East, west differ on investing…or maybe not

Canada’s national preoccupation with regional differences has several implications for advisor–client relationships, practice management and the art and science of client profiling — but do perceived regional biases really exist?

According to a recent TD Waterhouse investor poll, regional differences include variations in investment expectations, intended RSP contributions and choice of investment product. The title of the poll nearly says it all: “East and West Are Oceans Apart on Investing” — investors living in the west appeared to be more aggressive, with higher expectations for returns on their investments, than investors in Quebec and Atlantic Canada. Ontario investors fall in the middle in their expectations.

The same poll suggested that Prairie investors are most likely to contribute to their registered retirement savings plans this year. They plan to make the largest contributions, at $6,070, matching the plans of Ontarians. In Quebec and the Atlantic provinces, the average contribution is $4,120.

In Calgary, the greater aggressiveness and higher expectations stem from easier access to investments in junior oil companies and start-up opportunities offered through private placement arrangements, explains Hal Couillard, a 31-year financial services veteran and president of Calgary-based Couillard Group Inc.

“[These clients] know the people, and they interact with them, and they see them on a daily basis,” he says.

Such social contacts lead to private placement investment opportunities where the client often knows the promoter or the company’s track record, he says.

That difference indirectly complicates the financial planning process and increases the advisor’s duty of care, Couillard says. “We have to be open to the fact that clients will want to try some of these other investments that we are not able to offer.”

Advisors in these cases have to contend with the fact that clients want to make withdrawals for these investments from those held elsewhere, he says. That, in turn, increases the advisor’s responsibilities in areas such as adjusting asset allocation strategies, since one or more high-risk private placements may be held elsewhere.

“You want them to have their eyes wide open about their entire portfolio and how the success or the failure of the private equity investments can impact their total plan,” he says.

However, client segmentation by income level or profession offers a more effective means of practice management than working from regional considerations, suggests Gordon Shipley, president of Montreal-based Shipley Insurance Services Limited. “I don’t agree with the assumption that east and west are oceans apart in investing. I think [the differences are] far more prevalent to or relevant to income and profession,” he says.

Shipley points out that several major accounting firms contractually oblige partners to make the maximum RRSP contributions as a part of their retirement planning packages.

“That’s a function of the profession in the marketplace,” he says. This applies to the partners in all of the offices across the country, he points out. “That would be the case in Montreal, Quebec City, Edmonton, Vancouver, Calgary and Halifax,” irrespective of regional considerations, he says.

“[The RRSP maximum requirement] is sort of a no-brainer at that income level in all locations of these firms,” he says.

Al Emid is a Toronto-based financial journalist.

(02/07/07)