Archive for the ‘Podcasts’ Category

#23 Q2 2024 Market Outlook with Keith Allan

Tuesday, July 9th, 2024

Join Kevin Parton, Partner and Senior Advisor at VELA Wealth, as he sits down with market Keith Allan, Portfolio Manager at Harness Investment Management, to dissect the financial landscape of Q2 2024. Tune in for expert analysis, strategic advice, and a look ahead at what the next quarter might bring.

 


 

This episode covers:

  • Market Movements – A deep dive into the S&P 500’s performance, Canadian market trends, and the continued dominance of tech stocks.
  • Interest Rates – Insights into Canada’s recent rate cut, its impact on fixed income markets, and comparisons with the US Federal Reserve’s stance.
  • Investment Strategies – The role of cash as an asset class, private and alternative asset performance, and strategic adjustments in portfolios.
  • Q3 Expectations – What to expect in the typically calm summer months and the anticipated market activities post-Labor Day.

 

About the Guest – Keith Allan

Keith Allan is a Portfolio Manager with Harness Investment Management. Harness has engaged in a strategic partnership with VELA Wealth and provides discretionary portfolio management for many of VELA’s clients. With more than 15 years of buy-side investment management experience, Keith brings a wealth of knowledge and experience to provide insight and guidance to clients regarding their investment portfolios. At Harness, Keith is responsible for developing and maintaining investment portfolios for VELA clients.  To learn more, please visit Harness Investment Management team page.

 

About the Host – Kevin Parton

Kevin Parton, CFP professional, specializes in personal and business financial planning, tax reduction, and estate planning. Kevin is diligently concentrating on client education as a powerful strategy for building financial certainty. As no financial situation is the same, Kevin and his team monitor clients’ plans and implement personalized strategies to reduce their personal and corporate taxes, and protect their income, assets, and loved ones against the financial consequences of a serious illness, injury or death, ensuring clients maintain financial certainty and peace of mind. To read more, please visit the VELA team page.

 

The episode is also available on:

  

  

 

Disclaimer

The information provided in the podcast transcript is designed for general informational purposes only and is not intended to provide specific advice or recommendations for any individual or on any specific security or investment product.

#22 Finding Purpose and Creating a Positive Impact with Jonny Imerman

Friday, June 7th, 2024

In this episode of the Polestar Podcast by VELA Wealth, Jonny Imerman speaks with Kevin Parton about his journey with fighting cancer at 26 and how this battle has brought him to where he is today. They talked about Imerman Angels’ impact on the cancer community with their one-on-one free community support system that ensures nobody goes through cancer alone. They also discussed the incredible journey of CLŌZTALK, a B-Corp Certified T-shirt company co-founded by Jonny, specifically designed to help non-profit organizations grow by making comfortable ethically made shirts.

 

 

Podcast Highlights:

  • The inspiring journey of Jonny Imerman, fighting and beating cancer and co-founding Imerman Angels to help the cancer community with ongoing support.
  • The impact of Imerman Angels and how it’s helped approximately 38,000 people through their cancer journeys.
  • Dive into the creation of CLŌZTALK; a B-Corp-certified T-shirt company Jonny co-founded with his brother Jeff, with the mission to help more nonprofit organizations share their message through meaningful and ethical T-shirts.
  • Celebrating CLŌZTALK’s achievement of helping nearly 500 nonprofits get noticed.
  • Jonny shares his advice on starting and building meaningful businesses and initiatives with passion at the center for ultimate success.

 

About the Guest – Jonny Imerman

Jonny Imerman fought testicular cancer for 2 years in the Detroit area in his 20’s. He had a loving family and friends, but he never met another young adult who beat the same cancer. Jonny and a group of like-minded advocates and supporters co-founded Imerman Angels in 2006, a nonprofit that introduces someone fighting cancer to another person who fought the same cancer. Since 2006, Imerman Angels has made over 34,000 matches in more than 110 countries and facilitated endless honest conversations about living with cancer.
In 2017, Jonny Imerman and his brother Jeff Imerman co-founded CLOZTALK to raise brand awareness for great nonprofits. CLOZTALK is an online clothing and apparel company that produces and sells high-quality, made-on-demand, charity-branded apparel for nonprofit causes at CLOZTALK.com. Reach out to Jonny through his LinkedIn page.

