Jean (00:01) Hello everyone and hello Andrew. So today in our episode we are going to be speaking about the role that we are taking as thought leaders in the area of boutique wealth management in Canada. I think both of us, particularly you, you're very passionate about this niche in Canada providing extra diversity to Canadians when it comes to wealth management.

Andrew (00:03) Hello?

Jean (00:28) So today I thought it would be interesting to talk a little bit about what thought leadership means to you in this context. And perhaps since it is the first time we've spoken about this, you could dive into some of the steps that you took to launch our firm over the last 12 months for those who are listening who may be interested in doing the same. So first question then is how you view thought leadership and how you see that rolling out for Delisle over the next couple of years.

Andrew (00:59) For sure. And this is a topic that both of us are passionate about. And it really speaks to the contrasts and the evolution of the wealth management market, particularly in Canada and the number of boutique wealth management firms. And by boutique, mean independent, normally focused on a specific set of clients, really doing one specific thing, investment management or wealth management for high net worth.

Jean (01:09) you

Andrew (01:28) and ultra high net worth clients. In Canada, there are very few of these firms. There's only about 300 or so of these firms. And in the U S there's about 17 ,000. And in fact, in the U S it's the fastest growing part of the market. It represents about a third of the entire wealth market is, is this independent boutique channel. And so for us, we're

telling the story about this contrast and why this level of choice is so important for Canadians, our view is that this is now well underway and what you are going to see in the coming years is a significant number of boutique firms launching in Canada, very similar to what we have seen in the US. The markets are different and we can talk about that as you know.

But the clients are not all that different high net worth and ultra high net worth families in Canada or the US Largely care about the same things they care about their families. They care about their purpose in the world They care about their retirement and if they have enough money and on on and on the same the same things and so The markets have grown differently. We view it as part of our responsibility at Delisle

is not only to talk about what makes us unique in the wealth management landscape, but to encourage more people to think and explore and understand the different options that exist between, different types of options in Canada and Canada, where all clothes is it's largely one option because of all the consolidation that we've seen with the banks. it is largely

call it 80 % of the market is concentrated within five banks. And then 20 % of the market would be independent, whether brokerage firms or investment counseling firms. We really do feel that mix is going to change over time.

Jean (03:37) Right, right. And so in terms of setting up a boutique wealth management firm, often referred to as an investment counseling firm, such as we have done with Delisle, walk us through the steps or some of the steps to go from that being an idea to actually having a firm of one's own.

Andrew (03:57) Absolutely. Now it needs to be prefaced. There's no sugar coating that this is not for the faint of heart. It's a onerous process that took you and I with Sandra Henderson, the better part of a year in terms of pursuing registration. Now, in this spirit of thought leadership that you referenced earlier, we're going to be providing a lot more information on this process.

distributing eBooks, we're happy to talk to people about the process. Anything we can do to encourage the creation of more boutique firms will be good for the whole industry. And so let me give you a broad outline of the different tracks and the things that are involved in each of them. And I'll start with regulatory. This is a highly regulated industry, which is a good thing. We certainly want that given clients are entrusting

their life's wealth to advisory firms, investment counseling firms, in terms of the management and day -to -day decision -making. So there should be high regulation and standards. And so in Canada, you have to register with a securities commission, at least one of them. And the process is pretty detailed. You obviously need to do a firm application. There's a number of requirements for the firm application.

including experience levels for different roles. The first role is what's called the UDP, the ultimate designated person. This is the person that's ultimately responsible for the overall operation of the firm. And from a regulator's perspective, this is the individual who is ultimately accountable for everything. And so the UDP, as you would expect, has significant requirements. There's an application process.

around your industry experience, the roles you've done, your awareness of the rules. There is a sit down interview with the regulators, usually three to five hours, quite extensive in terms of understanding who the applicants are as they're setting up one of these firms. So the UDP is certainly one rule. Another rule is the chief compliance officer. The chief compliance officer has to have significant experience, understanding of

the industry because they have to be the one who know what the rules are and make sure the rules are being implemented within the firm, whether it's the policies and procedures, the monthly, quarterly, annual regulatory submissions that are required, whether it's around anti -terrorism, whether it's around liquidity requirements of the firm, registration process, on and on. You need to have a detailed knowledge

and significant experience in order to fulfill that CCO rule. So those are two critical roles, but probably the most important role is the person who can speak to clients. And so you need somebody registered as a portfolio manager in order to engage with clients, craft investment policy statements, and ultimately implement decisions on behalf of the client in terms of asset mix, how the money's invested.

in terms of the type of securities that are in the portfolio, et cetera. That registration is called advising representative, an AR registration. And there are significant requirements there as well. Certainly from an education point of view, a CFA is normally what you would see. Certainly that's the track that, as you know, I've pursued for my registration over the last 20 years.

