management Concept
Over the past year, we have been studying books on design principles, drawing from other disciplines like industrial and architectural design. Our purpose has been to ascertain whether their fundamental principles can apply to Family Finances. Indeed… we found it so, and from our research have distilled Financial Design down to eight principles.
Great Financial Design:
- Creates desire in you, our client, to have an appreciation of our Financial Design of your financial affairs in order to instill the desire to recognize our “partnership”, and to contribute in your own way to its ultimate success
- Distills financial management down to its most fundamental properties and explains complex matters in an uncomplicated way
- Considers other stakeholders in the stewardship of your wealth. It inspires primary stakeholders to embrace future stakeholders in the dialogue about long term multi generational wealth stewardship (Confab)
- Enhances the experience of, what may be to many, the unpleasant task of prudent financial management, encompassing practicality and attention to detail
- Challenges the norms that prevail. It stands out as confidently different
- Is timeless. It lingers and it evolves. It matures and becomes more confident
- Includes the story of your life lived, and your impact upon the world around you, both near and far
- Evokes meaningful stories which are offered to instruct and inspire you as we draw from the life experiences of the many in our world
Great Design requires communication of the purpose, structure and operation of the object or service being received. Consumers need some way to understand the product or service they wish to use, what it does, how it works and what alternative actions are possible…termed “discoverability”. This requires a conceptual model of the system (a Financial Plan..an Asset Allocation Plan), constraint mapping (to understand the upside and downside bounds of a Plan), feedback (your Annual Report), “signifiers” to communicate when and where action should take place (our internal management systems) and “affordances” (our communication of how your portfolio translates into affordable lifestyle ….or not).
“Human centered design” is a design philosophy: it requires starting with a good understanding of people and the needs that they have. Well-designed things (yes, even a portfolio!) can induce pride and enjoyment, a feeling of being in control, and pleasure, possibly even love and attachment. As we say “You pay us to love you, and we throw all the rest in for free”!
The world of financial management that we have evolved for you over 38 years has transcended taxation, accounting, investment management, financial planning and estate planning. If for nothing more than brevity of explanation, as we commence our 39th year this Fall, we are redefining ourselves as your Financial Designers. This one term endeavours to encapsulate all that we aspire to do for you, and also calls us to raise the bar of Design!
The client/advisor relationship: a two-way promise
Clients need to have the degree of input into their portfolio management that they feel comfortable with. As registered portfolio managers, we are legally registered to provide full discretionary management, which means we can make the investing decisions on your behalf without your needing to spend the time to establish your own opinion that each decision is appropriate. On the other hand, clients can establish a “partnership” approach to managing their portfolio, whereby we may generate suggestions for them to contemplate and/or they may bring forward suggestions for our comments. We do not act simply as order-takers to execute trades. This style of investing is best done through an IDA or discount broker.
Most of our staff have been professional educators in the financial services industry for decades. This, plus our long list of academic and professional qualifications, prepares us to help you learn more about financial matters, whether it be one-to-one or on our website at www.investoru.ca.
Every client becomes part of the caring net of our extended family. We welcome a relationship of mutual respect.
Every portfolio requires an asset allocation policy across fixed income, domestic equity and international equity. This allocation is unique to every investor. Most every portfolio needs some component of fixed income to provide a safe haven in savage equity markets. This allocation should divide into sub-policies when there are multiple accounts in the overall portfolio, viz:
- Sheltered accounts
- Non-sheltered accounts
- Accounts for multiple family members
Each investor’s portfolio is fully “segregated” (i.e. registered in their name at National Bank Correspondent Network). We do not manage by cookie-cutting our clients into internal pooled funds. Proactivity and an organized administration is part of our responsibility to our clients. We run various programs over the year to make sure that our clients are taken care of, eg RESP contribution and grant monitoring, RRSP contribution monitoring, capital gains monitoring.
Technology plus proprietary software applications can instantly update and review your portfolio’s allocations across industry sectors and geographic regions. Active trading usually doesn’t pay the investor in the long run. That said, portfolios are not built to be put in the drawer and forgotten until next year. We review briefly or in detail, as required in any given month, every portfolio.
Tax aspects of specific investments in specific portfolios are important and require the requisite knowledge and familiarity with the investor’s tax affairs.
Being accountable is important. We provide a detailed annual report which, if you dislike detail, tells you the one number that matters: what return we made for you that year. That report also shows what we have made for you every year since you came to us. If you like detail, there is a wealth of information about your investments in that report. After a few years with us, we report annually your long term compound return since you started with us.
- The total portfolio is the thing more than the individual securities in it.
- We don’t actively trade stocks.
- We do actively manage your portfolio across your target asset allocation and across industry sectors and geographic regions.
- We don’t follow the herd. This requires the wisdom and fortitude not to do so.
- Our job is to manage risk and return. Neither can be managed without due regard for the other.
- We don’t gamble: we invest. The words “investing” and “gambling” are different words in the dictionary for a reason. That said, if you want to hive off a small part of your portfolio to “have some fun” with a gamble, that is fine with us.
Mutual fund philosophy
Mutual fund management fees are expensive and generally not worth it. We lean towards holding direct bonds and stocks as well as exchange-traded funds. Deferred sales charges mutual fund purchases are to be avoided. We review monthly the updated long term performance data from the mutual fund industry and purchase only those specific funds that meet our goals and performance criteria. We are not beholden to any fund family.
- Transparency of the costs associated with investment management is important but uncommon in the industry.
- Clients know our fee schedule in advance and that is precisely what we earn, as evidenced from time-to-time on your statements.
- We earn no trailer fees or other compensation from anybody else.
The concept behind our investment management approach is reflected in the company name. “A.F.T.” stands for Accounting, Financing and Tax. We believe that sound investment management requires the merger of these three disciplines.
Accounting is important in a variety of ways. In general terms, our background as professional accountants provides a wealth of experience in interpreting financial information. In specific terms, we believe that investment management also includes an obligation to report on the overall performance of a portfolio. Thus, we produce an annual analysis which reports the overall rate of return, plus other specific performance measures and benchmarks to the marketplace.
Finance is obviously important to understanding the breadth and depth of financial opportunities available in today’s international marketplace.
Taxation is always crucial in investment decisions. After-tax returns are what ultimately count. Tax implications of RRSPs are also important. Our background as tax practitioners gives us solid understanding of how tax laws impact on financial returns.
Portfolio Management Association of Canada
AFT Trivest is a member of the Portfolio Management Associate of Canada (PMAC). Originally formed in 1952, PMAC represents over 180 firms nationally. Altogether, PMAC firms manage over $1 trillion in assets for more than one million institution and private clients. A non-profit organization, PMAC represents discretionary investment management firms not only for private clients such as Trivest, but also pension plans, foundations, and other institutional investors.