Andrew Auerbach (00:01) Well, hello, everybody. Welcome to another edition of Beyond the Bank. My name is Andrew Orbach. I'm the co -founder of Delisle Advisory Group and very delighted to welcome Paul Harris to this discussion. In this podcast, we feature interesting people that have traveled in unique ways across the wealth management industry. And that certainly fits Paul Harris. So let me read Paul's

bio to you and then we can get in with what I know will be a great discussion. Paul worked at TD Asset Management as a senior portfolio manager. He worked in fixed income, managing a money market fund and several bond funds with an emphasis on credit research. He then moved into equities to the equity group where he managed the TD Bank Dividend Fund, the Small Cap Fund, the TD Bank Pension Fund.

After a decade at TD Asset Management, Paul moved to Fiduciary Trust International in New York as a Senior Portfolio Manager of Global Equities for Institutional Clients. He then returned to Toronto three years later where he co -founded Avenue Investment Management and he was instrumental in the growth of its assets under management from $5 million to a very impressive $350 million over 15 years.

In 2019, Paul and Stephanie Douglas, his colleague from Avenue, combined their very complimentary skills to create Harris Douglas Asset Management, offering investing with financial planning and high level client servicing. Paul is also a past chair of the Portfolio Management Association of Canada, and he sits on several investment committees for a number of charitable organizations. He's also, you've probably seen a regular guest on BNN Bloomberg. So

Paul, welcome and thank you for joining us.

Paul Harris (01:55) My pleasure, Andrew. Thank you for inviting me.

Andrew Auerbach (01:57) Yeah, it's going to be an interesting discussion. And I need to start with your very interesting travels and maybe a little bit more color that we have an individual who has worked in an institutional context, in a private client context, in a bank, in a boutique, in Canada and in US. And those are really very, very different areas, backgrounds, experiences. Would love to get your color on your journey.

Paul Harris (02:26) Yeah, so, you one of the things that I think is important with any kind of job, particularly in the investment world, is to have this idea that, you you need your bags packed. And I feel that, you know, you can do with education, and you can also do with experience. And so for me, learning about, you know, I started in fixed income, I still think it's actually people think fixed income is boring, and fixed income money managers are boring people. But it's actually for me was, I think, the best foundation to have

Andrew Auerbach (02:50) You

Paul Harris (02:55) to manage money for clients. And so I worked with a very bright gentleman by the name of Satish Rai. And so it was really important for me to understand fixed income. And as a general rule, even though I do a lot of equity, still, the fixed income people are than equity people. I had this really strong foundation of fixed income, but I also wanted to learn about the stock side. so it worked really well because I did a lot of credit research. So was able to transition to the equity side very easily.

It was a very fascinating time to be in our business because it was growing so rapidly during that period of time. TD Bank had just started doing mutual funds and all that stuff. So I got this opportunity to do so many different things that I would never get a chance to today. And I think today, the problem with the industry is you get verticalized very quickly. You just cover telecoms. It's such a bizarre thing for me to understand that when I was at TD, I did real estate, tech, banking, preferred shares, all kinds of stuff.

there was a very different kind of world I was living in back then. And one of the reasons I got a chance to go to New York was that I felt that TD, we were really just generally doing a lot of Canadian stocks. And so I really wanted some broader experience in global equities and added this chance to go to New York and work for a company that did global equities. And New York is very special in the asset management world. And you probably know this, Andrew, very well, is that

The reality is that every major company in the world has to show up to New York. The CEOs mostly, the CFOs. In Canada, a lot of times it was international companies get the IR person coming. Nothing wrong with that. But it's great to have seen real important CEOs of companies and you had access back to New York. So to me, it was a very fascinating time in my life where I got to meet some really important people on the ran businesses and I got a chance to see so many different companies.

and travel a lot around the world to see them as well. So was a great opportunity for me. And when I came back, I had this kind of vision about I'd done kind of mutual funds, I'd done institutional money. And what I really feel I felt is people really need help with their wealth. And that encompasses a lot more than just managing money for them. It means doing a lot of different things for them and growing their wealth. And as you know, a lot of people don't have pension plans anymore.

In our work, when I see somebody with a defined benefit pension plan, I go, my God, what a wonderful thing you have, where most people don't have it anymore and they have to save. And it becomes a complicated thing in an investment world where years ago you had no information. Now you have too much information, I think, about the investment world. So that was why I really liked the idea of doing private client. It seemed like I was really connecting with people, helping people, getting to meet people.

things that I really like about this job is I get to meet individuals all the time and help them with their wealth. so, and it's not people who have billions of dollars, don't get me wrong, the average client for that is a guy to a million or a million five. It's not, it's really people who need help with their wealth to become secure in their retirement. And I, and I like that doing that for them. And I like the way we do it at our firm, but I really like that aspect of the job where the institutional client, you know,

You go there, you do a presentation and it's run by a consultant. And there's a very different world of doing that. And on the mutual fund side, you very rarely met any of your clients. You might have do a presentation in a big form, but it was never sitting at their dining room table or something like that. So that was really why I felt that, you know, kind of the private client business is really important and an important aspect of helping people with their wealth, especially people that don't have.

who need to save to retire, right? And I think that's a very big thing and important thing. And I think that there's a, that's what interested me the most when I kind of as I journey, I realized this was the place I felt most comfortable in.

