Building a Modern Portfolio
Alternative Investments with Jason Mann, CFA | Co-Founder, Partner, CIO | EHP Funds
Episode 2 - Alternative Investments - Jason Mann EHP - Dec 2023
0:00 Josephine Gonzales: The traditional 6040 portfolio has come into question in recent years, most especially after the anomaly of the year we had last year, where a portfolio positioned as such may have raised some brows. And curiosity as to whether this theory holds true. And arguably a portfolio of say 5030 twenty with the latter being allocated to alternative investments or alts is a new modern consideration for portfolio construction.
0:33 Today my guest is Co-founder, Partner and Chief Investment Officer of EHP Funds, Jason Mann. Previous to founding HP Funds, Jason was Managing Director and Co Head of the Absolute Return Arbitrage group for one of the largest Canadian banks. Thanks for taking the time to join us today, Jason.
0:55 Jason Mann: Thanks for having me.
0:56 I'm excited to pick your brain about a topic you know best about alternative investments or alt alter previously reserved for institutional investors, but now we're a little bit more prevalent in modern portfolios and more accessible to investors. I think in my personal experience and with the clients I work with, they now ask me about them and have an interest in adding alts to their portfolios. So for those who aren't quite familiar with them, what exactly is an alternative investment?
1:32 Jason Mann: Sure. So it's actually quite a broad category as you can imagine, you know, and really maybe the question is what is it an alternative to, you know, and really the answer is it's an alternative to a traditional bond or a traditional stock. What makes an ALT an alternative fund is that it uses some might use different strategies. It can use moderate amounts of leverage to enhance returns. It can also use shorting. So it can use strategies that can provide returns when markets actually go down. So you don't have to own something that only works when markets go up. You can have something that protects the portfolio and markets decline. Alternatives can also range from hard asset funds. So perhaps it's an alt that holds real estate investments or infrastructure investments that provide a steady rate of return. I kind of view those as the less liquid alts. What we do is called liquid alternative mutual funds and really these are the most recent foray for the Canadian investor.
2:41 Regulators change the rules about five years ago to allow for a regular mutual fund to use some of these strategies including leverage and shorting and that became the liquid alt universe and that really is where we participate.
2:57 Josephine Gonzales: OK. So a wide variety of options and I guess categories to be considered an alternative investment, but really just an alternative to what is usually in a portfolio, equity is fixed income, bonds, etcetera.
3:12 I think sometimes alt as well. And especially for those who don't have familiarity or experience with them, they get a bad rap and there's even maybe some mystery or fear associated with them. And truth be told, you mentioned there that there are some that are a bit more sophisticated in nature, a little bit more high risk.
3:32 But if you can go through a little bit more in depth the spectrum of alternative investments and maybe some of the ones that EHP specializes in that you mentioned that are more liquid in nature.
3:44 Jason Mann: Sure. So you know what's and I think you're right, alternative funds do get a bad rap, you know, and I think I think the word hedge fund is sometimes a dirty word, right. And it's because we see a lot of headlines where you know some hedge fund manager has taken too much risk and the the funds have have, you know, gone wrong.
4:05 Maybe they were in very illiquid investments or they used too much leverage or there was some fraud. I mean we've seen that in Canada. So I would put a lot of those types of strategies in the unregulated market, right. So these are what are called offering them random funds. They are unregulated by the regulators, which means that there is a lot of latitude for the manager to do things that you know that can cause these problems. Not to say that there aren't a lot of very good strategies offered under that that wrapper, but typically where you've seen problems in the past, it's coming from that illiquid market.
4:44 Bridging finance was an example that's got a lot of press in in Canada over recent years, but that was a case of a private lender that made bad loans. But really the worst part about it was there was fraud. There again an unregulated product where the regulators don't have the ability to control what's going on in the fund. Liquid alternatives on the other hand are regulated. So just like a traditional mutual fund, they we have to produce a certain amount of regulatory documents were audited by the regulator and there's a prescribed set of risk control if you will. So those types of products tend to be actually less risky than traditional long only stock or bond funds, right. We all know that if we if we buy even an index fund that holds 500 individual companies, you know the S&P 500, that index might decline 40 or 50%. It has multiple times in the past. So alternative funds are actually meant to be less risky than that and that really is why they exist.
