News and resources for Canada's top financial advisors
Stone said part of the blame for recent scandals could be laid at the feet of the regulatory regime itself, which takes a strictly reactive approach without looking ahead to what could go wrong. As a result, it is only a matter of time before another wave of scandal breaks over the financial markets.
Stone says that in the 1980s and 1990s the corporate world forgot who owned the company.
Executives either set their own compensation, or appoint those who do, with that compensation based on short-term goals. Stock option use offers management disproportionate rewards of ownership, but without the associated financial risks and are encouraged to drive the short term stock price higher.
This has led to more vocal shareholders, with some mutual fund companies demanding higher standards of governance. The problem for advisors and their clients, however, is knowing which funds are best representing their interests.
Advisors don’t have control over what happens in the boardroom of corporate world, but they can pick and choose which mutual funds they will sell. Stone recommends advisors ask their fund managers six questions to determine how seriously they take governance issues.
With the answers to these questions in hand the advisor can make a better informed decision on which funds they feel represent their clients’ best interests. And should the fund not live up to its promises on governance, the manager should be challenged can be challenged based on their reponses.
Filed by Steven Lamb, Advisor.ca, steven.lamb@advisor.rogers.com
(06/17/04)
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R elated Stories |
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Stone said part of the blame for recent scandals could be laid at the feet of the regulatory regime itself, which takes a strictly reactive approach without looking ahead to what could go wrong. As a result, it is only a matter of time before another wave of scandal breaks over the financial markets.
Stone says that in the 1980s and 1990s the corporate world forgot who owned the company.
Executives either set their own compensation, or appoint those who do, with that compensation based on short-term goals. Stock option use offers management disproportionate rewards of ownership, but without the associated financial risks and are encouraged to drive the short term stock price higher.
This has led to more vocal shareholders, with some mutual fund companies demanding higher standards of governance. The problem for advisors and their clients, however, is knowing which funds are best representing their interests.
Advisors don’t have control over what happens in the boardroom of corporate world, but they can pick and choose which mutual funds they will sell. Stone recommends advisors ask their fund managers six questions to determine how seriously they take governance issues.
With the answers to these questions in hand the advisor can make a better informed decision on which funds they feel represent their clients’ best interests. And should the fund not live up to its promises on governance, the manager should be challenged can be challenged based on their reponses.
Filed by Steven Lamb, Advisor.ca, steven.lamb@advisor.rogers.com
(06/17/04)
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(June 17, 2004) Advisors know that the problems in corporate governance are not their fault, but on the front line with the public they face the blowback from investors seeking to shoot the messenger.
There has been no shortage of bad apples in the corporate barrel in recent years, as executives at Enron, Worldcom, Adelphia, Tyco, Arthur Anderson, Global Crossing and Imclone became household names for all the wrong reasons.
Then it was the financial sector’s turn, as New York attorney general Eliot Spitzer cracked down on late-trading and market-timing in the mutual fund industry.
All of these problems shook investor confidence in the markets and likely caused numerous uncomfortable client meetings for advisors, even though there has yet to be even a whiff of U.S.-style corruption in the Canadian mutual fund industry.
In a sobering breakfast presentation to the second annual national conference of the Canadian Institute of Financial Planners (CIFPs), Richard Stone, president of fund company Stone & Co. Ltd., quoted Don Henley’s warning in “Gimme What You Got”, “A man with a briefcase can steal more money than any man with a gun.”
“What I’m constantly hearing from you guys is that you’re tired to giving us money to manage to make us wealthy,” said Stone.
He says many of the issues have now been solved, such as auditors doubling as business consultants. But when scandals rock the U.S., investors in Canada are often unaware of the significant differences between the two markets.
Some of the high-profile problems in the U.S. mutual fund industry are not even possible in Canada, due to both regulatory constraints and distribution through FundServ. The system has been shopped around the world, with foreign mutual fund industries amazed at the problems it resolves.
“They took it down to the United States and they looked at it and we showcased issues they weren’t even thinking about, which FundServ solved automatically with software,” Stone said. “The U.S. model wasn’t even aware of the problems and Canada already had the solution.
