The 'Black Belt Investor' with unshakeable belief in ETFs

The 'Black Belt Investor' with unshakeable belief in ETFs

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Conviction runs through portfolio manager Mary Hagerman as true as the Saint Lawrence River runs through Quebec.

It’s a conviction that got her through university via bursaries and jobs despite being raised by a single mom and with money scarce.

It’s a conviction that led her to drop a journalism career for one in finance when she realised she wanted to be someone making the news not someone writing about it.

It’s a conviction that saw her recently achieve 3rd Dan black belt status in karate after 20 years competing in martial arts.

And it’s a conviction that, amid the chaotic aftermath of the financial crisis, led to her become a discretionary manager and adopt an ETF-based strategy that has seen the Hagerman-Archambault Group at Desjardins Securities flourish.

With Montreal-based Hagerman, nothing is half-hearted and, as well as the respected author of The Black Belt Investor, she is also a sought-after authority on the ETF space.

She remembers her investment lightbulb moment well. With no discretionary portfolios in place, she was grinding hard to tailor portfolios to individual clients – and then the Great Recession hit.

She told WP: “All hell broke loose, and we saw our clients’ portfolios get beaten down over 18 months of hell. Everybody was shaking their head and thinking, ‘when is this going to stop and what do I do to protect my clients?’

“The best thing was to keep them in the market and keep them from selling. In the aftermath, looking back to see who had done the best job, what had worked and what hadn’t, it was clear to me that I was paying some money managers for absolutely nothing.

“They hadn’t done any better than the benchmark and, in some cases, they’d done worse. The financial crisis was the turning point for me.”

The transition to discretionary and automating the investment side of the business resulted in growth but the central element was an unwavering belief that, in ETFs, Hagerman had found the best tools to work with.

“That allowed me to leverage my business,” she added. “From that point on, I could focus on the money management, yes, but also on communicating the message and conviction to my clients that this was the way to go, devoting time to the service part.”

Within that framework, Hagerman primarily uses “plain vanilla” ETFs, with the occasional options-based or structured-product exception. It ensures a benchmark return that exceeds what most clients can do mixing and matching themselves and provides a portfolio mix she complements with exposure to different sectors.

Hagerman makes no apologies about giving expensive ETFs a wide berth and she believes fee pressure has been a boon for the industry.

She said: “Even in the factor-based and more rules-based type of ETFs there has been real pressure on fees. The product offering we are seeing in the ETF space is pretty darn good across the board.

“The pressure on fees and especially the transparency of fees, which are not exactly the same thing, have been a win-win for everybody. For people like myself, who have taken the discretionary route for the past seven years, it was initially tough to get people to make that shift [to ETFs] but not so much when they saw the fees embedded in other structures.

“The transparency has really now justified everything I started doing several years ago and the fact we are talking fees so much now has really been of service to the client and the advisor. I still tell clients I am worth what I am paid but the focus is not just on portfolio management, it’s also on the service, the total wealth management aspect.”

With ETFs on track to outsell mutual funds for the second straight year in Canada, Hagerman is of mind to agree with Matt Hougan, chairman of Inside ETFs, who believes mutual funds will never top the charts again.

If anything, the “intense changes” within the wealth management industry has only deepened Hagerman’s belief in her ETF strategy. It is clearly the fuel that burns her investment fire and a key part of her message to young, hungry advisors.

She said: “You have to have conviction and find something that brings you to work every day when the markets go up and down, and keep going down. That’s when you know someone has a business that is going to survive.

“Speak with conviction to clients that you are doing the best job you can do and that this is the right thing the client should be doing. Have the time to listen and interact in a meaningful way because we are the part that isn’t the machine and talking to clients is extremely important.

“That said, having access to really good technology is going to be super important and, more and more, using social media is going to differentiate how your message gets out there.

“People also have to remember that if you are not healthy you can have the best markets, the most conviction and still lose your business. As the ‘black belt manager’, I always like to have the last word on keeping a healthy mind and healthy body. I am also very conscious-based - people have to have a clear mind when they come to work so they can deal with the stress of the job.”

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