5:47 You know for the for the longest time liquid alts have been built as a bond replacement or a defensive allocation in a portfolio. They their objective really was to do what bonds couldn't do for you and rates were effectively 0, and you know all did meaningfully better than bonds over the last two years because rates have been rising and bonds fell a lot or they were meant to protect your portfolio against big equity drawdowns, big stock drawdowns and that really is that you know I think people need to distinguish between those. So. So what type of strategies do we see in liquid alt? It can be equity strategies, it can be bond strategies. Typically they're long short, meaning that the manager will buy stocks or bonds that they think have attributes that they like and will go up, and they'll short. Or bet against stocks or bonds where they expect to have bad attributes and those will fall. And in a perfect world, both your lungs and your shorts make money for you.
6:51 Realistically what happens is you get a less return stream and you get defence in bad markets. That's really what they're there for.
7:00 Josephine Gonzales: And that's I think a great summary of what an alt is. And from my perspective too and managing client money I think more often than not the reason I would use them in a portfolio is what you said there it's a diversifier for traditional asset classes. But for me it also in times where you know there is market volatility, it could smooth out the client experience like you mentioned there. There is a whole spectrum of different alternative investments, but it's really important to know exactly what they are and to really match and what I do as well is match the risk level of the client with the specific investment the way you would any other investment in your portfolio. So Jason, I want to go back a bit and draw on your experience prior to creating EHP where you are Managing Director and Co-Head of the Absolute return arbitrage group for a Canadian bank managing money, arguably the most sensitive and precious in our economy. And using some of the strategies which are ultimately now used to create the client solutions or products provided by EHP. What drove you to create EHP and provide some of these same solutions for client portfolios?
8:00 Jason Mann: Right. So yeah, so when we were at the bank, we really had two roles. Part of it was to run money for the bank. So you know you have one client which is the bank and you can certainly describe their risk tolerance as very low. Your job is to make money, not lose it and they have a very low tolerance for losing money. That's you know starting point #1. So that leads you to look for strategies that have built in insurance or quite defensive. You know I'll give you an example, one of them was merger arbitrage. So merger arbitrage is investing in companies as they're in the process of being acquired. So you know I many of your clients will know that last year Rogers bought shot you could buy Shaw at a lower price than what you would ultimately get when that deal closed. And the reason that there's this, this spread or the reason Shaw traded below its ultimate take out price is there's risk in that deal, there's risk the deal doesn't go through now as a as a single stock that's quite a risky thing to do.
9:27 But if you have a portfolio of companies that are in the process of being acquired, once you have 30 or 40 businesses all like that, all in the process of being acquired, they all have a spread. So you can earn a return by buying them after the deal's announced holding it until it closes. And if you buy a portfolio, the math starts to work in your favor. About 94% of all deals close and you get a bond like return screen, but it doesn't come from bonds, it comes from a different source and therefore doesn't necessarily act like a bond. So that's the kind of strategy where you can have low volatility, kind of a low risk return stream with a source of returns that's quite unique, right. It's a unique little part of the market.
10:10 So we did stuff like that at the bank. We did relative value long short very much like what we do in some of our equity funds. And in those strategies really we're trying to pick stocks that have attributes we like and short stocks with ones we don't. We're actually, you know if you do it on what's called a market neutral basis, you're buying exactly the same number of longs as you are shorting. In other words, you have no market exposure. So the fluctuations of the market isn't what gives you a return. You don't need the market to go up or down.
10:44 What you're earning a return on is the difference between good companies and bad companies and how they act over time. So there's, you know, there's a, that's another example of something that is quite different than what you're going to find in a traditional fund, which really only has one thing they can do. They they buy stocks or they buy bonds and you know you hope that they go up.
11:08 Josephine Gonzales: What's great about what you explained there is that you are quite obviously an expert on these types of strategies and quite obviously it is not something I would suggest to clients to try at home. They are sophisticated strategies in nature. So having access to something like that in a liquid alternative fund is kind of music to my ears. And I think you know the more clients learn about what these strategies are and what actually composes these funds, I think the more interested and more they would be willing to add something like this to their portfolio because it does make sense.
11:48 Speaking of portfolio construction, going back again to the I guess debate about 6040 portfolio versus something that's more 503020, what's your take on that? Do you think 503020 is kind of the new math that we should be looking into for the average investor?
12:09 Jason Mann: Yeah, I think you know, if you look at the biggest endowments and pension funds, so look at the Canada Pension Plan and teachers, you look at Yale and some of the big US endowment funds, they for a very long time have allocated a significant piece of their portfolios into something other than traditional stocks and bonds. For these very large firms like Canada Pension, they're investing in large infrastructure projects like highways, toll highways. They're actually funding them and getting a return stream. So a big part of their alt bucket is actually the sort of you know hard asset fixed asset type investments. But another piece of what they do are exactly the strategies we've been talking about. When I was back at the bank some of these pension funds were actually clients of ours and they would they would do these merger strategies in the pension fund. So you know, these are, they sound like they're kind of exotic, unique things, but really for the institutional market where your retirement money is sitting in pension funds, they've been doing this for years and they see the value in that over stocks and bonds for all the reasons we talked about. It smooths out their returns.
