Wealth advisor explains how core fund achieved a 7.5% return in 2022
Nicola Wealth was established in 1994 in Vancouver, with 8 employees and $80 million AUM. When Ron Haik joined in early 2019, he came aboard the Toronto team managing about $5.3 billion. Today, the firm employees 430 people, has $13.1 billion AUM, and exhibits no signs of slowing. Wealth Professional caught up with Haik to ask how the expansion in Ontario is going and how his team is defying volatility in the market.
“We've been in Toronto for quite a few years and experienced some incredible growth over the past three, doubling our assets through both organic growth and strategic acquisitions,” Haik, wealth advisor and client relationship manager at the firm, says. “We have 85 people in Ontario, four offices, and how it’s going, quite frankly, is that in 2022 our core portfolio fund saw a 7.5% return, which stands apart from the industry in terms of a balanced approach.”
Though Nicola has traditionally outperformed by 2-3% every year since 2000, and in fact has only experienced one negative year, Haik attributes 2022’s steeper outperformance to Nicola’s pension-style investment strategy that sees roughly one-third of AUM in public and private equities, fixed income, and hard asset income-producing real estate. It goes beyond the traditional stock and bond approach to include private equity, private mortgages, private credit, and private real estate, which provides greater diversification regardless of what's happening in the markets. For Nicola, real estate is foundational: Haik points to the Canada Pension Plan, for example, which has a big position in hard asset real estate. But for most retail investors and retail advisors, it’s difficult to replicate the way the firm accesses alternatives.
“The way we do it is we manage it in-house, we get our hands dirty, we do the due diligence on these assets,” Haik says. “Also, we provide it in liquid form, which is very difficult for other types of advisors to access and that's really because of the scale we have.”
Built firmly on this philosophy, Haik foresees no big changes to strategy heading into 2023 — “It's worked for 28 years, I think we've got a good thing going here,” he notes. “We’re very committed to our approach.” — but he adds that staying the course involves continuous monitoring and adjustments. Currently, the firm is still comfortable being underweight public equities and certainly underweight relative to the 60/40 model.
Nicola also boasts two other enviable statistics: a 99.4% client retention rate and 80% of new business stemming from client referrals. The firm tracks those metrics and Haik says the results are a great testament to the work they do with clients. When someone does occasionally leave, they seek to understand why. It’s a process of continuous improvement underpinned by the belief that if you serve clients well, you'll develop lifelong relationships and become a natural referral. That's been the key to the growth in terms of pursuing prospective clients, and in this hyper-competitive environment Haik urges advisors, regardless of what firm they're at or what solutions they have in front of them, to constantly evaluate what you’re doing today to provide value beyond traditional asset allocation.
“Our planning-first philosophy with our clients is a significant aspect to the value proposition at Nicola, and in volatile markets, you have to work harder to demonstrate it,” Haik says, adding that at Nicola, clients have 24-hour line of sight to their investments through a secure client portal and are also supplied with comprehensive reporting. This gives them peace of mind and allows advisors to focus the client on what can be managed: not the outcome of the market, but good tax and estate planning, solid mitigation strategies, and other areas to add value over and above investment value.
“You need to be able to demonstrate value beyond what the markets are doing, because the client could just go buy an ETF direct themselves if you're not providing any value beyond that,” Haik says.
Because Nicola’s clients were insulated from the volatility others experienced as the firm actively protects the downside because of that diversification through private assets, “what we hear in times like this is thank you. I'm glad I made the switch.”
Haik is also glad he made the switch to Nicola, and one of the things aligned with his values and attracted him initially was the firm’s commitment to giving back to the community. Nationally in 2022, Nicola provided almost $3M to a diverse group of charities including kids’ mental health, local hospitals, AIDS research, and the arts, and employees are encouraged to use paid time off to volunteer. This giving-based value is reflective of the team-based, collaborative culture of the firm, and if you want to be a part of it, Nicola is actively recruiting in the Toronto area.
Haik has always been motivated simply by the fact that he is never satisfied with the status quo, and warns even if you’re at the top of your game, there’s always somebody with an eye on you. It’s critical to evaluate where you are, where you want to be, and never take your eye off the opportunities that arise to get you there.
“You’ve got to evolve, and if you're looking for something different I'm happy to have a collegial discussion to tell you all about our firm, why I made the switch, and why this is truly the best place to work in Canada.”