 

About the Host – Kevin Parson

Kevin Parton, CFP professional, specializes in personal and business financial planning, tax reduction, and estate planning. Kevin diligently concentrates on client education as a powerful strategy for building financial certainty. As no financial situation is the same, Kevin and his team monitor clients’ plans and implement personalized strategies to reduce their personal and corporate taxes, and protect their income, assets, and loved ones against the financial consequences of a serious illness, injury or death, ensuring clients maintain financial certainty and peace of mind. To read more, please visit the VELA team page.

 

The episode is also available on:

  

  

 

 

The Podcast Transcript:

 

Kevin Parton:

Hello, I’m Kevin Parton and I’m here on the Polestar Podcast with the wonderful Jonny Imerman. How are you doing today?

 

Jonny Imerman:

Hi buddy. I was going to say you’re wonderful! I think you’re more wonderful than I am. Great to see you.  I love that you’re rocking the Imerman Angels’ T-shirt. Thank you, sir, we appreciate the love.

 

Kevin Parton:

We don’t record the videos here, just the audio. But I wore my Imerman Angel’s shirt to represent you and the organization. And I see you’ve got the CLŌZTALK T-shirt on! I know you walk around with that shirt on all the time.

I’d love the opportunity to share with our listeners a little bit about you. I’m going to try to do you some justice.

You and I met at the Summit event in California several years ago, you were a highlight of that trip, you were the center of everybody. I think you connected me with 100 other people, and it seems that that’s the impact you have on the lives of people around you and speaks volumes about who you are.

But back to your story. You started, at least as far as I know, all the way back when you were 26. You’ve got a foundation that you’ve built up, which is phenomenal. You’ve got a subsequent not-for-profit organization called CLŌZTALK, and that’s been your journey for years. There are so many more pieces in there that I want to get to, but I’m going to turn it over to you because it was great hearing the story from you. Tell me a little bit about yourself. Tell our listeners who are you. What is Imerman Angels? How did this all come to be?

 

Jonny Imerman:

Well, Kevin, you’re one of those great energy guys, it was a pleasure seeing you [at the conference]. We’re similar in that we love people and we’re inspired by what makes people tick and what makes them go. I mean, what’s more exciting than human beings that are alive? I think you and I both loved that event. It was like an idea festival, as I like to call it. But there are so many ideas and visionary people there, and it was just fun connecting with you and seeing all these other people and how everybody connects.

Our quick background is: that life takes crazy turns, and you sort of have to learn and do something with it that’s positive. That’s part of the goal. I was diagnosed with cancer at 26 in the Detroit area. I grew up 20 minutes from Canada, in Detroit, we’re right over the border. So even though I live in New York now, I have to come back to my core from time to time, which is a much calmer vibe. You were in New York not too long ago and you know that we got to escape because we need more of that good Detroit or Canadian vibes.

 

Kevin Parton:

And you were just in Vancouver!

 

Jonny Imerman:

Just in Vancouver, at the B-Corp conference at the Convention Center, it was incredible. So many good people and a lot of speakers were local Vancouver people, which was really cool. One of my favorites was the presentation by Sonia Strobel, Co-founder & CEO of Skipper Otto. She was incredible and she created an amazing B-Corp in Vancouver.

But my quick back story on how I got involved in social impact was that I got diagnosed with pretty advanced cancer at 26, and I went through chemo and surgeries. At the end of it, I thought, what’s the positive here? What’s the meaning? What’s the purpose?

A group of young survivors and I met randomly at the hospital, as we were all finishing our treatments. And we realized the positive was our story. We know a journey that we didn’t know before. We should be giving this back to somebody. Going through the same thing, and we should be a Big Brother or a Big Sister. We were scared, but now we’re on the other side of it! We know more. So, we created this thing, Imerman Angels, which you are beautifully representing today. I appreciate you, Kevin.

