Why a discretionary platform pays off

Advisor talks about the benefits of having an intimate knowledge of his clients' portfolio positions

Why a discretionary platform pays off

A nimble platform and an intimate knowledge of clients’ positions are crucial to one advisor’s investment ethos.

Val Cattelan, portfolio manager and senior investment advisor at Cattelan Private Wealth Counsel, and HollisWealth, a division of Industrial Alliance Securities Inc, believes his ability to react to markets within 24 hours using a discretionary model means he can be more flexible in the service he provides.

With investors wary as the economy cycle seemingly enters its final stage, Cattelan says valuations in the States are a bit frothy but that the markets continue to defy naysayers’ predictions, with cuts in US corporate tax and better numbers out of Europe and emerging markets.

Rising interest rates and the prospect of a market correction are, however, keeping advisors on the toes.

Cattelan said: “We are more bullish equities than fixed income, especially in the raising-rate environment but we are also cautious so I know in our portfolios, in our discretionary models we manage, we are still overweight equities but we are looking to redistribute risk.

“Part of the benefit of running a discretionary platform, and one of the reasons we moved to it, is that if you have 100 to 200 clients and you’re running a portion of the portfolio in stocks and a portion in ETFs, you can react to the markets a lot quicker than an advisor who is transaction-based or commission-based.

“We can trade all our clients within 24 hours and they all get the same pricing and all in the same model, so absolutely it’s an advantage and we also know the positions they are holding intimately, whereas advisors who don’t hold model portfolios, I don’t know how they do it because it’s impossible to know a thousand positions.”

Long-term strategies are vital, said Cattelan, because short term the economy can be hard to predict.

“We have to look at the macro factors but we always take a long-term approach. On the Canadian equity side we do individual securities but then on the global, fixed income and alternatives we use passive and active and when we take on those positions we are looking for a longer-term outlook – it’s hard to determine what short-term macro factors are going to be.”

He added: “I wouldn’t be surprised if we get a little bit of pullback in the short term. I don’t know whether that’s in a year or two. We have had a pretty good run. To see a substantial pullback would be surprising because, for the first time in quite some time, the increase in stock prices has actually been derived from an increase in earning as opposed to an increase in price multiples, which has been really positive. These tax cuts should also help as well. But we just want to make sure the market is not getting ahead of itself.

“It’s probably a good time for people with shorter-term expenditures to maybe take some profits but in the long run, everything goes up. It depends what your timeline is and it depends on what your risk tolerance is because some people can stomach it a little bit better than others.”

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