Focus on money management means better advice

David LePoidevin, VP and portfolio manager at National Bank Financial in Vancouver started his career in Toronto and moved to Vancouver as his book of business began to swell. He built his business the old fashioned way: through cold calling. Being in his 20s at the time helped. Being young wasn’t a problem because he didn’t have to meet the client. “I was a young looking kid, I had the low voice, it was much easier to create an image of yourself over the telephone,” says LePoidevin.

It wasn’t as much portfolio management as it was really selling back then. “I would just cold call on bonds and preferred stock, mostly conservative type investing, and you would hopefully get an order from a client to buy 20,000 of a preferred stock, and you would phone the client back and try to get another order and another order.”

Cold calls, hot tips

“The best way to bring in clients is cold calling. And we do get lots of referrals, but your best quality clients are cold calls. Absolutely 100%, without question. What we do from a cold calling perspective is we really just send a bunch of students out, and we make sure we have between 1,000 and 1,500 good quality prospects at all times.

“If somebody says, guys stop phoning, we will stop phoning. And if somebody becomes a client then they’re not a prospect any more.

“We try to market our office like a dentist’s office. When you go to the dentist somebody cleans your teeth, somebody pokes around in your mouth, does the fluoride, and the dentist comes in for four minutes and makes a diagnosis.

“So when you call one of my assistants answers the phone. I don’t answer the phone because usually calls are about admin or send me a cheque or I’m missing a tax form. I try to limit my time on the telephone to just doing what a dentist would do, is the higher profit stuff and talking to clients about investing and not talking to them about anything else but investing.

‘We kept the cold calling going from then, but we switched it from selling products to, [now] looking a bit older, approaching 30 years of age, positioning myself as a portfolio manager.

“At the time interest rates were north of 10% so we built our business mostly on government bonds. We found there was a lot of money in the Vancouver Stock Exchange, and a lot of money in the banks. We could come to prospective clients and say hey, do you know anything about bonds, because we can get you a better return than your GICs in the bank, and we can do it at very low levels of risk. And so that’s how we did it. It’s interesting that it was much easier to prospect in Vancouver than in Toronto, because people were either very high risk or very ultra-low risk, and we could come up the middle and there was a great opportunity to build our business.

“We kept growing [and by] 1993 we had about 20 million in assets. We have built that today to 435 million in assets.”

Good advice means good business

“For us it’s been a dramatic change in the last 4 or 5 years, because five years ago we were 200 million [and now we are] over 400 million.

‘We couldn’t handle any more clients because you had to make an outgoing call every time. And half the clients weren’t home, and they’d call back, and you’re on the phone and you would call them back to do a transaction. Now if we like something we’re buying we can buy a block of stock and place it in accounts. So that has enabled us to manage a lot more money.

‘The dramatic change for us has been discretionary license. We have about 50 brokers with a full discretionary license at our firm of 775 brokers. And I think it’s to the client’s advantage and to my advantage.

“Obviously, there’s been a positive regulator change. There’s been many negative ones. It doesn’t stress me out. It just costs me more money in terms of administrative assistance. We’ve got two full-time right now, and we’re going to have to hire a third. And it’s just because of all the paperwork involved.

“But so be it. We have the economies of scale to do that.

“I think the value of our advice is why we’ve doubled our assets in five years. We brought in 70 million bucks I think in 2008 or 2009, after the crash. Because our letter, which was dated February of 08 said ‘recession’, and it said get out of stocks. That might have been a bit of a lucky call, but that advice is what really propelled us to the level that we’re at. So my perception is that the clients deal with us because they do value our advice.”

Smarter the clients, better the industry

“I think clients have become more aware of the different options they have. [In the past], people really had no idea how much they were paying in management fees and mutual funds. And I think it’s very easy for us to talk about a 1% management fee rather than the 2.7% they’re paying at your typical mutual fund.

I think the clients have become more educated about the fees involved. I think it’s for the better. That it’s good, and a lot of it is the markets themselves. The client might have had an expectation five years ago of 12% or 15% return, [but now] the expectations have gotten much more realistic about what a portfolio can do.

I mean every financial plan five years ago said stocks will do 10% or 12%. Few people have done that in the last decade, and I think if you come in with a realistic expectation of say 5% to 7%, or 5% to 9% return you’ve got a pretty good chance of achieving that.

So I think clients have gotten smarter and it’s better for the whole industry.”

Little less conversation, little more action, please

“I send out a letter, [but] I try to communicate as little as possible with the clients, actually. It’s strange because I have about 800 households. So I really try to avoid meetings, because if clients came to see me once a year it would be just shy of four hours a day of meetings. If they saw me twice a day it would be 8 hours a day. So I’m trying to focus on managing their money, and that’s why I have a big staff and trader, and my marketing guy is now getting involved more and more with speaking with clients about answering their questions.

