Investment Counsel Firms in Canada

Investment Counsel Firms in Canada

Given the volatility in global stock, bond, and commodity markets, many individual investors are reassessing their investment portfolios. Often this reassessment generates interest in exploring alternative investment options that they may not have been previously familiar with. In particular, more and more individual investors are expressing interest in investment counselor or portfolio management services as opposed to traditional brokerage or financial planning services that they may be currently using.

The decision to chooses investment counsel services over alternatives is influenced by many factors including preferences on fee structures, discretionary versus advisory trading authority, as well as the fiduciary duty that some, but not all, investment professionals must adhere to.

An article written by John Heinzl of the Globe and Mail entitled, A watchful eye on emerging fortunes , does an excellent job in summarizing the unique benefits of selecting an investment counselor as ones investment professional.

Two of the articles key points on the differences between an investment counselor are costs and fiduciary duty:

Investment counselors or portfolio mangers such as Pacifica Partners, operate under a fee-for-service structure as opposed to a commission based compensation structure which is common among brokerages and commission based financial planners. Fee-for-service management fees are often charged per client on a monthly or quarterly basis and calculated as a percentage of managed assets. Alternatively, commission based advisors are compensated through the generation of commissions, which may be through mutual fund load and trailer commissions, or stock and bond transactions charges.

We believe that commission based compensation poorly aligns an investors investment objectives with the incentives of the advisor. In addition, the fee-for-service structure can result in lower fees when compared to most Canadian mutual fund MERs and are also tax deductible for certain types of investment accounts. Tax deductibility is not available for commission based fees or mutual fund MERs. For more information visit our one page report on investment options and costs .

Fiduciary Duty

Investment counsel firms act as a fiduciary to their clients and are therefore legally required to act in the best interest of their clients. It comes as a surprise to many individual investors that this requirement is not made of all investment professionals. However, the reason for the reduced legal requirement on advisors arises from the fact that they are not making decisions on behalf of their clients. Instead, advisors, unlike investment counselors, simply provide recommendations on appropriate investment alternatives. The final decision of whether or not to accept the recommendation put forward by an advisor ultimately rests with the client and with it, the client assumes the responsibility of all decisions.

The fiduciary duty of investment counselors is often seen as a benefit by those who wish to entrust the investment management responsibilities to a qualified professional.

Critical Questions

The Globe and Mail article lists critical questions to ask an investment counsel firm. We have answered the questions in relation to Pacifica Partners.

Is the firm registered with the provincial securities commission?

Yes, Pacifica Partners is currently registered in the provinces of BC, Alberta, Ontario, and Manitoba, with plans to register in additional provinces. Furthermore, Pacifica Partners is also registered with Securities and Exchange Commission (SEC) in the US.

What is the minimum account size?

Our minimum account size can vary based on individual circumstances and needs, however, our typical client has accounts valued between $250,000 and $5,000,000 CDN.

Are client assets held with a third-party custodian?

Yes, our clients assets are held in custody with secure third-party custodians including; TD Waterhouse Institutional, TD Ameritrade, and Penson Financial Services.

How long has the firm been in business?

Our portfolio managers have upwards of a ten year relationship with a large number of our clients. However, Pacifica Partners began operations in November of 2008, and two of our senior Portfolio Managers have practiced together since 1998.

How does the firm define its style?

Pacifica Partners is a multi style investment firm that believes in active management with a bias towards value investing. To learn more about our process click here.

Do the investment professionals carry the Chartered Financial Analyst designation?

Yes, currently all advising employees of Pacifica Partners are either CFA charter holders or have completed at least some of the CFA designation exam levels. Furthermore, Pacifica Partners subscribes to the CFA institutes code of ethics and standard of professional conduct.

Will the firm develop with you an investment policy statement that reflects your objectives?

Yes, the first step in determining which investments are appropriate for a client is through collectively developing an appropriate investment policy statement. This investment policy statement is revised as a clients personal situations or objectives change and are revisited periodically.

How often are representatives of the firm available to meet?

We believe in open lines of communication and adjust meeting frequencies based on client preferences. However, we prefer to meet with clients at least annually and twice in their first year as a new client.

On what basis are the investment management fees calculated? How frequently are they charged?

Investment management fees are calculated as a percentage of family assets under management. Canadian domiciled assets are billed monthly, while US domiciled assets are billed quarterly. For the purposes of calculating fees, client assets are pooled across all members in a family group in order to provide maximum discounts in fees.

Will the firm provide you with names of clients for reference purposes?

Yes, we are happy to provide client references upon request and after an initial meeting with an individual.