PART 2: How to Implement a Portfolio for an Affluent Family or Foundation

By Joe Modica on February 11, 2022

This blog will be considered Part 2 of a 4-Part series pertaining to Portfolio Implementation. Please view the Part 1 blog

Client onboarding sounds as simple as opening some accounts and processing a few transfer forms, right? Well in fact there is a lot more that goes into this very critical stage than just that, and for very good reason.

As a reminder, HighView’s Portfolio Implementation Approach is as follows:

HighView’s Portfolio Implementation Approach

Part 1 of this series addressed the 3 key steps that should be taken to properly implement a portfolio.  Part 2 of this series addresses the first phase of the client onboarding process Securities Transfer-In Plans.

Not everyone comes to HighView with cash on hand and sometimes it is not in the client’s best interest to sell securities prior to transferring cash proceeds. Sometimes it makes better sense to transfer these securities as-is (ie. in-kind) and incorporate them into their new HighView portfolio where it makes investment sense. We do not blindly sell out of a client’s existing holdings before doing a proper analysis on them.

Depending on where the client’s current portfolio is held or who currently manages it they could be faced with some key decisions that they have probably never considered before (or needed to consider) regarding HOW they are going to transfer their portfolio assets from their current advisor to their new one. These decisions are important because they could have some serious financial implications including tax consequences, redemption penalties, opportunity costs, etc.

This is why we feel it is important to have this stage as a prerequisite step to establishing a portfolio with HighView and processing transfers. The point of analyzing a client’s existing account statements from their current advisor is to ultimately avoid any needless/unnecessary costs to the client as they are transferring out from their current advisor.

HighView’s role (and legal obligation) as a fiduciary is to ensure the client’s best interest is put first and we take great care considering a number of different variables when we begin a new client relationship. In fact, this Securities Transfer-In Plan stage includes the consideration of the following 10 variables that can be grouped into 3 broader buckets:

1) Consequences of Exiting

  1. Tax implications
    • Are there any material unrealized capital gains that we need to be aware of prior to transferring?
    • Are there any material losses that we need to be aware of that could be used to offset any gains realized and does the client have any capital loss carryforwards that could be utilized?
  2. Managing Tax Situations
    • If there are material gains that would be realized, should we split it over multiple tax years as opposed to realizing everything in a single tax year?
  3. Exit/Redemption Fees
    • If securities were sold/redeemed prior to transfer, could the client potentially be charged a redemption fee
  4. Deferred Sales Charges (DSC) on Mutual Funds
    • Are there any potential DSCs that the client could incur if this position was transferred in-cash? Fortunately, the Canadian Securities Administrators’ (CSA) nationwide will officially ban the DSC option effective June 1, 2022.
  5. Transaction Costs
    • If securities were sold/redeemed prior to transfer, could the transaction costs be more expensive than if we/HighView were to liquidate positions on their behalf?

2) Consequences of Transferring In-Cash vs. In-Kind

    1. Opportunity Cost
      • Client could be out of the markets for much of the transfer process and could potentially miss opportunities.
    2. Duration of Transfer
      • If any securities are priced infrequently (ie. Quarterly) the client could be waiting a while to receive the cash proceeds.
    3. Maintaining Control
      • When transferring “in-cash” the client will lose some of the control they would otherwise have if they transferred “in-kind”. This is more important when dealing with taxable accounts vs. tax deferred/exempt accounts such as a RRSP or TFSA.

3) Company Insiders and Special Requests

    1. Company Insiders
  • Is the client deemed to be an insider of a particular company and is therefore subject to specific sale/redemption timelines and constraints.

2. Special Requests by the Client

    • Does the client have an emotional attachment to a particular security?
    • Does the client have a particular security earmarked for a specific purpose, such as a donation?

    After we have reviewed a client’s existing account statements we mark each security according to what we determine to be in the client’s best interest, considering the above variables. This is then packaged up in a document for the client’s final review before we begin processing transfers.

    We at HighView strive to be a thoughtful, caring portfolio management firm and we feel that this critically important part of the client onboarding process not only reinforces that sentiment, but also enhances the client onboarding experience.

    If our approach is something that you feel would be a good fit we welcome the opportunity to have a conversation with you.

    Be sure to bookmark HighView’s blog “The Wealth Steward” to keep up to date with interesting and relevant industry topics:

    Stay tuned for the Part 3 blog pertaining to Securities Transfer-In Plans. Please view the Part 1 blog.

    Joe Modica
    See Beyond

    Receive Market Commentary + Stewardship Insights.