So, anyone, anywhere on the planet, any age, any cancer, any stage level, anyone living touched by cancer, we can introduce you to another person who’s had a similar journey and fought the same cancer, and let you know that hope it’s on the other end of it. Or reassure you that they’re thriving for 10-15 years with it because maybe it’s incurable. That’s okay too. But if you’re doing okay in 10-15 years, you’re living with the cancer, you still have a voice to be a Big Brother or Big Sister to somebody sick.

So, that’s the goal. It’s a one-on-one buddy system. No one fights cancer alone. There’s a survivor out there to help every person that’s sick with the same thing today, we just needed a system. A nonprofit that’s called Imerman Angels to match them up. So, everybody’s connected to somebody who’s been there. It’s always free.

Even if language is a problem, we have people who are interpreters who can help with interpretation. But we do have survivors in Switzerland who speak 7 languages. We always find a way to make sure people can connect and communicate.

 

Kevin Parton:

That’s awesome. I love that it’s grown over time and this has been your life’s work and continues to be. But where it is today, I was looking on your website, there are more than 38,000 people [about twice the seating capacity of Madison Square Garden] that have had a diagnosis and have been paired with someone who could advocate for them or speak with them. That doesn’t happen overnight and most certainly isn’t how it started. So, I’d love to hear that story, so what you had said, there were four of you who had got this idea of “how do we give back?”. Can you talk a little about the journey of taking that idea and turning it into what Imerman Angels is today?

 

Jonny Imerman:

Absolutely, Kevin. It’s always a team and I think anyone who’s a Co-Founder who says, “I built this”, well it’s never only one person. So, it was a group of us, and we were all in the hospital, and we all realized that every one of our stories if matched to the right person at the right time, could move a mountain for them emotionally. So, we all banded together, and we thought, let’s just keep recruiting survivors, and then it became this community of thinking, let’s get more survivors in this state, the next state, in Canada, in Europe, wherever. And we just started to snowball, saying “Hey, here’s what we’re doing, if you know any survivors, they should be in the network. They can be an Angel with Imerman Angels.” And the snowball just kept growing, and so now we’re a community of over 14,000 cancer survivors worldwide, and we have thousands of people over the years that we’ve matched. But the goal is that no one goes through cancer unaware. The goal is that people are aware that programs like this are free and that there are survivors out there who really want to help them.

 

Kevin Parton:

That’s beautiful. One of the things you said is a realization that no matter the support network that you often have, it can still feel very much like a lonely experience because if you’re not talking to someone who’s walked that walk before, even if the intentions are great, it’s a different feeling. I’m sure that makes it even more conflicting to try and have a conversation with someone who’s supporting you as family and say, “I still feel alone”. So, you’d look to fill that gap there for people. It is amazing.

One thing that I’m curious about is regarding the actual structural organization itself. How does it scale? You started as four people, and now you’re all over the world. How did you take it from level to level? I would imagine like any organization you have to have tiers of people and communication and technology. Were you prepared for all of that? Was it “fake it until you make it”, learn as you go? What has that journey been in allowing it to expand with the demand?

 

Jonny Imerman:

We’re still faking it until we make it. I feel like you just keep trying things and see what works. I think most entrepreneurs feel that way. When things work, you just keep going with it. But we learned at an early day though, Kevin, that if this person, for example, Amy in Michigan has stage 3 cervical cancer, and there is a woman in Toronto named Susie has beat Stage 3 cervical – if you put them in the same room, we knew the connection would be immediate. And both sides usually would reach back to us and say “Thank you, what a great introduction. Suzie’s incredible, her story was motivating. I know I can beat this. I know what’s coming.” And then Susie says, “Oh my gosh. I talked to Amy for two hours last night. What a similar story we have. It was great to be able to share what I know to help her. I feel so much better about myself.” And the takeaway is, that everybody benefits. It’s a mutually beneficial thing.

So, we held on to that. That was the only thing we knew when we made these intros. The feedback loop was short, and they would tell you how much it helped them, Kevin. So, we thought let’s just keep doing it. Since then, it’s kind of been faking it till we make it.  Just keep building a structure.