13:20 One of those asset classes isn't working. Their alternatives have a better shot at working and it gives them a diversified return stream. So for the for the retail investor today, given that we now have regulated highly liquid, meaning you can sell it today and get your money back in two days standard mutual fund terms
with you know a regulator that has prescribed certain levels of risk management on those funds. So given that those are available and there's a whole range of strategies available in that liquid alternative wrapper if you will, you know moving away from pure stock and bond portfolio makes a lot of sense. Last year, as you said last two years, bonds obviously have not provided any downside protection. It's been you know a long time where it was sort of set it and forget it. You can buy your stocks, you can buy your bonds. When stocks don't work, bonds do and vice versa. That's not really true in a rising interest rate environment.
14:21 So you know I think if nothing else we should assume that interest rates are going to be volatile from here that they may drop in fact we would expect them to but they're probably not going back all the way to 0% like they were before. So bonds you know and they may end up rising again. If we go back to the 70s and 80s there was a multi decade. Where bonds were not very helpful in the portfolio. So alts can help fill that and going from 6040 to 5030, twenty meaning you're taking a little bit from stocks, you're taking a little bit from your bonds and you're putting in some of these alternative strategies that to us makes a lot of sense,
15:03 Thanks a lot that makes a lot of sense for me too. And I think at this point anyone who's listening is a little bit more intrigued about alternative investments if they don't have experience with it currently. So I want to leave everyone with maybe an example of one of your funds, the HP Tactical Growth Alternative Fund, one that I find particularly interesting because of its use of alternative data. If you could go into a little bit more detail with regard to how this fund works, that would be great and we can leave everyone with something to think about as well.
15:39 Jason Mann: Sure. So alternative data is actually really fascinating to me. It really came of age during COVID and if you remember during COVID, lots of data that investors would typically use. So government stats and company reports, it was effectively useless. It either wasn't being published or the numbers were so skewed because of the COVID pandemic that investors had a really tough time figuring out what was actually going on in the economy.
16:07 And so people turn to what's called alternative data. This can come from thousands of different sources, one that you know your, your clients can do themselves. I'll give 2 examples. They can go on to the OpenTable website. And if you search, you can find OpenTable. We'll share with you all of their restaurant bookings across North America in in aggregate. So you can see charts of how many people in each region are booking in table dining and whether that's increasing or decreasing year over year. So you can envision that that little piece of information might give you a clue as to how restaurant businesses are doing, how the stocks of restaurants might do and now and in the future. And what's unique about this data is it's real time. It's not coming from a government agency. So there's no revisions, there's no interpretation. It's just it is just a factual piece of data. We can do the same thing for satellite images. You can go on NASA's website and you can actually track industrial pollution around the world. So you can go to China for example and see if their pollution from economic activity has increased or decreased versus last year. That can give you a clue as to are they growing or shrinking. So you know these are two really simple examples. But now take thousands of data points including credit card spend, cell phone data, so you can track where people are moving around the world, shipping data, you can see who's buying and selling what in terms of commodities, crude, etcetera. So all of this together can give you a very good estimate of what inflation is doing, what employment trends are and whether economies globally are growing or shrinking. Once you have that information, now you can build a fund that takes advantage of that. So and that's effectively what our Tactical Growth Fund does. It is really meant to be a fund that rotates through the business cycle. So the business cycle as we know, you know, there are recessions, there are recoveries, there are expansions and then there are recessions again.
18:10 And predicting that is very difficult with traditional data because you're typically getting it lagged. You know, the government will tell you what CPI was a month ago.
That's interesting information, but it doesn't tell me what's happening right now. And the reality of the market is focused on what's happening right now and then predicting that into the future. And that's exactly what we do in this fund. We effectively are able to see in real time which economies are growing and shrinking. When China is growing, the second largest economy in the world, more likely energy, materials, metals and mining type stocks are going to do well. When the US is growing and the central banks are increasing liquidity in the market, they're printing money, things like tech stocks and semiconductors are going to do well. So we can map which parts of the market do well in which part of the cycle and then we can turn very defensive. So when economies are shrinking and rolling into a recession, we can actually start to short stocks become we can, we can bet against them, if you will.
