CPABC in Focus November/ December 2015 | Page 40

Staying in Control of Your Investments When Working with a Portfolio Manager By Kevin Greenard CPA, CA, FMA, CFP, CIM Kevin Greenard is an associate director and portfolio manager with The Greenard Group at ScotiaMcLeod in Victoria, and a regular columnist with the Times Colonist newspaper. T here has been a dramatic increase in the number of professionals working in the financial services field over the past decade, and these individuals have a variety of titles, ranging from financial adviser to mutual fund representative, financial planner to insurance broker, and investment adviser to portfolio manager—to name a few. There are two main regulatory bodies in Canada: the Mutual Fund Dealers Association of Canada (MFDA) and the Investment Industry Regulatory Organization of Canada (IIROC). From a regulatory standpoint, professionals in financial services are differentiated by approval categories. Two common registration types are “investment representative” (IR) and “registered representative” (RR). An IR equates to what some firms call “administrative associates.” IIROC rules state that an IR can trade, but not advise on, securities with the public in Canada. By contrast, an RR can trade and advise on securities. Often, an RR will speak directly to a client about trade recommendations, and give the trade sheet to an IR for processing after all trade details have been confirmed. There is another approval category: “portfolio manager” (PM). A PM is an RR who has been designated and approved for the purpose of managing the investment portfolio of an investment dealer’s clients through discretionary authority granted by said clients. Discretionary accounts are often referred to as “managed accounts.” It’s important to note that managed accounts must be fee-based, as PMs cannot use discretion to charge commissions. To obtain approval to act as PMs, individuals must first complete educational requirements, gain a specific amount of time in the industry, and have a minimum level of assets under management; they must also have a clean compliance record.1 Additionally, financial firms often have internal requirements as well, because their PMs have considerable oversight of all trades. Once approved, PMs are held to a high duty of care, often referred to as a fiduciary responsibility. While the regulations are stringent, PMs do have significant advantages over traditional advisers when it comes to the speed of trade execution. Consider that the markets in British Columbia open at 6:30 a.m. and close at 1:00