Andrew Auerbach (06:56) Really interesting and the skills that you develop in all those different areas, you know, are so distinct. And so I have a couple of follow -ons to hear given you've traveled this way, Paul. First, your perspective on this idea of having your bags packed. Clearly, you know, you've been curious and done that, but maybe you can give us a little more of what you mean by that. What do you tell somebody getting into this business with that council?

Paul Harris (07:26) Yeah, so I mean, it's just sort of, you know, I came from an immigrant background. My parents immigrated here from India. And so, you know, when I was very young, and education was a very important thing to them. And so, you know, I think that you need to go and get an education. It's really important. I know there's many people that talk about it as being useless and all that stuff, but it's not. It's important to get a good education. It doesn't mean it has to be in university, don't get me wrong, but you need to get a good education. And I think that whatever that education is, whatever you

feel comfortable in doing and I think that's important. And what I mean by getting, what I feel what's really important by getting, keeping your, having a bag packed is somebody can take it, somebody can fire you from a job. Like that's just easy for them to do. They don't need you anymore. They can get rid of you, but they can't take away your education and they can't take away your experiences. They can't take away all that learning you've got behind you. And that is very valuable, you know, as, as, as you get older and as times change and as things change.

it becomes very valuable because no one can take away that experience from you. And I think that's what's important because you can always use that to do something else. And I think people forget that. I think when you work for firm for a long time and you get let go, it's very devastating to you as an individual. But you have all these wonderful things that you packed away and you just have to kind of take the time to release them from yourself and you'll find something that's much more motivating and all those other things. But I that's the hard part for individuals is that they don't realize that you need these things.

And learning is really important. And I think this business is about learning over a period of time. You don't come in after university and become a great investor. Some people do. That's very rare. But you learn from great people. You have a mentor. You learn from other things. You learn by making mistakes in the equity market or in the fixed income market, knowing not what to do. You learn from having bad markets. I went through the 90s in the fixed income market in Canada, which was terrible. I went through

2008, I went through 2020. Those are really important experiences to have as an investor because it helps you understand not only what you did wrong, but what you should be doing if it happens again. And it will definitely happen again. All these things happen again. They may not be extreme as they were in those periods of time, but it will happen again and you need to be prepared. that's part of packing your bags is an experience and learning, right?

Andrew Auerbach (09:34) Ha

Yeah, what a what what great counsel and you know, to your point about you have to have these experiences to really appreciate what you're not going to get out of a book, you know, and so controlling your destiny, I think is so important. You mentioned, Paul, about, first of all, you know, the joy of this business of lifelong learning, I just wanted to pile on that I, think all of us have been influenced by mentors in our career, you know, people that we would look at who were

Paul Harris (09:54) Right.

Andrew Auerbach (10:13) The wise ones, you know with perspectives and experiences and lived through the 70s and could share those, you know those experiences I'll never forget though, you know one of the mentors I had early when I started in research on the buy side was a fellow who was 70 and who said the beauty of this business is it's more fun today than it was when I started and As long as my brain keeps working. I'm here like there's no impetus for me to to retire and I don't think there's many

Paul Harris (10:39) Right.

Andrew Auerbach (10:43) careers that can offer that where you have people who actually feel they're still growing in a role at seven.

Paul Harris (10:49) Yeah, I absolutely agree with you. So one of the beauties of, you know, running my own business is that, is that I can stay here for a long time. You know, we need a lot of people and it's, you know, it's a very different perspective, depending on what you do for a living, obviously. We need a lot of clients to go, I want to retire with 55. And I go, well, you're kind of living till you're 95 these days, unless you did something really at a very bad lifestyle, or you have some kind of, you know, genetic

disposition to die early. But outside of that, you're living for a long time, you can only golf that much, you can only travel so much. So to me, and then also you as an as you as we get older, you want your brain not to atrophy and your body not to atrophy. Doing something like this to me keeps me you know, alive and and one of the beauties of this business is that it changes a lot. And so it's also the bad part about this business. It's constantly changing, which is good, but it's also bad because we tend to make bad decisions when all these things are happening.

Andrew Auerbach (11:21) You

Paul Harris (11:45) But as a rule, think this is one of the important things for having my own business, which is very important to me, is the fact that I can continue to do this well into my 70s and maybe my 80s as well if I choose to. Right? And so that will depend on a lot of different things, but that doesn't stop me from doing this. And I think I will be better at it as I get older, because I have far more experiences and better knowledge about how to deal with things that when they turn bad, right? And I think that that's, and this will, like I said, it will eventually happen again where we'll have

from that thing happening, you need to know how to manage through that period of time.

Andrew Auerbach (12:20) Yeah. Well, I really am looking forward to getting into hearing about your experiences as a business owner, which is unusual in our industry in Canada, as you know, but a few more contrasts, given, you know, your very unique travels. You had mentioned earlier, having worked in fixed income and worked in equity. My background when we used to do the morning calls and you would hear from the different analysts is there's a very friendly tension between fixed income and equity analysts there.

outlook on the world, their perspectives on the triggers of events. What do you pull? You referenced given, you you're obviously quite immersed in equities these days. But what is your perspective on some of those contrasts? Like, what are the differences between a fixed income analyst and an equity analyst, their outlook? That tension I describe, for lack of a better word.

Paul Harris (13:10) Yeah.

