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Frequently Asked Questions

What is an ‘outsourced CIO’?

An outsourced Chief Investment Officer (CIO) is a fiduciary adviser with legal accountability to protect your assets and advise you objectively about inherent opportunities and risks associated with various investment options.

Once you have established your investment goals, an outsourced CIO helps you determine how to deploy your assets, designs your investment portfolio to meet your needs and reflect your risk tolerances, and selects and monitors the professionals who manage the portfolio on a daily basis.

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What is wealth stewardship?

A wealth steward is someone placed in a position of trust to protect, oversee, and be responsible for the wealth of another.

In our view, wealth stewardship operates according to four key principles:

  1. Ownership: A steward doesn’t own; they hold in trust and use what’s been given for the benefit of the one who owns.
  2. Responsibility: A steward is responsible for the care and development of what’s been entrusted to them.
  3. Accountability: A steward needs to provide an account to the owner of how well they’ve managed what’s been entrusted to them.
  4. Compensation: A steward is entitled to compensation for a job well-done.

These Stewardship Principles are prudent and sound yardsticks by which both the mindset and actions of all wealth advisors (i.e. financial stewards) should be measured, to ensure that clients’ hard-earned wealth is protected.

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What is objective and independent portfolio management?

The term objective refers to the fact that the decisions we make on behalf of a client are always in the client’s best interest as opposed to HighView’s – which aligns with our fiduciary duty. HighView has structured itself in such a way that we are financially indifferent as to which investment solutions are used in client portfolios. In other words, we do not make more or less money by using one investment solution versus another. This allows us to provide advice that is truly focused on client needs.

The advice that HighView offers is independent because it is not subject to potential conflicts of interest.  We have no financial or other ties to any of the suppliers – including the investment managers – that we use.

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What is open architecture?

Open architecture means that we do not use any of our own investment products. Instead, HighView carefully selects unaffiliated third party investment managers to manage the various components of our clients’ portfolios. We partner with these third party investment managers, which meet our strict criteria only after a thorough search and due diligence process. Once hired, we then monitor each manager closely and make changes as required over time.

In addition to hiring the most appropriate investment manager for each investment mandate (e.g. Canadian small cap equity, or Global mid-to-large cap equity), we also negotiate fees with each of these managers at the time they are hired. Typically the fees agreed to are designed to go lower over time as the total assets provided to each manager from all HighView clients increase. These fee savings are passed on directly to our clients.

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What is the difference between the suitability standard and the fiduciary standard?

These standards refer to the legal standard of care owed to clients.

The suitability standard requires that any recommended investment be suitable given the client’s circumstances. For example, if an investor seeks advice on how to invest to generate income, any product that generates income or has a reasonable yield will satisfy the suitability standard – regardless of the product’s cost or quality. All mutual fund dealers (i.e. regulated by the Mutual Fund Dealers Association of Canada or the MFDA), investment dealers (regulated by the Investment Industry Regulatory Organization of Canada or IIROC), and exempt market dealers are held to the suitability standard. Some individuals licensed under IIROC dealers are also held to a fiduciary standard.

A fiduciary standard, by contrast, requires any investment recommendation to be both suitable and in the client’s best interest. For example, the adviser to the above hypothetical income investor not only needs to make sure that investments recommended are suitable; but the adviser must also be diligent about finding, in the adviser’s assessment, the best products available to help the client achieve their goals. Firms registered as Portfolio Managers are held to a fiduciary standard. Accordingly, portfolio management firms must not only recommend what’s suitable for clients but also what is best.

HighView Asset Management Ltd is registered in the category of Portfolio Manager in Ontario and some other jurisdictions. You can check the registration of every firm in Canada at Canadian Securities Administrators registration check website. You can find HighView’s registration by clicking here.

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How is HighView licensed and regulated?

HighView Financial Group, through its wholly-owned subsidiary HighView Asset Management Ltd. is registered as a Portfolio Manager with the provincial securities commissions of Ontario, British Columbia, Alberta, Saskatchewan, and Manitoba. As a Portfolio Manager, HighView has a fiduciary duty to act with care, honesty, and good faith, always in the best interest of clients. Investment decisions are therefore independent and free of bias.

HighView is also a member of the Portfolio Management Association of Canada (PMAC). Established in 1952, PMAC is a forum for Portfolio Management firms to share best practices and industry knowledge. PMAC currently represents over 200 portfolio management firms who collectively manage more than $1.4 trillion of assets on behalf of pension plans, foundations, non-profit organizations, institutions, and high net worth investors. You can check the registration of every firm in Canada at Canadian Securities Administrators registration check website. You can find HighView’s registration by clicking here.

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How does HighView charge fees?

Portfolio Managers such as HighView charge a percentage of the investments they manage. This fee is transparent and generally much less than retail management and distribution costs, which are often embedded as a cost of doing business. Fees are fully transparent on client statements and typically go down as a percentage of your portfolio as your assets grow. Fees are not paid by commission based on volume of buying or selling investments and are generally significantly lower than typical mutual fund fees.