19:13 And we can buy things like the US dollar, which is a currency that tends to rise in times of stress. So it's what's called a macro fund. But the difference is we're using a rather unique source of information to help guide us on on where we are in that macro cycle.
19:30 Josephine Gonzales: I find that so fascinating and I love kind of reading more in depth and knowing exactly what the strategy is doing because it does make a lot of sense. And like you say because you're trading on real time data, you have the ability to I guess act quicker and respond quicker to this data as well. Jason, I think that's a great place to end our conversation and leave everyone with a little bit more to think about when it comes to alternative investments.
20:02 Thank you and your team at EHP Funds again for your time and putting this together with me to our audience. If you're curious to hear more about alternative investments or about EHP funds, please reach out to me. More information can be found at hpfunds.com and for me, Josephine gonzalez.com. For now. Thanks again for listening, and until next time.
Do people still need Investment Advisors?
Join us in our conversation with Aaron Siwiec, District Branch Manager as we answer the question, “do people still need Investment Advisors?”
VVPA EP1 - Aaron Siwiec - Jan 2023
Speaker1: [00:00:00] It's not often in your career and in your journey that you come across people who truly do things differently, different in a way that inspires, brings the best out of you and those around you, and pushes you and everyone around you to higher heights. That to me is true leadership. In episode one, I interview Aaron Siwiec, District Branch manager of CIBC with Gundy Bentall. Being a young leader in our industry with two decades of experience behind him, he truly represents the phrase vintage values, progressive approach. And at a time in our industry, the wealth management industry, specifically the full service brokerage arm, continues to undergo tremendous change to better exceed the needs of the clients we serve. At a time when the face of wealth is changing and the world around us continues to change at a rapid pace. Aaron and I answer the question Do people still need investment advisors living in the digital age where access to information is so readily available and more and more people opt to do it themselves when it comes to investing? I think it really begs the question, do people still need us? Join us for this conversation and find out as we uncover the answer to this question. Aaron, thank you so much for spending some time with us here today. You know, you and I have spent the past few years working together, and it's a little bit odd for me to be asking the questions, to be honest. It is. But nonetheless, we're happy to have you here today sharing your insights about yourself and of the industry. And given that we've worked together for a few years now, I not only know your story, but have so much respect for it. So if you could share with our listeners what your story is, the different roles you've had in the industry, just so they get a sense of who you are.
Speaker2: [00:01:58] Yeah, absolutely. Thank you so much for having me. I'm excited to be here. As I understand it, I may be your first guest. So. So yeah, this is pretty cool and I hope your listeners enjoy. I guess what to me is a pretty benign story, but I've been in the business, as you know, pretty much my whole life. I actually started off as a bank teller. I think I was 18 or 19 years old whenever 2001 would be 22 years ago. And yeah, that was my introduction into financial services. As I was still trying to find myself, I had the really good fortune of meeting some good people at the brokerage arm of the bank that I was working at at the time, and I was afforded the opportunity to move up to up to the wealth management arm. So my first job in in the brokerage firm was I supported from an administrative perspective, a senior advisor who have a great deal of regard to regard for it to this day. And it allowed me to kind of dive into the business, learn it from the ground up and quickly from there, I was afforded the opportunity to move into the rookie program or the developmental advisor program, as they put it, more formally nowadays.
Speaker2: [00:03:24] But really what it was back 20, 21 years ago I guess now was they sent a bunch of people to Toronto. You had, you know, training that I think is a lot different than the the new advisors coming in the business today get it was very product centric. You spent a lot of time on the stock exchange floor on the various trading floors of the brokerage firm. So you came away with with, I think, pretty decent knowledge in terms of what investment vehicles Canadians can invest in. So from there, I spent, I guess ten or so years as an advisor. This was all in Edmonton at the time. And I, you know, had I think a little bit of good luck where I was able to be a part of the wealth creation of Alberta that was a byproduct of energy prices rising. For example, my rookie year oil was about $18 a barrel. And you know, when I kind of transitioned out of the advisory role sometime later, oil was $140 a barrel. So there was considerable wealth captured by numerous small business owners, executives that that were all somehow tied to the energy sector. And I think it was a great experience and it was humbling to be a part of their wealth creation journey.