Right, so, you know, I think the problem with the world is there will be things that, so the stock market is the most visible thing that most people see, right? So you can walk down Bay Street or any, lot of major streets in Toronto and you can see the stock market right in front of you, but nobody can see the fixed income market in front of you because it's not an exchange traded market, it's institutional market, right? The pricing is very different in all those things. But I would argue that there are two things that are important.

from an asset allocation point of view fixed income is very important because if you look at any really bad day in the world and Stocks go down the bond market as well because people have to move their money somewhere else And if you look at all the bad things that happen in the world it all happens in the fixed income market first and the stock market as is an adjunct to that so In 2008 it wasn't that stock market people remember all the stock market fell the stock market fell No, no, it all happened in the fixed income market first. If you watch that movie the big short, it's all about fixed income It's got nothing to do with the stock market

the stock market that occurred because of what happened in the fixed income market. And fixed income is very important because people think about the fixed income market very differently, right? They say, you're a corporation, you're issuing bonds. Yeah, but lot of corporations issue short term debt because they fund themselves in the short end of the curve. And when all those bad things happen, it's a lot of times it's in the short end of the curve, all these bad things happen, whether it's 2008, whether it's...

whether it was 2020, March of 2020, which will the Federal Reserve have to come in and look to buy the short end of the curve and give everybody US dollars. So it's really important to understand fixed income because it has an impact on the stock market. You know, from an analytical point of view, fixed income people are kind of boring because all they care about is, I just want my money back. I don't care about anything else. I want my money back. So they analyze companies based on getting their money back, not on, this is a nifty product or

you know, this guy is so good at defining oil and gas and all that. That's just isn't, that's not the way they think about it. They think about it as saying, can this company pay me my money back at the end of the day? I know it matures in 20 to 30. Can they, will they have the money to give me back, pay my coupons and give me back my money, my principal. And that's how you think about it, fixed income. So it's a very different perspective that I came to the equity market with when I look at it. And so when I look at metrics in the stock market, it's very different than I'd say,

some other people that look at metrics in the stock market. So I really want to understand free cash flow and all those other things. So I felt it helped me be a better stock investor, but it also helps me understand the macro world we live in, which has far more implications for the stock market as a general rule than people think. And I think that that's the whole thing. I don't mean it in a bad way, but bad things happen in fixed income all the time, whether it's a company or whether it's a government.

or it happens in the fixed income first, because over indebted companies, their stock prices eventually fall because they can't pay their debts. So it has really big implications. And I think that people, in a world we live in today, you don't get a chance to do what I got a chance to do, which is work in fixed income, then move to equities. kind of work in fixed income or in equities, and you don't mash those together as much as even though a lot of...

portfolio management, asset management companies will say, the fixed income people talk to the equity people. Maybe, they live in different worlds a lot of times. think good companies that happens, but sort of okay companies they don't happen because they're just seen as different asset classes. And they may have to work together on a balance plan or some of that, but not really how they think about stock and bond investing.

Andrew Auerbach (16:53) You know, it's a very interesting point, your comment about the increasing level of specialization across sectors. And I think it's probably a challenge for our regulators as well, that, you know, the experience we require in order to be registered as portfolio managers is one that really draws on a more broad -based generalist approach that you actually do understand how to do a workup to value and assess companies that you've actively managed portfolios, these kinds of things. now

When you talk to some of the larger firms, say, look, I'm actually trying to hire computer scientists for AI, for algorithms, for things that actually they don't have that training and background. And oftentimes I hear they have difficulty securing registration for these individuals, given that lack of experience. So I think it is gonna be a challenge that, as you say, people are not gonna come up the way you came up.

Paul Harris (17:48) Yeah. And I think it's a, some ways it's sad to me, right? But I think, and I, when I speak to young people about advice, about getting into this industry, I really make it very clear to them that you will be forced into a specialization very quickly. And that's not, that's detrimental to you in many ways, right? So you have to make a decision to think about, okay, I'm going to learn as much as I can, but I got to move to someplace else to be much more broad -based. And I think that idea that you could, I could one day be looking at a

a real estate company and the next day looking at a tech company, the next day looking at a finance company was very pleasing to me as opposed to somebody saying, well, I just do telecoms. It's moved to the fixed income side too. So you will analyze telecoms, know, maybe globally, but in the fixed income pool, right? I think that in my view, it's a very bad thing in many ways. I think it hurts the individual, but it helps the company, right? It's harder for you to leave.

for you to move and all those other things within a big bureaucratic company like any of these large asset management companies. And I think that's the tougher part for a lot of people is that if they have to leave that, it becomes much more difficult for them to move someplace else. So the advice I give a lot of young people that come into this field is that learn as much as you possibly can, but you don't want to get stuck in one. You might, don't get me wrong, some people are happy doing that. I would never have been happy doing that. I don't think most people will because you can't.

do something like I'm doing. Start your own company if you just did telecoms because you need to be more broad -based.