We’ve gone through four different iterations of migrations of our tech system and we’re constantly updating the tech. Right now, we use Salesforce, and it works really well. I don’t think we’re going to have to do it again, but you never know. I’ve learned after doing four migrations that anything is possible.

We keep doing it, growing and recruiting volunteers, survivors, board members, and supporters – great people like you, who wear the T-shirt and talk about us, we know we help more people because of people like you. This way we try to keep touching as many people as we can, raising awareness, and then when things could be better, we’ll just keep trying to fix the system. But you know, it’s always hard. We always make mistakes. We hired a CEO who runs it, that’s a lot smarter than I am. Thank God! She is great.

And I’m still involved every day to some degree, I do a lot of external stuff. But the team really is running the day-to-day operations, and if you really care enough about the mission, you hire the best people who can make the most matches, quality matches, that are best for people. That’s really what it’s all about.

 

Kevin Parton:

Which is a very valid point. I spoke with someone the other day who talked about having worked themselves out of their position. They had a start-up, scaled it, and then recognized that their skill set didn’t take them beyond that. So, to what you just said there, that’s my next question. What exactly is your role now? What do you spend your time doing to represent the foundation?

 

Jonny Imerman:

Thanks for asking. Today it’s about mentoring people, which is why we started. I love talking to other younger guys going through testicular cancer or other cancers. I have one guy here in New York who has a totally different cancer. But we’re friends of friends and we just bonded, and he can get a mentor with Imerman Angels. I’m still going to talk to him, we became buddies quickly. So being that Big Brother is probably my favorite part of what we do. Also, as a board member on the team I am helping with advice, and helping open doors. I’m going down to Virginia in a little bit to do a speech at a group called Sentara Health. They have a group of hospitals all through Virginia and North Carolina, so I’ll take trips and I’ll do external work. The goal is to spread the word to the hospitals or give speeches to a company that really wants to have us in their system to be able to send employees when they get diagnosed. Anyone that wants to know more about what we do; I do external stuff like that. Then I flip them to the team and let them manage the operations of everything. So, it’s part-time and a lot of my time is now spent on the CLŌZTALK. We have about 500 nonprofits that we’re passionate about making their T-shirts like the one you’re wearing and making them cooler. And that’s what we do.

That’s why I was in Vancouver for the B-Corp conference last week. We learned with Imerman Angels is if people are talking about you, if you can bring up in the conversation a mission, an important nonprofit, it’s going to grow. Whoever’s listening, they’re going to know someone who needs it. So, maybe they want to be a donor, maybe they want to volunteer. But if people are talking about a nonprofit, they’re winning, and that’s our goal. Is just to create conversations about nonprofits through cooler logo apparel.

 

Kevin Parton:

Very interesting point. I remember when you were telling me about CLŌZTALK, one of the things you mentioned is there are a lot of organizations out there who will have shirts, but they’re not made well.  I can tell you, having spent a ton of time volunteering last year for the Alzheimer’s Society, I did a big campaign for the Leukemia & Lymphoma Society, I’ve done charity runs, I had a closet full of the starchy cotton shirts that, of course, mean well, but I wouldn’t wear them outside of volunteering and I wear this Imerman Angel shirt all over the place because it’s so comfortable and it’s just that little gap, right? Go a little bit of the extra mile and make it something nice. To your point, now you’ve got people wandering around advertising something they’re proud of, and you can merge those two. People love wearing good, comfy clothes and they love to have something that they represent. Well, if you can merge them, what better fashion statement could it be? Instead of having a name brand or something else, you’ve got that not-for-profit organization, that you’re passionate about, that you can walk around representing.

 

Jonny Imerman:

You’re exactly right, KP. We’re going to wear clothes anyway; you’re going to the gym anyway. You can wear a plain shirt, or you can wear a logo for something bigger, that matters, helps other people, saves the next animal, or helps someone with cancer. There are so many ways to use this as a tool for good versus just wearing it.

In addition, I would say, we’re a B-Corp. So, our whole mission is to be more sustainable and more eco-conscious. So, making the T-shirt with four recycled water bottles in every shirt, a long-sleeved shirt, and a tank top, it’s not perfect, but it’s greener than a lot of the other stuff out there.