Speaker2: [00:04:55] And hopefully I was an important partner to them. So I spent those ten years as an advisor. From there. I have always been interested in leadership. I was always interested in how the actual the business operates. So I began to explore that as a potential option for me to continue to challenge myself and be able to add value to the the organization and the community. So I was I spent a few years as a producing assistant manager in the Edmonton office of the firm I was with. After a few years of that, I moved to Calgary. I oversaw with with a partner and mentor of mine, the the Calgary office, which at the time was the largest office in the country for that particular firm. Again, it was a tremendous opportunity for me to continue to learn more about the business I love, but also refine my ability as a leader to really affect the best possible outcomes for the advisors that I work with and the clients that they work with. From Calgary, I ended up moving to Victoria. I oversaw the wealth management unit of Vancouver Island. That was a particular pride point of me because I know you're going to talk a little bit about business evolution shortly. That was a period of time where we were integrating various professionals and financial services together in one premises, really to be able to have people with particular expertise working side by side with each other to to better support the client.
Speaker2: [00:06:35] I spent several years there. After that, I was added the additional mandate of West Vancouver. So for a period of time I traveled a lot. I came and went back and forth between Victoria and Vancouver. It's obviously where I met you and spent a few years there, and I think it was. It was, yeah, it was a great experience from from that role. I was introduced to the current head of the firm here at CIBC, Wood Gundy, who's whose name is Ed Dodig. Him and I had several conversations over a period of time and I felt that the opportunity that I'm in currently as as the branch manager of the Bent Hall office of Wood Gundy, you know, best fit my skill set and really was aligned with with what I was trying to to accomplish personally from and from my own career aspirations. So that's kind of my journey very, very quickly. But it's, it's tremendous business and it's a business I love, as, you know, a business I'm passionate about, and I look forward to continuing to contribute.
Speaker1: [00:07:42] And that's a very colorful journey you've had so far, rich with experiences, I'm sure, which is why I believe that you would be the perfect person for this conversation. Just in my past ten years, I have seen an evolution in our industry. But I'm curious to know your take on how our industry has evolved in the past two decades that you've been in it.
Speaker2: [00:08:08] Yeah, absolutely. It's evolved a lot like, I think any any business over the course of time, particularly a series of decades. You know, I think, you know, to peg probably some of the more salient points of the evolution of the wealth management industry is, you know, 20 years ago and before that, when I first started out, it was a very transactional type of relationship that we curated with our clients. You know, we provided advice on securities investment selection, we provided research to clients, and it was very, very specific to the investment product. And and really I think, you know, probably failed. And that's the point of evolution is to continue to improve. But I think it failed to really address the entirety of a client situation. You know, we were focused on bringing the the, the best investment ideas that we could find for that particular client that aligned with what their objectives were, what their their tolerance for risk was. But more importantly, I think the business will now has evolved to a more holistic approach and engaging each family with their their wealth management needs. And I think that's underpinned now by their aspirations for their money. As as you so eloquently put it, time and time again, you know, money is very emotional to people and us as investment professionals, as as wealth management professionals owe it to our clients to address the entirety of a client's financial situation, not only to ensure that the investment management side aligns with that, but to ensure that everything is tied together, to be able to kind of put these pieces of a client's financial puzzle together in a way that allows them to achieve what they're looking to, to achieve with their their hard earned wealth.
Speaker2: [00:10:11] So that's probably one of the biggest evolutions I've seen, is, you know, now nowadays the the conversations we have with clients have considerable more depth to them. You know, most of our advisors, in fact, don't really even discuss the investment management needs until there's been a series of thoughtful and meaningful discussions, really trying to suss out that that person, that person as an individual, that person as a human to be able to to really bring to bear all the different aspects of wealth management. And that can encompass a myriad of things. But, you know, investment management and financial planning, estate needs, philanthropic goals, education goals for for their children, you know, and it really we're able to tie it all together now in a way that that we didn't a long time ago.
Speaker2: [00:11:04] So I think that's one important evolution that I've seen over the last few decades and probably the other one that stands out to me the most for for the purpose of this discussion is just how. Technology and access to information plays a different role in in in I guess our clients lives, but also in our our investment advisors and portfolio managers lives. Like in in 2008 you started to really start to see the introduction of social media. And at a time where there was considerable stress on the market because of the the financial crisis of 2008, all of a sudden there began a balloon. Of information available to to investors that you know prior to that they really needed to reach out to a specific professional to to capture that information and make an appropriate decision. So with the access to information that's changed with social media, the ability to near Google and Investopedia. You know, any conceivable investment strategy or product. I think comes a different duty of care for our advisors to ensure that they're getting the appropriate information, getting truthful information that's relevant to their particular needs. So that would be probably another salient evolution that that took place over the last little while.