Andrew Auerbach (19:21) That's a great segue into another area that you will have some unique perspectives on, which is why we do not have more boutique wealth management firms in Canada. And as a contrast, you know, I've talked to a number of people about this, Paul, that in the U .S., the, you know, independent boutique firms, there'd be close to 20 ,000 of them. It's about a third of the market. And in fact, it continues to be the fastest growing part of the market based on client demand. And in Canada,

there's probably under 400. I think it's debatable the exact number, but let's say under 400 independent firms, largely with the significant concentration of banks, of course, you know, with their dominance in Canada, which is different than the US. But as a starting point, I would just love to get your perspectives on that contrast. Why are there so few PM firms? And as you respond to that, you know, maybe some of your perspectives given, you also chaired

PMAC, the Portfolio Management Association of Canada. So I think you probably have a unique lens on this question.

Paul Harris (20:28) So, you know, I'm not, think one of the issues that really faced firms starting up is that it's become such a regulatory nightmare. And I'm not trying to be critical of the OFC or the CSA. I think some of the policies that they bring in are important and good, but their execution is always poor on these policies. I think, there's very little direction given to people like me about what they actually mean by things. And so,

I think that's become the regulatory burden for a lot of people like us who, you when I started off in the Business of the Avenue, there was really nothing, there was no major regulatory issues outside of, there are a few things that you had to do and it's become more more burdensome over a period of time. And I think that when people look at that, they go, I don't know if I want to be doing this, right? And so it becomes much more difficult. And I'm not sure that regulatory burden in the United States is any different. I'm not privy to that. I don't have knowledge about that as much. That's one thing.

I think that, you know, obviously we're a smaller country and so there's less likely for us to have as many, you know, as wealthy people or people that kind of fall into that category that will be private client as much. But saying all that, I think it's just really that it's not, I think people are scared to do this kind of stuff, right? I mean, even though I was very scared when I first started off, but I had the window opportunity

I saw some light at the end of the tunnel. I had some money saved and all these other things. And starting a business is very difficult. mean, you know, it's not an easy thing. And I think people get, when you get older, you get more conservative and you don't want to do it when you're older because you don't, think, I've got a lifestyle that I have and I don't want to give that up in a certain place. So that, you know, those may be some of the contributing factors, but I would say, you know, one of the problems I have is that, is that it's become a very large regulatory burden.

Don't get me wrong, regulation is very important. think one of the reasons why we have such a great banking industry in this country, it's highly regulated. Like the US is less regulated, they've always had problems. Whereas we're not. So we're highly regulated and we don't have the same problems that we have in the US, right? So that's really important and regulation is important. But regulation has to work within the framework, I think, of the kind of growing these businesses for people and allowing companies like yours and mine to grow over a period of time.

and give us better execution on regulation and what it means. Sometimes regulation is totally unclear to the lay person like me. So I think that's one thing. I I think with PMAC, know, PMAC is always... So when I started off with PMAC, it was just one person and somebody helping. Katie Wamsley who's done a fanatic job, one person, her and somebody else. But it's grown to be a larger organization with a board and many more committees.

And what they've done is, which is really important, I think, and why I think of PMAC, and I tell anybody that starts their own company to join PMAC, is that they are really tied into regulators today, whether it's the OSC, the CSA, the Quebec regulator, the Alberta regulator, they're really tied into them. And what that means is, years ago, if the OSC or CSA came out with something, they just came out with it, they didn't even talk to PMAC. Today, they call PMAC first. And we give great insight into

member firms about what they're thinking about stuff. Now, that may not necessarily change policy, but it makes them aware of the issues that we face. it's always, we go back to, they go back to them and say, listen, you know, these are the things you recommended. This is what people are saying about how you guys are looking at these things. So they really give you good direction. think that's what PMAC is healthy about it, or very important to be a member of. And I think, you know, I think firms are growing. There's, Katie will tell you that they've

over the last several years, they've had a lot of new firms join PMAC. So there is that kind of thing to do that. I think that where I think it's harder for people to do is, you know, I started the company in a very different fashion. Sometimes people who are working for banks, etc., who want to leave a bank, know, banks provide you with a great foundation, whether you're working, whether you're at RBC or some of that, you know, you don't have really do anything. But when you leave a company,

like RBC and maybe go to start your own business. Well, you kind of have employees and you have to take care of tech and you have to take care of leasing and all these other things that you go, well, I don't want to do any of these things or, you and so those things become much harder and maybe you're not managing money or you're not seeing quite so much. And I think that makes a difference because that's hard to do. Like it's hard to manage all those things. And you always obviously know all this, Andrew, but, but I think that's a much more difficult thing for a lot of people to give up that kind of,

I don't have to worry about compliance. I don't have to worry about my technology. They provide me with somebody who works for me. They pay for, especially if you're a big broker. So there's a very different field in running your own business, which I find enjoyable. I actually like the idea of running an operation. I like the idea of working with people and employees and all of that. So I like that. And maybe it's because I've done it for such a long time, I feel very comfortable in that zone.

But I think that's the trouble with people wanting to leave and starting their own company. There's all this stuff that you have to do that is not investment related. It's business related, it's company related, and that becomes burdensome. you can't, know, obviously you can get somebody else to do it for you, but it's not cheap, right? So you kind of understand that you make some money, but you also have to pay these bills. So I think that really becomes a difficult stumbling block for a lot of people to say, I'm going to go start my own business.