It’s important to note that your money must reside at a custodian financial institution for an extra layer of protection and safety and there is usually a small additional fee for this service.

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What sort of investor protection does a HighView family client or foundation have?

The primary safeguard that HighView provides to our clients is that, as a Portfolio Manager, we do not have custody of our clients’ investment assets. Instead, a separate financial institution establishes an account with each of our clients to hold and safeguard the assets contained within their portfolio.
 
This means that only the client can withdraw assets from their portfolio, and HighView – as Portfolio Manager – is only authorized to manage the assets contained within each client’s custodial account. For more information on this topic, please click here.

Additionally, firms such as HighView, who are registered as Portfolio Managers, must meet strict financial reporting, capital, and insurance requirements to further protect your investments.

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What is goals-based investing?

Goals-based investing addresses the holistic well-being of the family or foundation and directs transparent dialogues about ambitions, fears, and opportunities. It focuses on recommending appropriately designed solutions to achieve goals, tracks progress towards those goals, and adjusts the portfolio as necessary.

Goals-based investing is at the core of HighView’s investment philosophy, rather than the traditional industry model of measuring expected return versus market indices, which steers away from client goals and risk tolerance. Instead of asking “how can we increase returns or consistently beat the market?”, we ask “how can we achieve our investment goals with some degree of certainty?”.

This places performance in the context of achieving goals as the measure of success. Portfolio construction and investment performance is discussed in light of investment goals and risk tolerance as opposed to market dynamics. Ideally goals-based investing comes down to understanding the “purpose” of the funds, taking into consideration the levels of risk tolerance, the different investment horizons or liquidity constraints, and then focusing not on the gain or loss of the portfolio but on the probability of the portfolio to meet the financial and investment goals.

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What is an Investment Policy Statement?

Most of our Investment Policy Statements for family clients range from 15-17 pages, depending upon the complexity of each client’s situation. An IPS has key five sections:

Statement of Objectives and Risk Tolerances:

  • What is the purpose of the money as well as the quantified goal and timeline? (i.e. we need to have $1 Million saved for retirement purposes in 20 years)
  • Will any income be required now (later)? If so, how much?
  • What is the investor’s tolerance for risk of both capital and income?
  • What are the investment constraints to be considered when managing the money? (i.e. taxes, requirement for short-term liquid funds, unique preferences such as Socially Responsible Investment requirements (for example, no defense/military investments))

Portfolio Construction Guidelines:

  • What asset classes (i.e. Stocks, Bonds) and geographies (i.e. Canada, US, International, etc.) will the portfolio be invested in, and how much will the portfolio be allocated to each of these categories?
  • How will the portfolio asset classes be rebalanced when market prices shift?

Duties and Responsibilities:

  • What are the client’s responsibilities in the relationship? (i.e. providing personal financial updates to adviser)
  • What are the responsibilities of the adviser?
  • Who will custody/hold the client’s assets to keep them safe?

Portfolio Control Procedures:

  • What are the performance objectives and how will they be measured?
  • How will the portfolio be monitored to ensure that it continues to meet the standards of the IPS?
  • How will the costs associated with managing the portfolio be monitored? (i.e. trading, custody, investment management, etc.)

Investment Policy Review:

  • How frequently will the investor and adviser mutually agree to review the IPS?

The IPS should be carefully designed to meet the real needs and objectives of the client.

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What is an attitudinal risk questionnaire?

An Attitudinal Risk Assessment questionnaire is an essential tool that allows us to determine and understand a client’s acceptance and attitude about risk.

Risk is a very personal matter and as such must be assessed against an individual’s personal knowledge and past experiences. In order to gain an informed perspective, we have worked with a psychologist/cultural anthropologist to define the four dimensions of risk that must be considered and scored to establish a framework that can be employed when designing a portfolio solution for a client.

These dimensions of risk include:

  • Willingness (to accept more volatility in order to achieve higher returns)
  • Knowledge (understanding of capital markets risk return trade-offs)
  • Experience (past experience during varying cycles in the markets)
  • Capacity (ability to withstand extreme market swings relative to established goals and time horizons)

Our questionnaire is scored through these four dimensions of risk with appropriate weightings given to critical elements, such as capacity. The results of this questionnaire are then married with the defined goals, flowing out the Wealth Planning process, which allows us to design a portfolio solution that aligns with the goals and behaves in a manner that provides our clients with the comfort and confidence they desire.

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Why is a wealth plan important to a family?

At HighView Financial Group, we believe that affluent Canadian families – whether they realize it or not – are actually operating a ‘wealth management business’.

In other words, their investable asset base is of a sufficiently significant size and complexity that it is beyond being considered a traditional savings pool earned from employment activities; it should instead be viewed as a wealth management business that is a bi-product of their successful business activities.