There's also another designation called CIM, which is certainly acceptable, along with industry experience. They want to see that you have extensive experience in a portfolio management context, making investment decisions, of those kinds of things. So those are three of the critical roles. The process will require, of course, a lawyer that specializes in the application process to help guide you through.

all of these steps. It is not quick. Each step is thoroughly reviewed by the regulator. You need to be patient and recognize that it's a process. And so you have to go in with your eyes wide open that you've got to commit a significant amount of time. It's not like one and done. have to submit, you have to commit a significant amount of time throughout the year. It's not like you're just in a holding pattern. There's often iteration questions.

follow -up reviews, it's extensive in terms of that application process. There's also a number, I'm sorry, Gene.

Jean (08:52) Right. Yeah, I just have a question. You mentioned you need the CFA for the advising rep, and you certainly indicated the seniority of the ultimate designated person and the chief compliance officer, but can you get a little bit more specific on that? You know, how usually job descriptions say, you know, 10 to 20 years experience or five to 15. You came out of one of the large banks as, you know, I think you

there were 40 ,000 people on your team, you know, were the ultimate designated person, a chief compliance officer was on your team. Those are extremely senior roles in very big companies. If people listening don't have the background that you did applying, what would be sort of the, you know, the minimum kind of requirement that a person would need for those ultimate designated person positions and chief compliance officer?

Andrew (09:51) Yeah, this is part of what makes the regulators job so challenging is that there are guidelines, but they do a very good job, Gene, of kind of synthesizing all of it together to the core piece of can the individual perform the role competently? That's really the piece that's so important. And so as as guidelines, you know, obviously more is better.

of having done these roles. having, you know, if I were to use a ballpark five years of active experience in these roles is preferable, but it's not like the law. There's all kinds of exemptions throughout this process. I'll give you an example for the advising representative role. Certainly that's one where there's very clear posted guidelines by the regulator with the

Jean (10:34) is

Andrew (10:48) number of years of active industry experience, the criteria for an associate rep or for an advising rep, this call it three to five years of active experience, managing money with a CFA. Certainly if you're new to the business that that is very, very helpful if you only have three to five years, but certainly in my experience with registrations, some of the very best portfolio managers out there,

Jean (10:59) Right.

Andrew (11:17) do not have a CFA because they've been in the industry for so long. And so if you're a 25 year portfolio manager, who has been registered as an advising rep and you don't have the CFA, you know, that exemption will very likely go through you have the industry experience, you've been registered before. So there is some, some qualitative and some quantitative to the process. And, you know, the best rule of thumb for for

for me to guide people on is you need to have not just an awareness of the responsibilities in those three roles particularly, you have to have done them. And so if you've never been an advising rep, if you've never been a UDP, if you've never been a CCO, then I suspect the regulator will take a closer look at the application. Doesn't mean the application's not going to be accepted.

It simply means that, you like any other job, experience matters having done, having done these roles. so going in with your eyes wide open and you raise a very good point. These roles carry significant responsibility, personal responsibilities to adequately do the role, reputational responsibility. So you've really got to not, it's not a job you figure out on, on the job.

you have to have built up to two in order to do it. And, and the review is extensive for these three roles in in particular.

Jean (12:51) Right, because I can imagine there would be situations where people to your point are perhaps they don't have a CFA but many many years of experience but their experience has really always been in front of the client with others in the organization perhaps even in a different city carrying out the compliance function and carrying out the ultimate designated person decision making that you know that's just not been part of his or her career for example.

And I'm hearing you say that for that kind of person, even the very best client -facing person, it would be a challenge to put forward that application.

Andrew (13:32) This is why it's just so important to have a experienced securities lawyer helping you with your application, because you can do a lot of this preliminary exploration before you go very deep in the track. I mean, you certainly don't want to go through the time and expense of an application to find it's not approved in six months. And so the regulator does do a good job of a preliminary review of what they're seeing.

Jean (13:40) Okay.

Andrew (14:01) And before that even happens, you know, certainly we dealt with an excellent securities lawyer who specializes in these applications, who can make a phone call to the regulator, who can share their experience on other applications so that you have a rough idea if this is going to require exemptive relief in terms of seeking an exemption in your application, or if in fact that does fix the process. You know, our experience

Jean (14:01) I see.

Andrew (14:30) While we certainly were frustrated with the length of time the process takes, we found the individuals, particularly with the regulator, they're very good. They're very helpful. They are, of course, very knowledgeable, and they take their role of education quite seriously. And so they really do want to guide through this process and not waste time.

Jean (14:54) Yeah, well, and it's a protection of the public, reminds, you're speaking, it reminds me of the process I went through and my colleagues, friends in therapy have gone through to become registered psychotherapists with the College of Registered Psychotherapists of Ontario. know, it's onerous, there's a lot of steps, there's a lot of time, but at the core of it, they protect the public from people that are not appropriate to be.

Andrew (14:58) Absolutely.

Jean (15:20) Therapists similarly as the Ontario Securities Commission and every other provincial securities commission is responsible for making sure that the public is protected.

Andrew (15:28) Yeah. So I think we, and that's absolutely right. And ultimately that's what you and I kept reminding each other through this process, which is it's, there's a good reason. Exactly.

Jean (15:36) through both processes. When I was applying for a psychotherapy designation and we were applying for for July, in our frustration, we kept reminding ourselves that there's a very good reason for these processes.

