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small talk
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How do you incorporate environmental, social and governance (ESG) investing into your practice?
Mac Mekawi, financial advisor,
Edward Jones, Toronto
We start by understanding what’s most important to clients — for example, whether they want to invest only in companies that share their environmental or social values. We also discuss the potential tradeoffs
of sustainable investments, including funds that have a narrow focus, resulting in insufficient diversification.
We then incorporate clients’ ideals into a personalized strategy. For clients who want total control over where their money is invested, we help them select a basket of individual securities. For most cli- ents, mutual funds and ETFs are an efficient way to incorporate ESG criteria into their diversified portfolios.
Donna Schneider, vice-president and investment advisor, National Bank Financial, Regina
We are starting to dig deeper into companies so we can understand how they’re adopting ESG processes. National Bank has a research department that pro- vides us with a lot of information, and my team does
additional research on specific areas and companies. If we can’t
find sufficient information, then we talk to the analysts about a fund or mandate because they’ve spoken to the companies directly. We want to understand what the companies’ involvements are so we can accurately convey that to our clients.
I’ve made a point to bring up ESG investing with clients instead of waiting until they ask me. I want to know if these practices are important to them — and to what extent — so I can provide them with that alternative.
Gardy Frost, financial advisor,
Arbutus Financial Services, Vancouver
While ESG has been around for a long time and is now in high demand, it’s not well articulated. That means I need to ask hard and specific questions to our invest- ment managers about their ESG processes.
I have a client that’s very interested in climate change. I don’t know a fund off the top of my head that concentrates exclusively on climate change, so I asked fund companies if they have a manager concentrating their efforts in this area. I want to include clients in the conversation so they understand what the fund mandates are and what they’re trying to accomplish, so they know where their money
is going. My role is to be a communicator between my clients and the investment options out there. —Maddie Johnson
Don’t wait to disclose criminal charges
Delayed disclosure on Form F4 calls into question advisor integrity
I
you disclose the charges almost immediately. Advisors must notify regulators within 10 days of a
change to certain information on Form 33-109F4 Regis- tration of Individuals and Review of Permitted Individuals (Form F4). These changes include criminal charges, as well as civil actions and bankruptcies.
CSA Staff Notice 33-320 from 2017, which details the importance of accurately filling out the form and maintaining ongoing disclosure, says a false or misleading form “raises a red flag [...] that the applicant may be lacking in integrity.” Integrity is one of three criteria to determine suitability for registration, along with proficiency and solvency. If integrity is called into question, your registration is on the line.
Elizabeth King, deputy director of compliance and registrant regulation at the Ontario Securities Commis- sion (OSC), said in an emailed statement that when appli- cants aren’t forthcoming and truthful on the forms, “we have to question whether they are suitable for registration
Name that forecasting advantage
“Implicit egotism” refers to the way positive associations about ourselves influence import- ant decisions. People named Dennis and Denise
are disproportionately drawn to careers in dentistry, for example, just as St. Louis is home to a curious number of people named Louis. Police officers are more likely to
Related biases
A previous column examined the impact of homophily on financial advice: the more demographic commonalities that exist between advisors and clients, the more likely a client is to follow advice.
magine you’ve been charged with driving under
the influence. While your court date is months away
and you expect to be acquitted, regulators require that
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FALL 2020