Andrew Auerbach (26:15) And if I contrast that, which is a very helpful flyover to the US and the RIA model largely in the US, a lot of it is driven on the benefit to clients. One of the reasons why they would articulate in the US that the boutique wealth management space is so dominant is really based on client demand. And so it's not for the faint of heart to set up a firm.

but it does have advantages. And I'd love to hear your lens on as the equity owner of the firm, maybe you could walk us through a little bit of one from a client value proposition, you know, what you're able to do within your firm that provides that differentiation, like what makes you different than perhaps a bank owned firm, what makes your specific approach to the market unique, and then perhaps as the owner.

those advantages. So from a client lens and from an advisor lens, you know, your perspective on your career travels having owned two firms.

Paul Harris (27:22) So I think one of the problems I have with this industry is that people, and I'm I'm including myself in this, don't get me wrong. I think we all think we're investment gurus and we're not. There's only a few people that really just are totally investment gurus. And one of the things I found with a lot of firms, even through working with Femac, like all these people thought, well, I'm just gonna, you I'm gonna be this investment person because that's what they were. And it's not that, like it's not about investment.

only. It's important. Don't get me wrong, it's very important, but it's not the most important thing. And one of the reasons I have a partner with Stephanie is that I think financial planning is important. think taxes are important. think insurance is important. think having wills and powers of attorney are important. That's what makes this holistic approach is far more important to me. So how we think about it, if you want my elevator speech, is sort of we're a family office for people with a million to

five or $7 million. That's the kind of zone we're in. So we want to be a family office for those people because they don't get a family office unless they have 20 or 30 or $40 million. So we want to be a family office. And in a family office, that model is very appealing to me because it provides all these other things. If you don't do financial planning, like, and I'll give you an example, we do a lot of financial planning with our clients. In 2020, we had nobody call us. In March of 2020, that whole period of time, no one called us.

because they knew we had a plan. Right. And so to me, it doesn't mean the plan doesn't changes. It doesn't mean any of things, but in our, in our prop, in our value proposition, you know, we have one financial planner that does, knows all this stuff and takes you through this whole thing. It's not, I'm not bringing in somebody else next week to do a financial plan for you. It's Stephanie does them. understands the clients. We review them regularly, right? Not every year necessarily, but we will review them, you know, every two years or something. So we create a foundation from which to understand asset allocation and risk.

And then we do the investment side based on the risk portfolio. And then we do understand your accounting, understand your, you know, if you need insurance and all those other things. So to me, it's really more about an investment is a part of that pie, you know, and I like doing it. but it's not the most important thing that I do every day. Most important thing I do every day is helping my clients with other things that they need done and stuff like that. I do investments, I look at them, but it's not something I want to be doing every day. And so

To me, we have to get away from, if you run a firm like this, you have to get away from saying that I'm an investment guru. You're not. And the data shows that already. And I think even people, if you look at people like my firm as well, we don't tell people we try to beat the index anymore. Nobody does that because they're not gonna do it. So what they tell people is that we get you a great rate of return at the lowest risk possible. So if you look at anybody's website, they all say that because they're not investment gurus anymore.

And so, you know, to me, that's really important is to have a firm that kind of allows you to do all these things and help people. Like I said, I'm in the job of helping people with their wealth. I'm in the job of helping them retire the way they want to retire and making sure they can retire the way they want to retire. And that's what I like about it. With respect to having my own business, I mean, I think it's the most wonderful thing in the world to have your own company. Like it's, I wish

I had done this so much earlier than I did, but that wasn't the opportunity and I was learning and stuff like that. But I wish I had done that a lot earlier because I think it's the most wonderful thing about it. Not only do you get to understand the operations of running a business, which is very different, right? mean, I think most people analyze companies in our field, but they don't run a business. But they always tell people how to run their business. And when you actually run a business, you realize, well, somebody's telling you that business is totally useless. So you actually run a business, you have to...

Andrew Auerbach (31:07) You

Paul Harris (31:14) look at your cash flow, pay your bills and all these other things, which I think is, I love that part of it. But it also allows me a tremendous amount of flexibility in my life, right? So there's no, I have an office which I come to every day because I like working out of an office, but it's not necessary anymore. you know, prior to COVID, people felt that they can manage money everywhere and do stuff with that, but they never did. Now you can actually do that. But I have a lot of flexibility in my life to go and do the things I want to do.

And it doesn't stop me from helping my clients or getting my work done or anything like that. So it gives me a lot of flexibility, but I like this idea that I run the operations of a business, which I find very interesting and fascinating. Creating a budget, looking at budgeting, you looking at all those things to me is really kind of interesting because like I said, I looked at some of these financials and said, they're going to grow their

revenue by this or whatever. And I ran a spreadsheet when I was looking at companies. But I never actually had to do that myself. Right. And so do I find that a real pleasure? Like even just thinking about, you know, how do we, how do we look at our revenue model? like, you know, we're going to grow our business by 5 % each year on returns and how much are we going to bring in and, you know, setting targets and budgets and looking at marketing and advertising. If we decide to do that, all those aspects are really interesting to me.

And, you know, some things have worked, some things haven't worked. it's like I said, it's learning about the equity market as well. You learn through, sometimes you make some mistakes, you go, spent money on this stuff, but it was just totally useless. But it but it's actually interesting. And, and I like that aspect of it. And I like the freedom I have, you know, personally, I don't think you get that working at a firm or a big firm and this idea that you, you know, when I finish my work, I finish my work, it doesn't mean I have to

sit around and wait for my boss leaves so I can leave, right? So I don't have that, that kind of feeling. know, everybody, Stephanie does her own independent stuff. do my own independent stuff. We work together, but we get everything done. And sometimes you get things, sometimes you have a day where you get things done at 12 o 'clock. I don't need to, you know, there's, there's no reason to stay till five because you finished everything you have to do. And I can do it, you know, at home or my phone or whatever. there's a dramatic amount of freedom that we have when you run your own business. You work hard.