“The rest of the world buys our solutions. That is one point that is really important to share with your clients.”
|
R elated Stories |
|
|
Stone said part of the blame for recent scandals could be laid at the feet of the regulatory regime itself, which takes a strictly reactive approach without looking ahead to what could go wrong. As a result, it is only a matter of time before another wave of scandal breaks over the financial markets.
Stone says that in the 1980s and 1990s the corporate world forgot who owned the company.
Executives either set their own compensation, or appoint those who do, with that compensation based on short-term goals. Stock option use offers management disproportionate rewards of ownership, but without the associated financial risks and are encouraged to drive the short term stock price higher.
This has led to more vocal shareholders, with some mutual fund companies demanding higher standards of governance. The problem for advisors and their clients, however, is knowing which funds are best representing their interests.
Advisors don’t have control over what happens in the boardroom of corporate world, but they can pick and choose which mutual funds they will sell. Stone recommends advisors ask their fund managers six questions to determine how seriously they take governance issues.
With the answers to these questions in hand the advisor can make a better informed decision on which funds they feel represent their clients’ best interests. And should the fund not live up to its promises on governance, the manager should be challenged can be challenged based on their reponses.
Filed by Steven Lamb, Advisor.ca, steven.lamb@advisor.rogers.com
(06/17/04)
|
(June 17, 2004) Advisors know that the problems in corporate governance are not their fault, but on the front line with the public they face the blowback from investors seeking to shoot the messenger.
There has been no shortage of bad apples in the corporate barrel in recent years, as executives at Enron, Worldcom, Adelphia, Tyco, Arthur Anderson, Global Crossing and Imclone became household names for all the wrong reasons.
Then it was the financial sector’s turn, as New York attorney general Eliot Spitzer cracked down on late-trading and market-timing in the mutual fund industry.
All of these problems shook investor confidence in the markets and likely caused numerous uncomfortable client meetings for advisors, even though there has yet to be even a whiff of U.S.-style corruption in the Canadian mutual fund industry.
In a sobering breakfast presentation to the second annual national conference of the Canadian Institute of Financial Planners (CIFPs), Richard Stone, president of fund company Stone & Co. Ltd., quoted Don Henley’s warning in “Gimme What You Got”, “A man with a briefcase can steal more money than any man with a gun.”
“What I’m constantly hearing from you guys is that you’re tired to giving us money to manage to make us wealthy,” said Stone.
He says many of the issues have now been solved, such as auditors doubling as business consultants. But when scandals rock the U.S., investors in Canada are often unaware of the significant differences between the two markets.
Some of the high-profile problems in the U.S. mutual fund industry are not even possible in Canada, due to both regulatory constraints and distribution through FundServ. The system has been shopped around the world, with foreign mutual fund industries amazed at the problems it resolves.
“They took it down to the United States and they looked at it and we showcased issues they weren’t even thinking about, which FundServ solved automatically with software,” Stone said. “The U.S. model wasn’t even aware of the problems and Canada already had the solution.
“The rest of the world buys our solutions. That is one point that is really important to share with your clients.”
|
R elated Stories |
|
|
Stone said part of the blame for recent scandals could be laid at the feet of the regulatory regime itself, which takes a strictly reactive approach without looking ahead to what could go wrong. As a result, it is only a matter of time before another wave of scandal breaks over the financial markets.
Stone says that in the 1980s and 1990s the corporate world forgot who owned the company.
Executives either set their own compensation, or appoint those who do, with that compensation based on short-term goals. Stock option use offers management disproportionate rewards of ownership, but without the associated financial risks and are encouraged to drive the short term stock price higher.
This has led to more vocal shareholders, with some mutual fund companies demanding higher standards of governance. The problem for advisors and their clients, however, is knowing which funds are best representing their interests.
Advisors don’t have control over what happens in the boardroom of corporate world, but they can pick and choose which mutual funds they will sell. Stone recommends advisors ask their fund managers six questions to determine how seriously they take governance issues.
With the answers to these questions in hand the advisor can make a better informed decision on which funds they feel represent their clients’ best interests. And should the fund not live up to its promises on governance, the manager should be challenged can be challenged based on their reponses.
Filed by Steven Lamb, Advisor.ca, steven.lamb@advisor.rogers.com
(06/17/04)
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