Andrew (15:47) Exactly, exactly. so, you know, regulatory is a big track, and there's a lot to it. But there's a there's a whole lot more. You've got to set up a firm. And so in order to set up a firm, of course, you need your appropriate registrations. But you also need to build a firm. And so there's a number of pieces related to this part of the operational aspect to running to running your business. First of all, you're going to need custodian.

this is something that as we speak to clients is, you know, really important to understand that the firm that you're, delegating decision -making to does not hold the client's assets, right? The client's assets are held by a custodian with a direct record keeping. There's a very clear separation. so, you know, it's an important piece around the security of the assets. If for any reason, anything were to happen to the firm.

retirement or transition or whatever, the client assets are kept separate from the firm. And so you want to find a good custodian. The trades will be executed through the custodian. That's certainly an important criteria to go through. There's really two large providers in Canada for you to review. Our experience is the regulator certainly as part of the process will ask you why you chose who you did as it relates to your suppliers. They certainly wanted to know why.

We made our decision in our case, Fidelity is our custodian, one of the largest in the world. And there's a number of reasons we chose them, which we can get into perhaps later or another podcast. Another area is your whole technology platform beyond the custody aspect. And so that really encompasses how you onboard clients, how you provide reporting.

the type of client portal you're delivering to your clients so they can access their information as they need it, how you trade your portfolios, how you rebalance, how you do market research, all of these tools you need to solve for. We partnered on a white label basis with SOM at Purpose, Purpose Advisor Solutions.

We did a lot of work looking at the platforms. have a lot of experience, both Sandra and I, in terms of selecting vendors. And SOM has built a wonderful white label platform, fully integrated. So we just liked how progressive they were with their thinking on technology. And that was a really good decision. Our tools are fantastic as it relates to our platform. They're all integrated. They're seamless, paperless.

It's a wonderful, wonderful process. So that's all good. You'll need a website. You'll need to design your website, be comfortable with it. You'll need a good, and I need to underscore good, experienced tax accountant. This is not like a typical business where, of course, there's lots of capable accountants to do your books. There are very significant requirements around your financials. Again, protecting...

Jean (18:51) Thank

Andrew (19:04) the investing public and the financials need to be audited annually. And so you want to deal with a firm that has experience dealing with investment firms because there is a lot to the audit process that you'll be going through. Finally, what I would say in this whole piece is you need a strategy like any other business. Why are you setting up your firm? What makes you different? What are you going to be offering that will be compelling?

relative to other choices through it. there's a lot there, but that's a high level overview of at least the pillars that you've got to be organized and work against.

Jean (19:47) Right, right. And then of course, everything that you're talking about has a price tag attached to it, as does the starting of any business. We, in building Delilah, we just had excellent professional assistants and, you know, professionals charged for their time as they should. that is always a factor in deciding to open a business, including a boutique wealth management firm.

Andrew (20:12) Yes, that is very true. And I think again, back to the capital requirements to do this, you you can get good guidance on what to expect around how much it will cost, you know, in order to launch your firm. Obviously there's nuances based on the work you're doing, but you definitely want to go in with an understanding of, how much investment you will need to make financially.

Jean (20:39) Exactly. So just as we're winding up here, I think it would be useful if you outlined what are some of the plans you have for providing thought leadership in the months ahead and of course letting people know how they can contact you personally if they'd like a discussion about their plans and ideas.

Andrew (21:03) Yeah, we have been really, really struck by how open the other boutique firms are to meeting and interacting and a strong desire across the industry to see more boutique firms. Having more boutiques for firms is not just good for investors or for the public. It's good for the industry. And we want to play a role in that. And so I know that

both you and I and Sandra are always happy to speak to anybody who is contemplating a path, like, like this one. we certainly are closely connected with, PMAC, which is the association that a number of these boutique firms are members of, including Delisle. we are also, very close to the CFA society of Toronto and very happy to make introductions to, to those folks.

And in our own personal work, we're gonna be providing a lot of tools for people to be aware of the options, whether it's eBooks, which will provide more detail on what I've just covered in a very, very broad level. We're happy to make referrals to some of the experts that we have dealt with who have helped us navigate through this process. And really for us, we feel that given you, Sandra, myself have...

traveled in very different ways. You know, we've worked in big banks, we've run very large firms, we've run small firms. We really feel we have a role to play in the education and we're going to do our level best to tell the story. I think these podcasts are another good example of where people will be able to get information on the industry, on topics like what makes boutique firms unique.

Jean (22:55) Yeah, that's terrific. The investment management field is absolutely fascinating and the more that we can share with people of all ages, how great the industry is and the different options. The podcast is called Beyond the Bank and the banks in Canada are absolutely terrific institutions, but there are many other ways, as we're seeing in the United States, for a person to

practice the profession of investment management and we're very, very committed to sharing our ideas about that with others. So I think that's, unless there's something you'd like to say before we wrap up.

Andrew (23:34) Well said.

No, I think we've done a good broad overview.

Jean (23:41) Terrific. Okay, so anyone listening, if you choose to follow us wherever you get your podcasts, we would very much appreciate that. And of course, we're on Instagram, Facebook and LinkedIn. Goodbye for now.