Don't get me wrong, you work very hard, but, you work weekends, sometimes you're working in the evenings, but you actually have a freedom to get a lot of stuff done at a very fast pace where you wouldn't necessarily in a large organization where you have meetings and all these other things, right?

Andrew Auerbach (33:54) That's really, really well articulated. And I think it's not really understood in Canada, given how few firms there are like yours, Paul. In the US, I think it's much better understood the flexibility to run your business the way you choose to, how it evolves around your clients. And very clearly, your clients have evolved, which we'll talk about in a moment. And also, the value of equity, which is as a business owner,

the investments you're making in that business, you're creating value to shareholders, which in this case happened to be you as opposed to a large organization. And therefore your priorities don't really shift. Your priorities are a value proposition about being in service of your clients. I mean, that's your business. It's not changing based on the market environment or acquisitions and other businesses or those things. And I think that's not

thoroughly understood in Canada would be my observation because we're a very cash rich industry. know, advisors do well, of course, and really any of the different distribution sectors, but that freedom and flexibility to truly carve your course, I think is something that, you know, I've certainly discovered going down this path. The passion that you've just articulated about how you've done it is something I hear again and again, as I talk to, you know, independent boutique.

Owners of firms

Paul Harris (35:21) Yeah, so I absolutely agree. Like, I mean, I think that that's, that's really it. Like, it's not, yes, I get a chance to build equity. And, you know, I don't know what happens to that. But Stephanie and I kind of work together to build a business. And that business has some value to both of us, but hopefully to somebody else at some point time, I don't know. But I think that, and I think this is one of like, you brought up a very interesting thing, because one of the things that we've done, they used to do at PMAX,

is they used to have all these events to try and say, okay, well, people are transitioning out of their business and, you know, looking at selling it and all these other things. But nobody really ends up selling their business very often, and this isn't because they realize, well, I can just keep on doing this, right? So it becomes harder to, it becomes harder to exit. That's one thing, because obviously, a lot of people who run these kinds of businesses think it's worth a lot more than it really is. So that's one, that's a different valuation issue. But, but I think it's also for a lot of these people, they realize that, you know, I can't, I don't need to

Andrew Auerbach (36:11) Yes.

Paul Harris (36:18) stop doing this. I like it, I enjoy it. Most of clients, like lot of these clients are mine, so and I know them personally, so I can carry on doing this. think that that's kind of the issue is that not only the personal freedom, but this idea that you have the ability to do it for a lot longer. And I think that's one of the reasons why maybe there's not as many transactions in this industry as you would think that because people are somewhat older, you think that we would be more transactions.

Andrew Auerbach (36:45) Yeah, I think that's right. And I think it's, it's interesting back to that point of flexibility. It takes me to clients and how clients have shifted. And, know, your comment about, we're not Warren Buffett. This idea of outsmarting markets is not the value proposition properly across the business. However, there's so many advisors that I think, particularly perhaps of a different generation, Paul, who, you know, if, they're being honest with themselves would much rather

stare at the screen and talk about their portfolio strategy, then do the things you're talking about around, you know, really engaging with clients around their families, priorities, accomplishing goals, the dynamics, et cetera. Can you describe, are you noticing an evolution in terms of what families are looking for today? there, does the business feel different in terms of expectations or have you been running it a certain way and you feel like it hasn't really?

changed much based on the way you're running the firm.

Paul Harris (37:47) I think the issue that we face is that, well not the issue, but I think one of the things that our clients are slightly older, and so I think there's a sense of what am I gonna do with my money and my kids are gonna get it and all these other things. So there is a sense that we do talk about those issues and financial planning really helps with that and our legal stuff helps with that as well. But I think that what happens with,

Like, just to be clear, like when I sit down with a client, yes, we may have a conversation for five minutes about the portfolio. Sometimes not at all. But most of time I talk about their lives, right? What they're doing, their children, depending on what age they are, their grandchildren, all these other things. And I think that's much more enjoyable and much more about building a relationship with me because that builds trust over a period of time. And that's really what I try to do is what Stephanie and I try to do is build trust with our clients. It's really not about

talking about our portfolio and all these other things, right? Yes, the portfolios have done well, you know, and I'm happy to speak about every stock in the portfolio ad nauseam if they want to. But I find that most people don't, right? Most people want to know about, you know, if they've known me for a long time, they want to know about my family or they want to know about Stephanie's family or, you know, I could talk about their family and their children and what they're doing. But that's really the conversation with most of my clients.

Andrew Auerbach (38:52) You

Paul Harris (39:09) you know, the KYC takes 10, 15 minutes to do, but that's what I spend time talking to them about, right? And in a funny way, COVID's really been hurt our business in that way, because a lot of people don't want to come downtown Toronto where we are to meetings and stuff like that. And they tend to be, especially some of the older people, they don't want to drive down, they don't want to park. So I think COVID's hurt my ability to do the things I really enjoy about my business, which is meet my clients on a regular basis.

