* Says too many asset managers follow the crowd, play to
* Managing client expectations key to long-term success
* Sees opportunities in corporate bonds, emerging markets,
By Andrea Hopkins
TORONTO, Jan 30 Comparing wealth managers who
exploit niche markets to tobacco companies who make "light"
cigarettes, the head of investment at Alberta's largest bank
said it is time the industry started leading investors rather
than feeding them trendy products.
"Far too many firms are cranking out whatever advisers and
clients are asking for at the moment, and we've ended up with
thousands and thousands of funds, most of them are quite
mediocre," said Sheldon Dyck, president of ATB Investor
Services, the wealth management arm of ATB Financial, Alberta's
"To me that's like making light cigarettes - you're doing it
because it will sell and you're filling a market niche. But are
you actually doing the right thing for people who are counting
on you to be a professional and give them advice and steward
their money properly?"
The rant against fellow Canadian wealth managers who churn
out investment products in response to consumer demand may not
win Dyck a lot of friends in the industry, but he says he does
not care. He believes he has a fiduciary duty to the bank's
635,000 customers and growing the C$8 billion ($8 billion) in
assets under management is the priority.
The refusal to follow industry trends cost ATB some clients
when Dyck did not buy into the run-up in income trusts a decade
ago. But he said the long-term performance of ATB's Compass
Portfolio Series, debuted 10 years ago, proved that customers
were wrong, and the attrition was "temporary."
Dyck, whose bank is big enough in the resource-rich province
of Alberta to go head-to-head with Canada's big five national
banks in terms of branches and investment services, said
communication with clients and advisers is key.
"A big part of having people stick with the strategy is to
give them realistic expectations - not about the 10-year
average, but what the individual year is going to feel like."
Being on the wrong side of groupthink in the last decade
meant Dyck was pushing U.S. equities three years ago, when no
one wanted to hear about the stock market ever again, and
selling the upside of the housing correction now - through
investment in securitized commercial mortgages - just as
investors are bailing out amid falling demand.
Dyck said ATB can't predict the future of investments any
better than any other wealth manager, particularly on timing. He
looks for oversold or undervalued assets, and knows it is time
to get out when the crowd arrives.
Looking ahead, he expects to invest in corporate bonds
rather than government bonds, in emerging markets beyond the
BRIC countries of Brazil, Russia, India and China, and in parts
of Europe that have been unfairly tarred by the region's debt
crisis. He also is "looking very hard" at securitized commercial
mortgages for yield enhancement that cannot be had in government
Dyck said ATB benefits from its client base in a province
that has boomed in recent years, full of new money, new wealth,
and an educated and mobile workforce that may be more prepared
than the average investor to follow an unpopular path.
Not being publicly traded also gives the bank a flexibility
its big Toronto-based competitors do not have, he said.
"Lots of people see the trends that we see, but the question
is whether they have the conviction to act upon it as if they
were investing their own money, rather than having a popularity
contest and worrying what next quarter's results will be."