NexGen offers new take on tax efficiency

NexGen Financial has announced that its mutual fund lineup is now available to investors through registered dealers and advisors in Ontario, Quebec, Alberta and British Columbia.

While the Canadian mutual fund universe may seem like a crowded market for an upstart company to enter, NexGen promises to focus on tax-efficiency for the non-registered account holder.

“This is a different approach. Most funds just pass their tax problems out and they don’t do it very well,” says Jim Hunter, NexGen’s founder and CEO. “Ours is an approach whereby you think about what you want and you order it up by indicating your preferences. We’re trying to solve the tax problems rather than passing them on to the client.”

The company is offering 13 tax-managed mutual funds, which are available in four different classes, depending on the needs of the client. For example, investors seeking monthly income can choose either the Return of Capital Class or the Dividend Tax Credit Class. Investors with special tax objectives who are seeking long-term growth are able to choose the Capital Gains Class or Compound Growth Class. Investors can switch between classes on a tax-deferred basis.

According to Hunter, these options level the playing field for planners who cannot buy dividend-paying stocks for their clients. Planners are expected to account for between 60% and 70% of sales, with brokers making up the remainder.

“By indicating that they want their return delivered as Canadian tax dividends, it gives them a powerful competitive tool,” he says. “In Ontario, theoretically in a taxable account we can get $46,000 tax-free to an individual. Same with the capital gains class.”

“The independent planners we know are interested from the [results of] focus groups and we have several of those dealers signed,” Hunter says. NexGen has also signed on three of the major bank brokerages and is working on the remaining pair, although Hunter declines to say which three are on-board.

“The issue you have in getting your fund company listed is a major exercise,” Hunter adds. “Many of the vertically integrated fund complexes have no interest in adding new funds, or they put you through a process that is extremely onerous and time consuming.”

Of the 13 available mandates, five are managed by Selective Asset Management Inc., six by J.Zechner Associates Inc., and two are managed in-house by NexGen’s investment manager, Jeffrey Young.

If Hunter’s name sounds familiar, he is the former CEO and chairman of Mackenzie Financial. He launched NexGen in May of this year following the completion of a private placement.

NexGen anticipates its funds will be available in the remaining provinces and territories in mid-2007.

Filed by Steven Lamb, Advisor.ca, steven.lamb@advisor.rogers.com