Right? So like I said, the KYC takes 10, 15 minutes to do. It's not a big deal to do, but it's the pleasure of sitting down and having a meal with somebody and enjoying their company and talking to them about their life that connects me with them in a way that, you know, is so important to me because I know I can ask them about their grandchild and what they're doing or something like that. Right. So next time I meet them. So it's all about that. And I think COVID has only hurt our business in many ways. Yes, it's made easier to do a

KYC on online or whatever, that's not the issue. But I miss that contact I have with people when they came down and had lunch with me or I went and had lunch with them. And I that's really important to me. And that's how we kind of drive our businesses. Because that connection helps us to get referrals to and you know, and for us getting a referral from a client is we have a 95 % chance of closing the account. Right? It's so to us, it's really about building that relationship with people. And I miss that sometimes but

Andrew Auerbach (40:30) It's great.

Paul Harris (40:35) because of what's happened. But that's really what we do. We don't really talk about the portfolio. I'm, like I said, I'm very happy to talk about the portfolio. And, but it's not, it's not the, it's not really what we concentrate on in any meeting with our clients, you know, unless they want to, like, like I said, but most people don't, right? They want to talk about everything else but that, right? Maybe it's politics, maybe it's other things. It doesn't have to be about their family, but we get a chance to talk about other things as well. And I like that aspect of it.

So I don't really, I don't think the business has changed outside this idea that they don't want to come in, come downtown necessarily. But I think that we've always had this idea that the client is the most important thing. You you want to talk to them and have a relationship with them. And a relationship, and sometimes the relationship may not be, they may not want me, some people don't even talk to me at all, right? But the people that do, I want to know about what they're doing. so we really haven't changed that model.

I think it's harder for, you as people are getting older, you know, their kind of, their issues change to other things that are about their children and their, you know, their inheritance and all these other things. And so, you know, we, because we set up this kind of family office approach, can bring in experts to talk to them about all those things and have conversations with them in the same room if they want to, right? So.

But it really is more about a relationship, I think. And I think that's where you drive. And I would think that when you look at a lot of the stock brokerage industry or the advisor businesses from RBC and all these places, I would say what some of the guys that are very good at that business are really just are good people who are spend time with their clients. They're really good salespeople slash not sales, but salespeople slash, you know, they have relationships, they build relationships. That's really what it's about. Right. And that's why they've got some of these large books because they've built

Andrew Auerbach (42:19) Mm -hmm.

Paul Harris (42:30) strong relationships with people.

Andrew Auerbach (42:33) Yeah, I think that's spot on. And I think it's kind of irrespective of which channel works best for you, whether you're in a bank owned brokerage or independent counseling firm, the successful advisors, I think would echo your comments very strongly, which is, you know, what I hear so clearly from you is one, the trust foundation that your clients trust you, they know the money is being managed well, or they understand your investment strategy.

Paul Harris (42:38) Yeah.

Andrew Auerbach (43:00) but they don't need to understand why you happen to favor Royal over TD if that happens to be the case. That's not the thing that really matters to them. And I think that's an evolution in our industry, certainly from the legacy brokerage, where it was that, right? Where the business was transactional. Here's an idea. How do you implement that idea? And I think there's very few people that kind of run money that way today.

Paul Harris (43:28) Yeah, and I think that one of the things that is changing in our industry is that people like part of the problem with our industry is that people we do stuff or if you start a new company, you do things because somebody else did it. And that's not necessarily the kind of this whole what we're doing right now, somebody wouldn't have done 10 years ago, right? So 20 years ago, but but even with me, like I don't, you know, writing a quarterly letter to clients was something that everybody did. And then so when I started a company was, we have a quarterly letter. But it's

Andrew Auerbach (43:38) Hmm.

You

Paul Harris (43:53) But everybody has all that information already. you're not, you're most times regurgitating things that have happened. And very few people tell you what they think is going to happen because it's hard to do. so, you know, when I found out that most of my clients don't read my quarterly letter, I now do a video for them, which is five minutes and says what's going on in the world or what's happened with their portfolio. So, so I think that we have to, I think as a new company or companies are the world we live in today, we need to think about our business differently and think about the mediums which people

kind of interact with those meetings in a very different way. Like if you send a three page or four page letter, I bet you they don't read it because it's just too long and they can't watch it on the screen or print it off. Whereas if you send them a five minute video, they'll probably listen to it in their car, they'll listen to it on their iPad. So I think we have to understand that the industry is changing from that perspective and how you communicate with your clients is very different. And I think people still tend to do this old way of writing a quarterly letter and saying all the stuff. And I think it's fine.

Andrew Auerbach (44:30) Sure. Yep.

Yes.

Paul Harris (44:51) But I think it's not as it's not valuable as it once was because, know, in the 1940s and 50s, or 70s or 80s, nobody knew. Like today, everybody knows what a stock price is or what the fiat did, or they just know that, you know, they know it on their phone. So you're not giving them new information, right? You're just regurgitating old. And it was useful before because nobody had that information. But today everybody does. Right. So I think that so we as portfolio managers, companies, running companies, we have to think about changing how we interact with people.

in the best possible medium to help them, but it makes them understand what you're doing, but help them in a quicker way of doing that because they just don't, whether they don't have the time or they don't want to the time, it's, you know, we have to think slightly differently. And I don't think there's a large group of people in our industry that don't think that way. And I think that's bad for their clients as well.

