It’s been a solid seven months for most of Canada’s wealth professionals. After hitting rock-bottom in 2015, energy and mining stocks have rebounded and the country’s stock market is currently one of the world’s top performers. The loonie is performing well and, despite a slight recent fall, oil prices have settled at just under US$50 a barrel.
The mood is good, calm even. But, for advisors, now is not the time to relax. “The markets have had a good run and some advisors can get a bit complacent during these times, but I tend to be a little more cautious,” says industry veteran, Robert Lewkowitz. “The VIX has been pretty low, and it’s an inverse indicator for the markets, so that’s encouraging me to be cautious. Having said that, it’s all about maintaining a consistent approach.”
Explaining the importance of rebalancing portfolios is one particular challenge that advisors face when the markets are performing well, Lewkowitz says. “Taking some of the profits from winners and adding them to what’s underperformed is a concept that many clients have problems coming to terms with,” he adds.
Although Canadian equities are on track to record their best year since the financial crash, investor expectations are changing and that’s forcing advisors to shift their approach and rethink how they interact with their clients. Lewkowitz believes that advisors need to shed the arrogance that can be commonplace in the industry. “Younger generations demand to be more involved in the process and they want to get educated,” he says. “There is so much information readily available on the internet, so advisors have to be one step ahead in order to be a useful source of information for their clients.”
With regards portfolio creation and asset allocation, advisors are coming under increasing pressure to explain their decision making processes to their clients, Lewkowitz says. “Also, advisors are shaking in their boots with CRM2 and the transparency of fees and how they’re compensated” he adds. “I welcome that because advisors will have to justify their value, and that will come down to doing more than just picking the best fund. Advisors should be intimately involved with everything that surrounds their client’s financial affairs.”