2002 in review: Advisors help Canadians make it through the markets

(December 30, 2002) This was a year to go back to the basics as a financial advisor in Canada.

Every New Year begins with fresh optimism, a warm glow of confidence. The bearish year of 2001 was rough on investors and advisors, but this year began with a commitment to resilience and patience.

Remember?

It turned out this bear can really run.

“It’s a trying time to be an advisor,” said David Morgan of CIBC Wood Gundy in Saint John/Moncton, New Brunswick.

The biggest issue of 2002 for Morgan was helping clients through the rough market. “You have to work closely with your clients in this kind of environment and communicate a lot with them.”

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Technical indicators suggest an economic turnaround, he noted, yet investors struggle with their confidence.

“The hardest part I see will be convincing investors who have moved into money market funds or large cash positions. It’ll be a challenge to convince them that the worst is over and to move then back into the markets,” said Morgan, winner of the 2002 Advisor of the Year Award for the Atlantic region.

For the benchmark index of the Toronto Stock Exchange, the end of 2002 could bear a striking similarity to the finale of 2001. The TSX composite index will likely end 2002 with a loss in the vicinity of 14%, which was the decline recorded by the TSE 300 in 2001. The TSE 300 closed out 2000 with a gain of 6%. The major U.S. equity markets are headed for their third consecutive year of losses.

“One of the things that I’ve learned is that when you’re in an up cycle you think it will last forever, and when you are in a down cycle you think it is going to last forever. That’s where we are right now,” said Dan Richards, chief executive officer of Cartier Partners Financial Group.

“If 2001 was a year of anxiety, 2002, for a lot of advisors and investors, was a year of discouragement. This has been a year that really tested the resolve of an awful lot of people in the business,” Richards told Advisor.ca.

David Christianson of Wellington West Total Wealth Management in Winnipeg said many more advisors earned the title of ‘advisor’ in 2002.

“The vast majority of clients have weathered this storm remarkably well, totally different than 1987 and some other bears or crashes that we have gone through. This has been the toughest one and the longest one but in spite of that, most clients are disappointed and concerned but hanging in,” said Christianson, winner of the 2002 Advisor of the Year Award for the Prairies region.

“Things will be better in 2003 and those who stuck to their philosophies and appropriate asset mixes will be rewarded,” he predicted.

Richards said it’s a time to go back to the basics. Advisors should be proactive in contacting clients and encourage an open dialogue about their financial plans. This dialogue could analyze a client’s anxiety, long-term objectives, expected rates of return, and other issues, said Richards.

“The very fact that you’ve picked up the phone, been proactive, have got a meeting in place, will give clients peace of mind. Because one of the things clients want to know is that their advisor is worrying about their financial situation and is on top of it,” Richards told Advisor.ca.

“It’s really the year of getting back to basics… re-establishing with the client what their plan is,” said Chris Reynolds, president of Investment Planning Counsel of Canada in Mississauga.

This year helped many advisors learn their strengths and weaknesses, said Reynolds. And 2002 reinforced the message that advisors should focus on giving comprehensive advice, not on portfolio management.

As a new year approaches, advisor Lance Howard of The Lance Howard Group, Cartier Partners, in London, Ontario, said advisors are needed more and more to cut through the financial noise and clutter. He also urged his colleagues to put themselves in their clients’ shoes.

“Advisors have to stop looking at the world through the eyes of the advisor. You’ve got to look at the world through the eyes of the client. What does the client want?” added Howard, winner of the 2002 Advisor of the Year Award for Ontario.

It’s also time to move on, says veteran U.S. advisor and author Nick Murray.

Treat the last five years as an investment lesson and help your clients forget what they’ve lost, Murray said at the Toronto Advisor Forum in November. “Tell people to make believe that everything they bought they bought last night and just look at the portfolio.”

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Share your “year in review” for 2002 by sending a message to the “Free For All” forum of the Talvest Town Hall on Advisor.ca.

Filed by Jim MacDonald, Advisor.ca, with files from Doug Watt and John Craig, jmacdonald@advisor.ca.

(12/30/02)