Andrew Auerbach (45:39) Yeah.

Yeah, I love that positioning because I also think it's so client grounded and we have so much information available to us now that we actually don't even have to ask our clients. I mean, we know what's being opened, what's being viewed, what areas are most trafficked in terms of the pieces we're doing. So it's like, clearly my clients want to hear more of this because that seems to be the piece that and nobody's looking at that. And so while I think it's wonderful, nobody is consuming it. So.

Paul Harris (46:03) Okay, yeah.

But yeah.

Andrew Auerbach (46:10) There's no point in baking it if nobody's consuming it, which it sounds like you got to with your quarterly newsletter. This has been a really interesting conversation, Paul, and I know it will benefit everybody listening. I like to close, though, with just maybe opening it up. Is there anything we didn't cover or any words of advice for people that are either thinking about boutique wealth management or alternatively just thinking about early stage in their careers?

Paul Harris (46:36) Yeah, so there's a couple of things. One, I would say that I think that starting your own business is really a wonderful thing to do. I think that, like I said, I wish I did it earlier. I think that, you know, you also have to be at the right time and you have to have enough savings to manage through maybe a difficult time of getting clients. Like, you know, when people say they're going to give you a million dollars, they're only going to probably give you 250. So, you know, there's always this feeling that they go, I'm going to give you a million dollars and you start your own company. But then they go,

So I think that's always the case, but some people are able to transition a lot of their money, but we certainly weren't because we didn't have clients like that. We all came from the mutual fund industry. So I think that's really important. I think one of the things I get worried about for younger people wanting to get into this industry, I think that unfortunately AI will, like especially on the analyst side, I think AI will really take over a lot of those jobs. I feel that.

going as becoming an analyst is going to be a lot tougher down the road because that's going to be a much more difficult thing for people to, know, those, these machines can actually, so I remember when I first started at TDS management, we had Excel, but you had to go get a annual report and type in everything and then run all the formulas. And then Bloomberg and Reuters and all these guys had all the data, but it wasn't scrubbed. So it was terrible data that you got dumped into the thing. And now, now it's all scrubbed and it's all very clean and you can get, you know,

Microsoft since it came public all the data you want. And I think the problem for a lot of people with AI is the data is not scrubbed as much for whether it's company, you know, and so from a financial point of view, you know, everybody issues things digitally nowadays, so all the data is very scrubbed, right? But I think AI will kind of get rid of a lot of these jobs. And I feel bad about saying this to people, young people, but I really do believe that because I think today I can print out whatever I want and get

the information I need to look at a company the way I want to see it and the machine will do it for me. I'm not sure how long these kind of these portfolio managers may be around for a longer time. But I think being an analyst, you know, if you're a TVAXe manager or RBM or whatever, you may not need as many people, right? So that's one thing I get worried about. I think there's only upside to starting your own company. I think that you should, you know, jump off the cliff or whatever you want to call it.

And really do that because I do think there's a lot of people that can help you with this stuff too. Not only professional like lawyers and stuff like that, but PMAC helps you with all kinds of things. So I think there's a lot of opportunity to do all this stuff. I think that if you have to come with a mindset that you want to help people, not help yourself. So if you come from the mindset that you're helping people, that you're to help them grow their wealth, that you're going to help them retire happily and live their life the way they want to.

If you come from that mindset, think then your firm will be successful. I think if you come from the mindset that, I'm really great at buying stocks and investing businesses and stuff like that, you won't run a good business on a private client side anyways. It might be good for the mutual fund side, but not for the private client side, because it's about a relationship and driving a relationship. And not only the people today, but their kids. Like we manage a lot of children's money because the parents, so there's a generation already that's already with us. They may not stay with us.

but they definitely are with us right now. So I think that's kind of the thing you will really enjoy in your life if you do that and if you started off with the right attitude about helping people as opposed to kind of helping yourself, right? don't know, hedge funds and all that stuff, people go on about all that stuff, but it's not so much that, it's just that you need to be able to, if you're gonna be in a private client business, you really have to start off with a basis that you're helping people. And I think that makes you very, will make you for a very successful, actually.

because it's all about kind of dealing with people, you helping them and them helping you because they refer people to you. But I think those are only things. I I do think from an investment point of view, obviously, because of a lot of the data we have and it's really cheap to get to, it's a lot easier to do the investment side. But that's not, you years ago, you if you work at Royal Bank, you get Royal Bank research rate. Well, I can get the research from anywhere that I want to look at, not necessarily bank research, whatever.

But the ability for me to look at businesses are very simple today at a very low cost. So I think like that, that part is really the easiest part. think the harder part of our business is sort of the, you know, lawyers and accountants and all these other things that you have to hire to manage your business and dealing with regulatory environment. But saying all that stuff, I think those are small distractions and a bigger pleasure you will get out of running your own company.

Andrew Auerbach (51:23) I think one thing that's very clear as well is every time I talk to you, Paul, you love what you do and it comes out as you articulated and you're really good at what you do. So it's been a great conversation. Thank you for your time. Paul is the CEO of Harris Douglas Asset Management and co -founder. And it's been a real pleasure, Paul. So thank you for making time for the pod.

Paul Harris (51:45) Well, thank you very much, Andrew. I really appreciate the opportunity.