Speaker1: [00:12:32] And I think you hit the nail on the head right there, because know, the goal of evolution is to improve our offering to our clients because they are first and foremost the focal point of our businesses. And I think I agree with you in the sense that a lot of the evolution has had to do with being more client centric and focusing in on the many different aspects of their financial lives and their personal lives that affect them and their wealth. One thing you did mention there is the rise of technology, things like Investopedia, Google, and more people wanting to do it yourself.
Speaker2: [00:13:10] Absolutely.
Speaker1: [00:13:11] If you could answer this question in one very succinct response.
Speaker2: [00:13:15] I do my best.
Speaker1: [00:13:17] What do you think? What value do you think in investment advisors, Wealth Advisors bring to the table for the families that they serve?
Speaker2: [00:13:28] Yeah, absolutely. That's a good question and it is a big question. So I'll try to be as succinct as possible. But, you know, I'm a firm believer and as I know you are to Josephine, that we bring tremendous value to the clients and the communities that we work in. And to me I do. And this is just my own personal perspective, but I drum it down to the fact that each person, each each client or customer that any financial professional works with, you know, they're working with people. And people have, like I said earlier, emotions. They have particular perspectives that tend to be influenced by their past experiences, whether that be personal past experiences or with various financial products or investments. So really, I think the value that we bring in a nutshell is our ability to help that client realize what type of plan they need to put in place in order to achieve a particular outcome with the access to information that's available on social media and all the different mediums that you suggested, it can become overwhelming. And, you know, there's it's pretty much summed up to me that I personally don't fix my own car. I don't know anything about it. And I really do believe in the value that a professional and a team of highly accredited, highly competent, caring, thoughtful professionals can bring to to a client's life in a way that I don't think that they can do themselves.
Speaker2: [00:15:07] So there's there is many answers to that. And another one that sticks out to me that I think is important is most professionals, most you know, most people with who've generated wealth over a period of time have done so because they're very good at what they do, whether they be business owners, executives, inheritances, any means of wealth creation. And I think it's important that the professionals they hire can put in the time to, you know, to really understand how their how their particular investment needs can be best satisfied. And that takes time, as you know all too well, to develop a thoughtful and comprehensive roadmap that helps see a client through many different years and decades of their life, I think takes a great deal of time and expertise that most people don't necessarily have the time or the inclination to to do themselves. And I think that's where we bring tremendous value, is being able to to be somebody that's close to the client, that's a confidant, that's a trustworthy profession. You know, that they can kind of walk through their entire financial journey with having that person right by their side. And to me, those are those are a couple of critical things that I think we bring to the community amongst many more.
Speaker1: [00:16:32] And I do agree with you there that there's tremendous value in outsourcing to professionals who day in and day out do this work and provide valuable insights and information, but also in being objective, being the objective third party, like you say, where we understand them on a deep level, we understand the family dynamics, we understand what their goals are, but we don't have the same emotional attachment to their money as they do. Absolutely. So I do think there is still a very important place for us advisors in the lives of our clients.
Speaker2: [00:17:12] And we just continue to get better at our craft. And that's something you've heard me talk about for several years now is is through, you know, through the evolution that we talked about a few minutes ago. Every professional in wealth management is becoming better and better at delivering thoughtful investment and wealth counsel to their clients. And and yeah, that's something that I've witnessed and and feel a great deal of pride about, particularly with the advisors that I work with, because I'm able to see day in, day out how how careful and thoughtful each of you approach your client's ambitions with.
Speaker1: [00:17:53] And I think final question for today, kind of dovetailing off of what you said, they're continuing to make improvements that benefit our clients and give us a better offering to our clients as a leader in our industry who has had a hand in shaping kind of the evolution of where we have come to now and a hand in shaping our future. Can you give us a glimpse of what's to come?
Speaker2: [00:18:20] One thing that that I think we all agree on is none of us are able to predict what happens in the future. But one thing that that I'm I'm unequivocal about is we're going to continue to be a meaningful part of the clients and communities that we work within. And I think it does boil down to the objectivity, the professionalism, how how much our advisors deeply care for their clients well being. And that's something that can't be found on the Internet, that can't be felt, can't be found through Googling investment strategy or doing a do it yourself wealth plan. So I really think that over the course of time we're going to continue to have a very meaningful place in the lives as one of the trusted professionals that our clients will continue to lean on as their needs change, as their needs evolve, or the environments around us evolve. You know, so in terms of predictions, I've never been good at those. But what I do believe is, is as we look forward in the future, our advisors are going to continue to, as I said, become better and better at our craft, and that's delivering thoughtful wealth counsel to the clients and communities that we care about.
