CLIENT COMMUNITY NEWSLETTER Spring 2017Submitted by Parkhouse Financial Inc. / Gravitas Securities Inc. on March 24th, 2017
Life & Disability Insurance
Nathan Parkhouse, CFP, CIM, FMA
Portfolio Manager & Investment Advisor
121 Richmond St W, Suite 501
Toronto ON M5H 2K1
Thank you to all of our clients and friends for a terrific first decade in business - Parkhouse Financial's doors first opened in late 2006! In particular, thank you for the significant amount of referral business that we received, especially throughout the last couple of years. We appreciate your support always and take that vote of confidence seriously. We always enjoy working with you and welcoming new clients too. You make our job fun!
The global economy entered 2017 on solid footing, with investor optimism high for pro-growth regulatory and tax policy changes from the new government in Washington. Generally, global stock markets have acted very positively since Trump’s election…the so-called “Trump-Bump”. Specifically, the Canadian stock market continues to be very much tied to the price of oil, with a great 2016 on the heels of a poor 2015. South of the border, the U.S. economy continues to experience a mix of mid- and late-cycle dynamics with a low risk of recession.
However, the new Trump administration's more confrontational approach to trade relationships raises protectionist risks for the global economy and financial markets --- an outright trade war with China for example. And, since it seems like every day we’re waiting to find out what Trump's administration is planning next, markets have demonstrated a lot of uncertainty over these past few weeks.
We continue as always to recommend exposure to domestic and non-domestic markets and currencies. History has shown that this strategy improves return over the long-term while reducing overall portfolio volatility.
We also remind everyone that sometimes markets do go down. Reviewing portfolio performance over the last 10 years, it is usual to see two or three negative years since 2006 for most clients. That timeframe, of course, includes some of the very choppy markets that we experienced in 2007 and 2008.
"I will tell you the secret to getting rich on Wall Street. You try to be greedy when others are fearful. And you try to be fearful when others are greedy." --- Warren Buffett
Nevertheless, overall investment returns over that 10 year period have been generally solid. We also note that, even in calendar years that deliver strong investment returns, it is quite normal to have at least one negative calendar quarter.
Obviously, we know and expect that markets will sometimes pull back. Most stock markets around the world historically go up approximately three years out of every four. So we know to expect occasional market declines. Investment success entails being emotionally detached from short-term market ups and downs and staying invested.
More Comprehensive Reporting with "CRM2"
Starting in 2017, statements sent to clients now have information on investment performance and the amount of fees and commissions received by our dealer, Gravitas Securities. This additional information is the result of a new regulation called CRM2 ("Client Relationship Model"). CRM2 applies to all mutual fund and investment dealers. CRM2 does not apply to segregated funds offered through life insurance companies.
One of the most frequent questions I hear, particularly from new clients, is "How do you get paid?" For several years, our remuneration has been very simple. I utilize funds with management fees and taxes that are embedded in the daily pricing of the funds. The proportionate amount of all the fund company fees and taxes (such as HST) is called the Management Expense Ratio ("MER"). The MER is a number that I often bring to the attention of clients. All else being equal, the lower the MER the higher the net investment returns to the client over time.
From the MER, the mutual fund companies pay for portfolio management, regulatory, accounting, legal, operations, marketing, reporting and other overhead costs. Also from the MER, fund companies pay dealers like Gravitas Securities a monthly "trailing commission" for service and advice. That trailing commission is then divided between the dealer and the advisor. The amount of trailing commission on any fund is publicly available through Fund Facts, prospectuses, and many other sources. Of course, please feel free to contact us directly if you have any questions.
My eldest child, 9-year-old Mackenzie is entering her first year of competitive dance competitions after already having 5 years of recreational level dancing under her tiny belt. Madison, my near 7-year-old middle child is half-way through the same training regimen and is already looking forward to her turn at competitive dance in a couple more years. Spencer, the youngest at 5 years old and the only boy in the bunch, whom is also in dance, is mostly just looking forward to starting his hockey 'career'. My wife Jennifer continues to operate, counsel and serve patients at her Guardian Pharmacy located in the Bloor-Islington Centre.
We are committed to a low stress common sense approach to investing - hire the best managers who are able to cover the world and focus at least as much on risk management as achieving high returns. We bring a higher level of academic credentials, expertise, and experience to the table. We invest considerable time and effort on research, tax effectiveness, and risk management. We are committed to providing the best level of investment advice available in the most cost effective manner. We remain sensitive to management expense ratios - the lower the ratio the better for you, all else being equal. In a nutshell - we strive to offer the best possible service at the best possible price.