What exactly are financial advisers doing with their own hard-earned cash?

CAMILLA CORNELL - Feb 14, 2015


This article first appeared in the Toronto Star, Feb. 14, 2015

What exactly are financial advisers doing with their own hard-earned cash?


Special to The Star


At this time of year, financial advisers are busy telling us what to do with our RRSP money. But we’re curious about how those financial industry insiders are investing their hard-earned cash. And how does that differ from what they advise for their clients? We asked three advisers to share their own personal strategies.


Janine Purves, CFP, CPCA, 52 Assante Capital Management Ltd.

“As I get older, I’m beginning to take a more balanced approach to investing,” says Purves. “In the past I have tended to be more aggressive than my clients because I was younger than many of them and because I have the stomach for it.” While Purves still has a portfolio heavily weighted towards equities, she has begun to add more safe investments recently, in keeping with the idea that security becomes more important as you age.


But rather than put up with the meagre returns provided by fixed-income investments like GICs, Purves opts for preferred shares, often described as “a stock that acts like a bond.” The advantages: Preferred shares can pay dividends of as much as 4 per cent to 5 per cent (generally higher than common shares) and they’re less volatile because if a company needs cash it will cut common dividends before touching the dividend on preferred shares. On the downside though, preferred shares don’t tend to rise in value as much as common shares.


High-yield bond funds that invest in corporate bonds (rather than government bonds) are another fixed-income investment Purves has opted for in the past. But she’s more cautious about them this year as she believes interest rates are due to rise, meaning bond prices will fall.


Since Canada is a small market, Purves will also aim to get some exposure to the global marketplace through mutual funds such as Black Creek Global Leaders, as well as the ETFs offered by companies like PowerShares. As a confident, informed investor, Purves looks for opportunities to buy undervalues individual stocks. For example, she says, “I know that energy stocks have seen a fall-off recently. And one of the stocks that I’ve historically likes is Suncor, so I may be looking as add a little more Suncor stock to my portfolio.” That’s not a strategy she’d recommend for all of her clients through, largely because “I don’t know if it has hit bottom yet. And my clients may react differently to volatility than I would.”


Ultimately, she says, a big part of her job is to understand that money personality of her clients and how they’ll react to ups and downs of the stock market. “I am a huge believer that people’s emotions can get in the way of their investing,” explains Purves. “Many people tend to get over-aggressive when the markets are doing well and over conservative when the markets are not.” In doing so, they fly in the face of the cardinal rule of the stock market: buy low and sell high.


Part of her role, she says, is to be a “psychologist” for her clients. That means helping them make the right decisions for the right reasons, rather than just reacting. ”I don’t always do everything do everything for myself that I do for my clients,” she says.  “After all, people investment priorities change depending on their age and stage of life.”