Speaker1: [00:19:37] And some great words to end this conversation. Thank you so much for sharing.
Speaker2: [00:19:42] Thanks for having me on. Valuable Insights. I do my best.
Speaker1: [00:19:46] Your time is very valuable. I know that. So thank you for sharing some of that with us.
Speaker2: [00:19:50] Of course.
Speaker1: [00:19:52] I'm sure our listeners have found this valuable and has given them a deeper understanding of our industry and how we could be of value to them and their families financial well-being. For now, we wish you all financial wellness and until next time.
Speaker2: [00:20:06] Thank you.
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Creating a Strong Estate Plan
Approaching Estate Planning from a different angle: I interview Scott Somers, Estate Litigation Lawyer at LK Law in BC to provide insights.
00:00:03:23 - 00:00:36:09
In my role as a wealth advisor. One of the key things that I do is build a financial plan for my clients. Part of an exceptional financial plan is an exceptional estate plan. And in my opinion, building a great plan involves assessing all the possible things that could go wrong, all the possible holes and accounting for them. So today I have Scott Summers, estate litigation lawyer at L.K. Law in D.C. Obviously, we are approaching this topic from two very different angles and from opposite sides of the spectrum.
00:00:36:11 - 00:01:00:21
But my hope is that we come out of this conversation with some very important considerations for an estate plan. Scott, thank you for joining me today for a discussion on estate planning. I guess you could say we approach this topic from two different angles. And of course, in my role, I attempt to build an airtight estate plan in which my client's wishes are honored when they are no longer here.
00:01:01:12 - 00:01:12:12
So my first question for you is, I'm curious to know what you've seen in your line of work that are common and maybe not so common pitfalls in building an estate plan.
00:01:13:04 - 00:01:42:11
So the two that jump out to me is first jurisdictional. And the idea that if you have assets outside of B.C., the will made in B.C. likely and probably won't cover them outside. They are not. Every jurisdiction has the same legal requirements, so they may not consider the will valid in Europe or even in another province. So if you have assets out of outside of this jurisdiction, you're going to have to do another will in that jurisdiction to deal with it.
00:01:42:23 - 00:02:05:14
And the other one that's coming up quite often now is this inheriting or leaving someone a very small piece of the pie. If you're going to favor one child or the other or remove one child completely, it's very important that you have reasons why and that should be an addendum or something written down with the will to document your reasons.
00:02:05:14 - 00:02:11:08
There could be very good reasons, but you need reasons or the court won't look on that very favorably.
00:02:13:02 - 00:02:33:24
To me, building an estate plan sometimes involves bridging a generational gap while ensuring continuity of family legacy. Can you speak on how different generational values and maybe even mindsets play a role in conflict with the estate? How would you account for this in an estate plan?
00:02:35:01 - 00:03:01:11
Yes. So right now there's a tug of war between what will makers want in terms of their intentions versus what the courts will allow in terms of generational perspectives. The best example is leaving everything to a male heir because he's male. The courts will look at a will and determine it based on a moral ground. What does society accept as reasonable and a legal ground?
00:03:01:19 - 00:03:28:18
What the law allows you to do. So when you're drafting a will, you need to let these individuals know that your intentions will do the best to honor them. But the courts will revisit what you're doing, and they will look at through the lens of those legal and moral obligations. So the best way to deal with that with a client of an older generation or different mindset is to explain to them that the court can change that.
00:03:28:18 - 00:03:53:04
So you need to be very certain this is what you want and maybe everyone will agree, maybe it's not, but it can leave a very messy situation that ultimately resolves someone like me or ALC law, having to go to litigation to defend or represent these individuals who've been cut out of wills simply because of not likely morally acceptable reasons anymore, such as the, you know, only male heirs.
00:03:53:05 - 00:03:57:16
So you have to explain it to them very carefully that their wishes may not hold up.
00:03:59:07 - 00:04:14:14
Adding to my previous question, whose rights are protected in litigation involving exclusion of certain family members in the will or when terms in the will are contested? Can you give any specific examples from previous cases you've worked on?
00:04:15:12 - 00:04:39:21
Yes. So the wills the court really does want to honor the filmmaker's intentions looking through those two lenses. So the law is set up to protect both sides. A case I'm involved in right now, the deceased had a child, but they're not entirely sure that child is from the deceased. So a DNA test is need to be required to see if it really is the biological child.
