Balancing act

Former Finance Minister Joe Oliver reveals why he decided to return to Bay Street after his time on Parliament Hill

Balancing act
WHEN HE named Joe Oliver as chairman of Echelon Wealth Partners this past June, CEO David Cusson outlined what the former finance minister brought to the table: “With Joe aboard, we will have a strong voice representing the value of robust independent investment firms in Canadian capital markets.”

Specifically, Oliver brings not only decades of experience in the investment industry, but also expertise in the regulatory field from his years with the Mutual Fund Dealers Association, Investment Dealers Association and Ontario Securities Commission.

Increased compliance costs are felt much more by independent firms, and it’s no coincidence that there are fewer of them out there in 2017. Echelon Wealth Partners, a marriage of Euro Pacific Capital and Dundee Goodman Private Wealth in 2016, is an example of an independent that is managing to carve out its own place in the wealth management space. The firm has more than 100 advisors and portfolio managers, $4 billion in assets under management, and 10 offices in Canada and Japan. Having Oliver on board is another statement of Echelon’s intent to become one of the country’s top independent brokerages.

As a former regulator himself, the former MP for Eglinton-Lawrence is well aware of the difficult balancing act that goes into drafting legislation.

“I understand why it is more comprehensive than it used to be,” he says, “but there is a danger that disclosure will become so verbose and lengthy that it adds costs and doesn’t necessarily achieve the regulatory purpose to protect investors.”

Another unintended consequence of increased compliance and its associated costs has been a reduction in the number of advisory firms. Competition is good in any industry, and Oliver acknowledges that fewer independent names in the space certainly isn’t in consumers’ best interests.

“We know that people getting advice tend to do better,” he says. “Those with larger portfolios can afford more, and the investment firms are more interested in them. So you have to be careful that regulations don’t become so burdensome that they drive the investors who most need advice out of the market.”

Advice for all
One of the major talking points in Canada at the moment is the federal government’s tax-reform plans for incorporated businesses. The proposals put forward in July by Finance Minister Bill Morneau received quite a backlash from the advisor community – not surprising, given that small business owners make up a large part of advisors’ clientele.

As someone who has been in the hot seat now occupied by Morneau, Oliver explains his philosophy when it comes to taxes.

“You always have to balance competing interests, but the tax system is supposed to be fair and also efficient,” he says. “We were of the view that you try to minimize the tax bite because it can create quite the disincentive to entrepreneurship, to employment and economic growth. People with a different philosophy will be more focused on income redistribution and inequality. I’m of the view that you try to raise all boats.”

Trying to balance the federal budget, a task Oliver achieved in 2015, is now the responsibility of his successors, while Oliver is busy assisting Echelon in its efforts to become a premier wealth management brand. The industry in 2017 is in a state of flux, and the firm needs to ensure it is on the leading edge of that evolution.

“We have to think about ways to provide products that aren’t terribly expensive and are suitable for people with less means, because there are a lot of those people,” Oliver says. “That is one of the main challenges. I’m not critical in principle with robo-investing, but clearly for most people, they want to deal with a human being.”

Robo-advice is another divisive topic in the advisory space: threat or tool? As a platform, it clearly has its advantages; advisors are increasingly using it to delegate some of their more time-consuming and tedious work. In Oliver’s view, robos have their place in the investment space and will be increasingly used by investors of lesser means.

“They are not necessarily disadvantaged in using a robo-advisor, provided the initial analysis of their financial circumstances has put them in the right category,” he says. “Then the firm can afford to provide the best possible management of those resources, because in aggregate they are big enough to justify the effort.”

Intelligent investing
As a profession, advisors and financial planners have struggled in the court of public opinion over the years. Having been part of the federal government for four years, Oliver is no stranger to criticism. Expecting nothing but praise is as unrealistic on Bay Street as it is on Parliament Hill, but it’s certainly something to strive for.

“I was a lawyer, an investment banker and a politician, so sometimes a bad reputation is richly deserved, and other times not at all,” Oliver says. “Of course it is a concern, because if people don’t have confidence in their advisor, then they won’t put their money in, but it’s really important that they get advice.”

The need for proper financial planning has never been more apparent: As the baby boomer generation retires, Canada will undergo the greatest transfer of wealth in its history. The implications for the advisors tasked with overseeing that transfer are clear.

“We have a retirement issue – people are living longer, and government pensions are never going to be adequate for the vast majority of people to keep them in the same standard of living,” Oliver says. “Increasingly, people will have to rely on their investments, so the need for intelligent investing is going to be become more acute for individuals.”