Managed Money Reporter Newsletter — Issue 139, September 1998


Editors: Carl Spiess & Allan McGlade



Is There Life Beyond Mutual Funds?

Delegating daily investment decisions to seasoned, professional portfolio managers has long been an appealing concept to investors. Traditionally however, this option has only been viable for large institutions and individuals who could afford multimillion dollar investment minimums. But nowadays, with the development of an increasing number of managed asset programs, the advantages of professional investment management are accessible to a broader range of investors -- and industry experts say the trend towards delegating investment decisions is growing quickly.

Managed asset programs for individuals with less than $100,000 in assets were introduced a decade ago in the U.S. For a small annual fee, these programs allow investors to delegate portfolio management to investment professionals. Often called wrap programs, these programs provide an investor with ongoing monitoring of their portfolio and detailed performance measurement normally not available with regular investment plans. These type of programs have attracted a wide range of investors - from those who don't feel comfortable making daily investment decisions to sophisticated investors who have the comfort level but not necessarily the time or the desire to be involved in the decision making process.

Demand for these programs has grown so much that in the U.S., there is over $60-billion under management in managed asset programs, a near tripling in size over the last two years.

In Canada, the popularity of fee-based programs is also growing. Recent research by a leading investment dealer showed more than 60 percent of clients would prefer a fee-based investment approach rather than the traditional commission-based relationship.

Perhaps the greatest reason for this popularity is the freedom and peace of mind they offer investors. For example, responsibilities like regular monitoring and daily investment decision making are managed by professionals. Many programs also include professional asset allocation and diversification, important services that reduce an investor's risk.

The investment advisor plays a strong and central role in most managed asset programs. In fact, while investors are attracted by the freedom and convenience of these programs, they also point to the solid and trusting relationship they develop with their investment advisor.

An Investment Executive begins by working with the investor to set investment objectives and develop a realistic strategy based on personal circumstances. In a fee-based managed asset program, the focus is clearly on developing an overall investment plan tailored to an investor's needs, objectives and return expectations. Some managed asset programs also take into consideration the specific level of risk an investor is prepared to accept. Above all, managed asset programs offer an investor more peace of mind, knowing a professional manager is making the day to day buy and sell decisions and that their investment plan has been tailored to his or her needs.

For investors in a traditional broker/investor relationship or looking to move up from investing in mutual funds, managed asset programs are an appealing option. But how do investors know if a managed asset program is right for them?

Before enrolling in a managed asset program, individual investors should ask the following questions:

  • How does the firm offering the program select the professional managers who will actually manage their money?
  • How often will performance reports be received?
  • Does their firm also act as a fiduciary or trustee?
  • What services are provided for the fees being paid?

The answers to these questions should be considered and compared carefully. For investors who want to build and preserve wealth, managed asset programs are a new approach worth exploring.

How a Managed Asset Program Works

One of the newest managed asset programs in Canada is the ScotiaMcLeod Pinnacle Program[TM]. As a program with many features, Pinnacle is a managed asset program with appeal to a broad group of investors.

Under the program, a ScotiaMcLeod Investment Executive works with a client to develop an "Investment Policy Statement", an integrated plan of action based on the investor's age, goals and time horizon. Guided by Asset Navigator, an asset allocation tool specially designed for ScotiaMcLeod, the client and IE identify the customized combination of assets -- domestic and international equities, bonds, and cash equivalents.

Then they choose from among a select group of mutual funds designed exclusively for the Pinnacle Program[TM]. The Pinnacle Program Funds are managed by leading institutional and pension fund managers, chosen by independent consultant NT Global Advisors. The consultant also monitors the managers closely to ensure they fulfill their investment mandate.

The ScotiaMcLeod Investment Executive regularly reviews and discusses portfolio matters with the investor, and recommends adjustments to keep the portfolio in line with the client's goals. By combining personal investment advice with professional portfolio management, the ScotiaMcLeod Pinnacle Program demonstrates a key reason why managed asset programs are growing in popularity across Canada.

Next Issue

Watch for our October issue which will review the recently improved Registered Education Savings Plans.

Fund News

Dundee Bancorp (parent company of Dynamic Funds) has launched the new Power Funds, including the Canadian, American, Bond and Balanced Funds. The Canadian Fund is managed by Rohit Seghal, having 27 years of experience with London Life. All funds in the Dynamic fund family are eligible for switching to these new funds.

Mackenzie and Cundill announce an alliance, which expands Mackenzie's three fund families of 42 funds to include the Cundill Value and Security funds.

C.I. launches the Global Boomernomics Fund which will be managed by Bill Sterling , Global Strategist with BEA Associates in New York.

Fidelity has announce a change of manager on the European and Japanese Growth Funds to Thierry Serero and Jay Talbot respectively. Serero previously acted as associate portfolio manager for the European Fund, and Talbot brings his experience in managing several portfolios available to Japanese investors.

Reminder to GIF Investors

In this environment of volatile and declining markets, investors of the Manulife Guaranteed Investment Fund (GIF) can rest assured. The principal of the GIF investment is guaranteed. So while the markets decline, you know that your value will not decrease beyond your original purchase price. Those who had an opportunity to 'reset' the value of their GIF, are guaranteed at their new level.

 



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T.  416.863.RRSP (7777)
     1.800.387.9273
F.  416.863.7479
E. carl.spiess@scotiawealth.com
    allan.mcglade@scotiawealth.com

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