00:04:40:15 - 00:05:05:10
If it is the biological child, they inherit the state. If it's not the biological child, then they don't have the estate. So the law set up to be very clear as identifying who is a beneficiary and who is not. If you're entitled, you will get something. If you're not, then you won't get something. I'm also involved in a matter where a child was adopted by another family and this is important practice point for anyone.
00:05:06:01 - 00:05:29:09
If a child is adopted by a new family, they no longer have a claim to the previous family's will. But if a child is a foster child or stepchild, even though they're in this new family like situation, you would need specific provisions for that child in this new will, this new families will or they will be left out of it.
00:05:30:10 - 00:05:44:01
So the law is very kind of clear cut and it's says you can get this if you're following these categories, but if you're not, it'll deny you access. So it's actually very straightforward in terms of protecting both sides.
00:05:45:16 - 00:05:59:23
Given that the modern family takes on many different forms these days blended families, common law, same sex couples, what type of considerations do families need to account for to ensure that their wishes are legally sound?
00:06:00:09 - 00:06:30:02
So just touching back on that, I should point out that even though it's straightforward, it doesn't mean people won't sue. Unfortunately, anyone that falls into that category that feels they've been wronged, rightly or not, so perceived slights and grievances can still file for claims and whatnot. So with blended families, it becomes even more of a a situation because people don't look at it that way as a cut and paste thing because you've brought lots of children, previous spouses.
00:06:30:13 - 00:06:54:03
So the court for blended families looks at this idea of marriage like situations, which is a growing idea that we no longer have the 1950s family. People will live apart just because of work purposes or we'll live apart because of whatever situation demands. But there's still a marriage like relationship. So all the court is concerned about there is how do you present yourself to the world?
00:06:54:03 - 00:07:18:11
And if these individuals are presenting themselves as a relationship, then the court is going to honor that well. But one of the more interesting dynamics that show up is in these increasing marriage like situations where someone of a previous generational mindset, I've seen them challenge the will saying that person can't have access because they weren't in a marriage like situation.
00:07:18:11 - 00:07:42:14
The estate all should come to me, and that's usually based on some generational ideas against same sex marriage or what is not a traditional marriage. So the courts really do try and grow a society and reflect what's marriage like situation. But the people in a marriage like situation that don't follow the standard definition have to be cognizant of that.
00:07:42:21 - 00:08:06:19
They have to document, you know, tax returns, make provisions for adopted children are and foster children. Right. That's what I just talked about. You have to make sure that you're catching everyone with under the umbrella of who can be a beneficiary. So it's important to sit down with a planner such as yourself and say, these are the people I want to make provisions for.
00:08:07:00 - 00:08:11:22
Let's do that. You have to be very open minded, not just a box thinking.
00:08:13:08 - 00:08:22:15
And finally, what are your top five tips for families in creating an estate plan to avoid some of the conflicts you've witnessed in your line of work?
00:08:23:02 - 00:09:02:15
First and foremost, pick a levelheaded executor. An executor is job is to be neutral there to honor the wishes of the estate, not to pick fights with everybody, because people will burn through the state's assets, through needless litigation if they can. And your executor can be the one that's starting fights. File a wills notice, please. It makes it so much easier when you know there's a will and you can find it because it's an entirely different process without a will and it's much simpler with a well revisit any life changes and then think about your will.
00:09:02:19 - 00:09:38:18
New child adoption, divorce, marriage, significant acquisitions. You should always be revisiting your will. It's not set in stone. It's growing like your life. If the will maker, this is your job. If the maker wants to have any sort of thing that goes against the grain of what the law would expect, you need to they need to understand very carefully that what they're doing, while that's their intentions, may not be honored, the court can vary a will and people need to be prepared for that because it might just happen.
00:09:39:21 - 00:10:09:24
And finally, from a purely litigation perspective, keep all your correspondence about what's going on someone's going to challenge a will in terms of its validity or what was meant by that, by certain provisions, communications, what was said, what was thought, what was meant are an imperative to making sure the wills makers intentions get done because by the time it gets to court, that individual's passed away and they cannot speak for themselves.
00:10:09:24 - 00:10:22:21
So these documents have to because someone will sue over sleep grievances or perceived wrongs. And those documents make it so much easier to defend the estate.
00:10:24:06 - 00:10:47:16
Thank you so much, Scott, for sharing those valuable insights. I'm sure our viewers out there found it useful and some may even have some follow up questions. So please feel free to reach out to Scott or I. Um, if you need help with the estate planning side of things or estate litigation side of things, or leave our contact information at the end of this video.
00:10:47:16 - 00:10:52:08
And we look forward to the next conversation. Thanks very much for tuning in. Bye for now.