'Returns are important but peace of mind is paramount'

Investment advisor Paul McKenna reflects on switching back after years as a wholesaler

'Returns are important but peace of mind is paramount'

As a teenager, Paul McKenna would sign for courier packages at MD Management head office after reception had clocked off.

Then part-time work at Christmas morphed into summer employment at the company’s Ottawa HQ before he transferred to the Toronto office, ultimately landing a financial consultant role to manage physicians’ multi-million dollar accounts.

Decades later, and after years hammering the wholesale beat, including a spell in alternative strategies, McKenna’s career has come full circle. Approaching 10 years at Richardson GMP as Investment Advisor, the V-P has now branched out on his own with a $135 million book of business that is set to surpass the $150 million mark early this year.

Extensive experience on both sides of the divide has given McKenna perspective on the pros and pitfalls of the two disciplines and he said that moving back into the advisory world was like starting out again, albeit steeled by years in sales.

Not everyone makes a success of the switch but freed from the wholesale shackles, McKenna has thrived, although he admits the stark reality of having to attract clients was at times scary.

He said: “On this side of the business, the world’s your oyster. Anybody that’s high net worth is a potential client. That means it’s a bit of shotgun approach initially – but you have to quickly determine what’s working and start to narrow in on that.”

Initially, McKenna took what he could get but knew he had to quickly establish a niche and start getting referrals from existing clients. Well set and with plans to grow his book – “if you’re not growing you’re shrinking down” – McKenna said he owes a debt to John Horwood for providing him with the perfect platform to kick-start this phase of his career in 2009.

The chance to build his business in the comfort of a big team, with a salary for the first year and a promise he could go it alone when he hit the $100 million mark was too good to turn down and the perfect exit strategy from his sales gig at AGF.

Horwood also needed another hand on the tiller to deal with the fallout from the 2008 financial crisis.

McKenna said: “The world was going to zero and markets were going to zero, and although John was a very seasoned advisor with a large practice, his staff was much younger. He needed someone right in the middle because clients who used to want to review their portfolio once, twice a year, they now wanted to talk every week because of the heightened volatility. So we were in defensive mode for 10-12 months, then they had someone who could help them grow.”

The move to Richardson was the end of a career journey that took a turn when, after recognizing he was a little too inexperienced to be telling doctors what to do with their millions, a colleague introduced him to her spouse, who had wholesaled at GT Global and Fidelity during a period of huge growth. He explained what it entailed and McKenna was sold.

He joined MAXXUM, formerly part of London Life, which was bought by Power Financial under the Investor’s Group umbrella, and his patch was Yonge Street West to Vancouver. The firm launched a line of hedge funds that, when Power Financial and IG bought MacKenzie, was rolled into the latter. MacKenzie didn’t have a home for the alternative strategies so McKenna followed the portfolio manager in taking the funds and going it alone.

After the Canadian hedge fund space hit turbulence, McKenna headed to AGF for five years before Horwood intervened and he returned to the advisory side of the business. Rather than chasing up redemptions, he had to separate himself from the competition and prove value.

His philosophy is while you will always need to discuss returns with clients, more importantly you have to be able to offer peace of mind.

He said: “I always try to get beyond the industry jargon and get to the personal stuff. Money is always a means to an end. People don’t want to accumulate money for the sake of accumulating money, they want to retire or put their kids through school, buy a property etc.

“If you focus on those things, you make it less about the returns. Look at how the markets have done the past two or three months. If all you did is rely upon returns, the last couple of months you will have zero value … in fact, negative value!”

McKenna, who lives in North Toronto with his wife Kate and four kids, highlighted two examples of providing peace of mind to clients. Firstly, foreseeing a $1.3 million tax bill for a widow after her husband - and co-owner of their businesses - passed away. The advisor immediately identified $975,000 in liquidity with a plan for the rest before the tax bill was due one year later.

A second client, also a business owner, kept investing in new projects unbeknown to his wife, who had no clarity as to their financial situation.

He said: “In our first meeting I said to them, you are always going to be an entrepreneur but we have to carve off a piece and that has to be your long-term savings money and this can be your entrepreneurial money.

“Then when you have another one of your home runs you can carve off a piece and put it in your long-term pot. That gave the wife peace of mind and allowed me to land them as clients in the first place.”

He added: “When people switch sides [wholesale to advisor], people mostly focus on the numbers. You have to have both – you have to demonstrate you can manage a portfolio competently, but you take the relationship to a deeper level - and the opportunity to earn more share of wallet - when you have the confidence and courage to delve deeply into personal and emotional matters with clients.

"But you only get the chance to go there once you've earned their business in the first place; then you strive for that much higher level of trust."

Follow WP on Facebook, LinkedIn and Twitter