How Carte built a $1.3 billion financial planning organization

President on firm's ethos and why financial planning drives the product, not the other way around

How Carte built a $1.3 billion financial planning organization

Financial planning determines the product, the product does not determine the planning. It’s a subtle difference – although some argue otherwise – and one that inspired the founding of Carte Financial Group.

Kirk Purai, its president, started the company 13 years ago and has overseen its growth to $1.3 billion AUM and about $200,000 a week in insurance premiums. Independently owned with a presence in every province, it’s split into two operating companies, Carte Wealth Management, which is a mutual fund dealer, and Carte Risk Management, an MGA.

The genesis of Carte, which means map in French, began when Purai was studying for his CFP. He sketched out a globe, which represented financial planning, and a circle around it, which signified cash flow. The logo symbolizes how the four quadrants of the globe – cash flow, risk management, tax planning, investment planning – relate to that cash flow. It’s the logo you see now on the company's business cards and websites, and illustrates the original premise of Carte, which was to build a financial planning organization.

Purai told WP: “When I was practicing, I made a point with the families that I served to simplify financial planning through those five elements because sometimes they get overwhelmed. We would have one conversation at a time but when we were having the cash flow conversation, that affects all the other four elements. That's why it's a circle that touches all the other ones. Cash flow is so important but it doesn't get the attention it should because it's not tied to a product.”

Purai would do a financial plan for each prospective client for $225. It was his way of finding out how serious people were about their finances. Those that were came back for a second conversation.

It’s an ethos and culture that stands today, with 170 mutual fund licensed advisors on their books and about 500 more on the insurance side. Of the former, Carte is taking on two or three new advisors a month and targets those with at least five years in the business, with AUM of at least $10-15 million and $40,000 insurance premium a year.

On the product side, the firm deals with all the manufacturers and deliberately has everybody on their shelf.

Purai explained: “One of the reasons I started Carte was because one, I was doing well and, two, I saw an industry where there really wasn't a space for true independent firms. A lot of them were owned by the banks or owned by a parent company and so they all had their own products. If you're practicing financial planning, and you start focusing on the product first, then you can't really do planning, because the planning now becomes the product.”

He added: “Being an independent distribution firm, it’s important, because we don't have any product of our own. They all feature about the same payouts in revenue so it doesn't matter if you sell product A or product B.”

The vision was to become a “true brokerage”, offering products independently based on financial planning. But Purai admitted moving from an advisor to the boss of a country-wide firm needed a change in mindset and joked that it looked a look easier from the outside.

Now, Carte is one of the lower-risk mutual fund dealers in Canada according to the MFDA, an achievement he puts down to strict business processes, which cover everything from taking on millions of dollars of assets to checking mail.

He said: “It really took something to build all that, and in the past three years, now that we have the foundation set, we're able to bring on significant assets. We can bring on $100 million dollars on a monthly basis and it’s not a big deal.”

The dealership is 100% digital – each advisor has a cheque machine, for example, and there is an app for the back office system – meaning COVID-19 caused minimal distraction. In fact, sales were up 30% and, while Purai lamented the lack of water cooler bonding, productivity rocketed.

Reporting back on daily targets has also fostered a sense of efficiency, accountability and, importantly, accomplishment. A morning call stating what each advisor was going to do was followed by a wrap-up call at the end of the day, where they report on how many of those goals were met.

Risk tolerance has naturally been top of mind for advisors, especially after the mutual fund industry suffered a rocky few months earlier in the year. Carte’s policies are designed to ensure clients are correctly positioned and they flag up (and even freeze) portfolios that’s not right. For Purai, he and his compliance team are uber strict about how much risk the firm takes on.

He explained: “We are not an order-taking firm; we're not like a Wealthsimple. We’re a planning firm and sometimes not all clients are the right mix.”

He added: “If the client wants to do that, that's fine. We’ll look at the retirement part of the asset and the shorter-term play money, you can probably do on your own. We don't want to take on that risk as a firm.”

While the pullback in March was dramatic, Carte’s message to clients was that this, essentially, was what they had planning for. A portfolio designed to produce 5-6% had been making 30% 45% in the lead-up, so the drawdown was a reality check. Purai said it comes down to ensuring clients’ portfolio are riding a “steady seven” rather than a “lumpy seven or eight”. The lumpy journeys are the ones that push the emotions and spark panic selling.

“The problem is people are getting back in now on another market high and we’re going through COVID, so we’ll probably have another market low. You do that too many times and you don't need a financial plan because there’s not much to plan with!”