Private Portfolio Management
The current financial landscape is filled with a wide array of products and services. With so many choices, investors can easily find themselves lost in a sea of information, unsure of what is best for their needs. We outline Hemisphere’s Private Portfolio Management service and show how it compares to private wealth management services at other firms.
WHAT IS THE MINIMUM INVESTMENT?
Many other portfolio management firms have minimums of over $1-2 million for private wealth services. We recognize that this amount is not achievable for many Canadians.
Our Private Portfolio Management service is available to individuals, families, holding companies, trusts, estates, and charities with investable assets greater than $750,000. We also offer our Select Managed Portfolios for smaller accounts.
WHO MANAGES MY ASSETS?
Our Private Portfolio Management is a discretionary investment management service. You will deal directly with the registered portfolio manager overseeing your assets. Our portfolio managers hold a fiduciary duty to act in your best interests. There are no relationship managers in our process.
WHERE ARE MY FUNDS HELD?
All client accounts are segregated with safe-keeping provided by third-party custodians, ensuring your peace of mind. Our third-party custodian is National Bank.
HOW DO YOUR FEES WORK?
We charge fees based on a percentage of assets under management using a tiered-structure. Our fees are fully tax deductible for non-registered accounts. We clearly report our fees each year in dollar amounts.
Firms using mutual funds and managed products do not have this same requirement. While they do have to report commissions, the investment management fees embedded in the products do not need to be clearly reported. This stems from gaps in the CRM2 requirements. As a result, many mutual fund or managed product clients may be unaware of what their fees actually are.
WHAT TYPES OF SECURITIES DO YOU USE?
We are focused on steady, long-term returns through proven asset classes. We use individual publicly-traded securities, including bonds, preferred shares, and common stock.
While other financial institutions may use alternative asset types (private real estate, infrastructure, etc.), we feel that these are not suitable for many investors. These asset types are typically owned through mutual funds or other managed products. The restrictions, fees and valuations methods are often not well disclosed. This lack of clarity can lead to too much risk and unexpected loss.
IS YOUR APPROACH FLEXIBLE?
We offer a highly flexible and customized approach to investment management. Whether you are an executive that has restrictions on holding certain shares, or you have specific environmental, social, and governance (ESG) considerations, we can accommodate your needs. By using individual securities, we can choose to avoid specific companies.
For many of our competitors that prefer to invest in mutual funds or managed products, this level of flexibility is not possible. Since a fund is being managed at an overall level, individual investors have no influence over the holdings within the fund. This means you could be left investing in a company that goes against your values.
WHAT MAKES YOUR APPROACH TAX EFFICIENT?
We consider tax as part of building your overall portfolio. Income, dividends, foreign dividends and capital gains all have unique tax considerations. We place securities in the accounts (RRSPs, TFSAs, non-registered, etc) where it makes the most sense to minimize tax impacts.
The benefit to holding individual securities is also through recognizing gains and losses. With mutual funds, there is typically an annual distribution that is not controlled by the investor. This can result in an unwanted tax burden, particularly if you buy a mutual fund near the end of the year. Funds may also have embedded gains from existing holdings. You may be inheriting a portion of this unrealized gain and the associated tax liability when you buy the mutual fund.
With individual securities, there are no embedded gains at the time of purchase. Taxable gains can be postponed to avoid an unwanted tax burden by deferring the sale of a security. Any losses can also be harvested to offset high taxable gains in a given year. By controlling the timing of purchases and sales, we can work with you to minimize tax impacts.
ARE THERE ANY OTHER TAX OPPORTUNITIES?
Individual securities that have performed well over a long period and have a large unrealized gain may also become prime candidates for donating to a Donor-Advised Fund. By donating a security with an unrealized gain, you can avoid paying tax on the capital gains while also enjoying tax benefits from the donation.
HOW DOES YOUR REPORTING WORK?
Hemisphere prepares quarterly performance reports. Clients also receive monthly custodian reports showing any transactions in the account for that month. We report our performance net of fees and using a Time-Weighted Rate of Return (TWRR) calculation. This is the recommended approach according to the Global Investment Reporting Standards.
Other firms and banks may report performance as gross of fees and/or using a Money-Weighted Rate of Return (MWRR) calculation. These are not as robust of performance indicators. Particularly when fees are not adequately disclosed. The MWRR calculation is sensitive to the timings of any deposits or withdrawals and therefore may not be a good indicator of an advisor’s performance.
How does the onboarding and ongoing relationship work?
We provide private wealth management through a holistic approach. This is an ongoing process to capture any personal changes in your wealth journey.
Through a diligent discovery in our wealth management process, we learn about your goals, constraints and risk tolerance. We are focused on better understanding you, what you are trying to achieve and over what timeframe.
Using the details from the discovery process, we develop an Investment Policy Statement (IPS). The IPS forms the basis for your asset mix and the investment decision-making process. We list your risk tolerance, timeframe and any specific restrictions in the IPS. The IPS is reviewed at least annually to ensure we are always working with the latest information in mind.
We evaluate a wide range of securities to build a diversified portfolio that reflects your IPS. This is a methodical process that typically takes between 6 to 12 months.
During the initial stages of a relationship, we try and meet with our clients more regularly. Once the relationship is established, we typically meet with our Private Portfolio Management clients on a quarterly basis. During these meetings, we address any changes to your financial circumstances to ensure your portfolio continues to align with your goals. We also review the portfolio holdings and discuss financial markets. We offer a clear line of sight into our investment process and provide quarterly reports.
The Core Balanced Composite consists of consolidated client portfolios with an equity mix between 40% and 80%. These are considered moderate to higher risk portfolios.
The Income Balanced Composite consists of consolidated client portfolios with and equity mix between 15% and 40%. These are considered low to moderate risk portfolios.