Why managing clients’ expectations is crucial

Advisor on giving people “real life” and how he's dealing with tax changes for small businesses

Why managing clients’ expectations is crucial

Giving clients “real life” is proving an effective approach for one up-and-coming advisor.

Adam Schacter, financial advisor, Mandeville Private Client Inc, focuses on tax and investment planning and favours laying out the impact of market changes and strategy decisions in terms his clients can relate to.

It means that when the headlines get sensational, or when many are panicking about their savings, his office remains calm.

A three-time Wealth Professional Young Gun of the Year nominee, Schacter believes that constantly managing expectations is a crucial part of the job.

He said: “So often, as advisors, we talk about risk and volatility to clients but maybe not in terms of how it’s positioned and really in their portfolio. So we have to say, you’re 64 years old, you’ve accumulated $1 million and that represents $55,000 a year of income for you and then next year that million is down to $800,000, now that $55,000 is down to $40,000 and at least I can go on one less vacation, we can make that work. And then it goes down to $700,000.

“I like to give people real life. I do that all the time, and I don’t get any calls when this [market volatility] happens. I’ll do the calls.”

Ottawa-based Schacter has been in the industry seven years, taking on assets for the past four. The earlier part of his career as an associate was spent “trying to get the recipe” and soaking up knowledge from senior advisors.

The portfolios he manages are comprised of fixed-income, cash and equity. He explains: “We’re talking diversifying between active and passive management, and we’re talking about diversifying between geographic locations, across sectors, across market capitalizations, across styles. The only free lunch you have in investing is diversification.”

Ahead of today’s Federal budget, he also said that the way he manages small business owners’ taxes has changed after the government sought to close loopholes relating to the distribution of income among family members or “sprinkling” as it's known. 

Schacter said Canada Revenue Agency has yet to reveal how they plan to track the before-and-after scenario for businesses, which presents a challenge for advisors.

He said: “Income from corporate accounts is going to be different now. One of the things that we view on the horizon is there is no way for CRA to track the old stuff versus the new stuff and they haven’t suggested a way to separate them.

“So what we’re doing here is opening up a second account calling New Corporate versus the Old. That way, if CRA ever comes knocking, which it will, it’ll say it’s up to you, it’s your responsibility to keep these things tracked. So that’s one of the ways we are trying to stay onside.”

In his relatively short career to date, he says the biggest change in the industry is the growth of ETFs. Schacter says more competition in that space is a good thing and has helped bring down mutual fund fees. He does warn, though, that there is nothing stopping “expert” retail investors rushing to leave at once if the market has a major pullback.

He said: “We use ETFs here but I think most people say, ‘I don’t need an advisor, I can use ETFs’. Then they have these robo-advisors and that’s fine as well. All these things are great for the industry because they get people in.

“But I think when the market does have a turn and people start getting a little bit more irrational and saying things like, ‘this time it’s different’, [then] these are dangerous words to say in investing. There’s nobody really there to stop them pulling out and I think that may be a bit of a concern.”

Schacter does not pretend to predict the market and jokes that his clients fully know that. He says his job is to simply make sure he gets it right most of the time, even if that means having clients go against his advice when it comes to weed stocks.

He said: “I have a couple of clients who have side accounts and I highly advised two years ago not to purchase weed stocks. Not because there was anything wrong with the company, not because they weren’t positioned to succeed but because the price they were paying was already way up.

“Overpaying for something, you are shooting yourself in the foot. If you are overpaying and you expect to sell it to someone for an even higher cost, it’s tough. So I advised against it at the time, and their portfolios are up 450%!

“So it’s an even worse buy that it was two years ago. So they were right, somebody is willing to buy it at a more crazy price than they did two years ago!”


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