Over many decades of advising families of significant means, our experience has been that each family has unique levels of complexity which have evolved over the family’s evolutionary lifecycle. These complex structures are needed to address the delicate balance that exists between tax and estate matters, asset protection and income splitting issues, as well as current lifestyle versus longer term succession and philanthropic goals.

A truly integrated wealth plan eases some of this complexity and closes the gaps between the various elements of these structures, providing a solution that offers confidence and peace of mind.

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What is the difference between Money Weighted Rate of Return and Time Weighted Rate of Return?

In our quarterly client reports, we use both the MWRR and the TWRR calculations for performance reporting.

First we use the money-weighted methodology to inform clients of the returns that were earned by each of their accounts and their consolidated portfolio.

Then, we show the performance of each of the investments owned within the portfolios using the time-weighted methodology, as this provides a more accurate reflection of how the underlying investment managers performed, excluding the impact of deposit or withdrawal decisions made by the investor.

Our examples below will highlight the differences between TWRR and MWRR:

Let’s assume that an investor has three separate investment accounts.

At the beginning of the year, she invests $100,000 into each account and makes the exact same investment in each account. In the first 6 months the underlying investment loses 20% and in the final 6 months of the year the underlying investment rises by 35%.

Let’s also assume that the investor withdraws $30,000 from the first account and deposits $50,000 into the second account immediately after the first 6 months.

The table below provides an example of both the TWRR and the MWRR of each of these three accounts and the total of all three accounts over the 12 month period:

The TWRR is the same regardless of the deposits or withdrawals because it measures the underlying investment’s return.

However the MWRR measures the investor’s performance. Accordingly, MWRR is heavily influenced by the dollar amount and timing of the deposits or withdrawals.

Account B, for example, had a significant deposit right before the investment rebounded – so it had more money benefiting from the rebound. The opposite occurred in Account A.  And with no deposits or withdrawals the MWRR for Account C was identical to the TWRR.

When using MWRR, it is much more difficult to compare the performance of various accounts.

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Are HighView investments ESG (Environment, Social, and Governance) friendly?

There is a significant and growing interest in ESG/SRI (Socially Responsible Investing) and Social Impact Investing. As an outsourced CIO, we see it as our responsibility to work with our clients in the continued evolution of an ESG/SRI/Social Impact Investing strategy that will meet each client’s specific requirements. The alignment of investment goals and making society a better place makes intuitive sense.

It has been our practice to work with our managers to gain an understanding of their policies and procedures with respect to incorporating an ESG aspect to their portfolios. While our managers might not offer an ESG option per se, many of them embed ESG factors into the evaluation of businesses they invest in. We see this as a growing trend due to greater demand and a growing awareness of environmental and social challenges.

At HighView, we are keenly interested in ESG/SRI/Social Impact Investing. We encourage you to read our article on the subject, entitled: Making an Impact: Aligning Values with Investment. It is our intention to continue learning and developing an expertise such that we can support our families and foundations with understanding the opportunities for investment, goals definition, strategic policy design, due diligence, and ongoing over-sight.

HighView is a member of the Responsible Investment Association (RIA), Canada’s leader in Responsible Investing. The Responsible Investment Association focuses on the integration of environmental, social, and governance (ESG) criteria into the selection and management of investments. It is a national, membership-based organization composed of financial institutions, mutual fund companies, investment firms, financial advisors, and various organizations and individuals who practice and support responsible investing.

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What is a virtual family office?

A Virtual Family Office (VFO) is a family office model that harnesses the experience, dedication, and loyalty of your established group of independent advisors to provide the comprehensive wealth stewardship affluent families require. This model simplifies all important financial decisions, as decisions are made in a disciplined manner with the appropriate advisors, at the same table, all working together.

A VFO will help you navigate the challenges that come with wealth, including:

  • Wealth management
  • Tax and estate planning
  • Business succession issues
  • Setting and funding philanthropic goals

Integrated, holistic, and with only your family’s interests at heart, your VFO works together to create a seamless approach facilitated through well-defined governance, structure, and processes.

At HighView Financial Group, our response to the requirement for a VFO is “The Family Stewardship Council”, which we organize and guide in the fiduciary oversight of your wealth.

Benefits of the Virtual Family Office

  • Experience and Competency: Continue to harness the experience and competencies of the long-established relationships with the professionals that surround you.
  • Variable Cost Structure: Avoid the costs of setting up your own Single Family Office (SFO) or participating in a Multi-Family Office (MFO).
  • Objective Advice: Avoid any conflicts that might arise from using the services of a Commercial Family Office (CFO) and ensure a purely objective set of solutions to address your specific needs.
  • Integrated Advice: Eliminate planning gaps or oversights through the collaborative efforts of your advisors.
  • Confidence and Comfort: Achieve the peace of mind which only comes from knowing that there is a formal governance structure and set of processes in place to ensure that all the family’s stewardship needs are being met in the appropriate manner.
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