“A retired guy would love to say I’d love to sit down and come in with you and go through my account. Well, we try to change that into a phone appointment. Phone appointments can be done in 15 or 20 minutes, and sitting down always is an hour. Talk about the weather, family, holidays. Phone appointment we can get down to business.

“The challenge we have is clients calling in and wanting to chat with me, and that’s the biggest challenge we have. And it sometimes can be difficult. Because when there’s market volatility you can get 70 calls in a day. So we try to communicate with the letters, and from brief phone appointments, and stick to managing their money.”

Contrarian investing

“I think mostly what sets us apart from the peers is the way we actually manage the money. We’re not always bullish on stocks. We short stocks, we buy put options on stocks, we are very active in bonds. At one point we were the largest holder of real return bonds in the country. We had 1% of all the real return bonds issued by the government of Canada.

“At that time real returns were yielding 4.5%. The bonds soared in value, we sold them. We seemed to be the only ones on that trade that I know. We tend to be contrarians, which can be difficult at times. Because you can be too early.

“But in 2007, early 2008, I probably lost 20 very good clients, because they said I was too conservative. I was conservative because I felt the stock market was going to take a tumble. But the clients were very optimistic, so it’s very hard to sometimes be a contrarian, because it’s hard to nail the timing directly.

“So what sets us apart is having a different approach, and being willing to suggest to clients, or to invest them away from stocks. Because we don’t believe stocks are always a great place to be. We do a lot of fixed income trading, probably more than anybody that I know.

Game of monopoly

“I love the financial markets. I mean imagine being a sales rep for a pharmaceutical company where year after year you’re selling the same product. I mean for us the product changes every single day. I leap out of bed in the morning to find out what the markets are doing. The bond markets, the forex market, the stock market.

To me it’s absolutely a fun place to be. And it’s fun dealing with money. There’s no question I’m in my element. It’s what I love to do. I will never retire. My clients will be called one day to say David’s no longer with us.

I can’t imagine not doing this. I drive my wife crazy, because we’re on holidays, I’ve got my computers, and I know what’s going on all the time. Running up from the beach to check the markets. It’s what I love to do. And when you really love something you can be better than most, because it’s not just a job for me.

Certainly as a young person it would be much more difficult to get going. But it’s a great business. You get to play with money all day long. It’s like a game of monopoly with real money.

Pain in the neck

“Oh sure, the compliance and administration and the documentation that are required are extremely frustrating. I wouldn’t even know how to open an account. So I just let other people deal with that. [We are] absolutely frustrated with compliance and that kind of stuff. But we’ve never been sued, touch wood, and we’ve never had a problem with a client.

“The hardest part for us is you actually have to fill a client order before your order. It’s hard because you have to do clients first. So I get in, I want to buy this [but] I’ve got to buy it at the end of the day, after clients. It’s more challenging. If we didn’t have that rule I’d buy it some time in the middle. I’d buy some clients myself.

“You’ve got to worry about that stuff [but] we just deal with it. It’s not the end of the world. I mean most of the rules that are in place are good rules. I think that they’ve gone a little overboard with documentation and money laundering. I can guarantee we have no money launderers as clients. We have nobody involved in terrorism. However, it’s as though we do. Because somebody’s passport is expired [and] I think they’re the same person, but you’ve got to get new documents and all that kind of stuff.

“Clients get frustrated with it, too. [They say things like] ‘what do you mean, I’ve been dealing with you for 20 years, you know who I am.’ I know, I’m sorry. Yeah, it’s the regulators.

“I mean compliance, sometimes they just need to justify their own existence, so they send you a lot of silly questions. What’s this, what’s that. I wish someone would explain to my compliance department, putting 1% of someone’s portfolio into put options [may seem like] a risky investment, but in the context of a portfolio it reduces risk.

“But our compliance department doesn’t quite understand that. It’s a bit frustrating. But I’m not, I’m not here to say how bad our industry is, I thin it’s a pretty bloody good one.

On community involvement

“I had colon cancer five years ago, so my favourite charity is cancer and St. Paul’s Hospital, only because I survived that and came out with flying colours. People tend to gravitate to their own special needs as well. And I can give to those charities and get a tax write off, so it’s a pretty good deal.

“In fact, I usually give stock. I was fortunate enough to buy, in my own account Rogers Communications with an average cost of $5, so I usually just donate some Rogers shares, and it’s costing me next to nothing because I don’t have to pay any capital gains tax on the gift, and then I get a write off on the value of it. So it’s only costing me about 20 cents on the dollar to give to charity.”