 

Kevin Parton:

So, let’s go back a little bit. What was the pivot that happened? You’re building Imerman Angels. Where did that idea come from of CLŌZTALK and how did that start?

 

Jonny Imerman:

It happened right from our nonprofit. We thought we had to get the word out for Imerman Angels to recruit more survivors. We wanted to raise awareness that “we’re here, survivors join us!”, because we needed survivors first, to get them plugged in to help somebody sick with cancer. You don’t want people who are sick with cancer coming to Imerman Angels and saying, “Do you know a survivor like me?” and respond with, “Well, we only have seven. We don’t have one like you.” So, we had to recruit first.

So that was our strategy. We were in Chicago at the time, I was there for about 15 years. The whole team and I came up with this idea: let’s make our T-shirts cooler so people are proud to wear them. They’re nice and comfortable, people wear them at the gym, at a Cubs game, walking their dog in the city, a city like Vancouver is great for it. I love that you wear it all the time, dense urban centers are the best because most people see it and then some people ask, and I think Canadians and people in the South in the US are the best, maybe the West Coast too, because they tend to ask, they’re just friendlier.

New York is a great city and I do love it, but a lot of people have their heads down, you know. So, it’s not as much. It’s a little harder here, no doubt about it. But the goal is to get people to talk about it. And that’s what we notice with Imerman Angles. If our friends wore them and people asked about it, all of a sudden, people were joining us and helping us, and survivors were finding us. Everything just started to roll. If we could get our friends to wear the T-shirt, then we said, let’s do this for all nonprofits. And we have about 500 nonprofits total that we partner with. They’re all US-based now, but one day we, of course, want to be in other countries like Canada and Europe and so forth.

 

Kevin Parton:

That’s where this conversation started, at least around the shirts, is I was looking to get some great comfy Leukemia & Lymphoma Society of Canada shirts, and you’re not in Canada yet, so I got an Imerman Angels shirt.

Where is the future for CLŌZTALK? We talk about big visions and missions. What do the next 10 years look like in your mind for CLŌZTALK and where it grow?

 

Jonny Imerman:

We’d love to be worldwide. We would love to have nonprofits everywhere to be able to have a page with us that doesn’t cost them any money. We don’t require them to spend money or do anything. Most of them see this as value. So, they take our page that we build for them, our designs, and the whole system of making them on demand and drop-shipping. But it’s up to them how they want to promote it when they want to promote it. We realize every nonprofit is different and we never want to be pushy with how they do it, but we do believe if they see the value in getting their logo on more ambassadors and more bodies, their awareness is going to grow, and their impact is going to grow.

 

Kevin Parton:

How do you do that? How are you finding success? You’ve got 500 organizations. That’s no small feat, but how do you then expand outside of the US and start to get more global reach?

 

Jonny Imerman:

We’ve had some Canadian companies reach out to us, which is great. But I think a lot of it is going to be us reaching out to them saying, “Hey, we’re able to be in Canada now, we’re able to be in Europe now. We can build you a page.” We’re going to have a lot to figure out on our end because of logistics and shipping internationally. There are more costs on that because we shipped from Milwaukee, WI, which is very close to Canada, and that’s where everything comes out of and it’s made on demand.

And then there’s the vetting process. We are very clear on our website that every one of our nonprofits is a vetted 501(C), so they’re all in good standing with the government. And every country has different levels of what you need to be a registered nonprofit. So, we’re going to have to figure out how all that works. We want people to come to our site and trust that any nonprofit they find on CLŌZTALK is going to be vetted and legitimate and the money is going to the right place and that it follows the traditional norms of nonprofits and that it’s not anything that they’re going to regret supporting. We want people to trust every brand and nonprofit that’s on our site.

 

Kevin Parton:

All right. Well, I mean, Imerman Angels is great, and I love hearing that story, and we’ll get back to that in a minute. And CLŌZTALK is awesome, but I do want to focus on you a little bit and hear more about your journey. So, at 26 years old, to have a diagnosis, a serious one, and to go through two years of treatment, I think it’s safe to say that changed the trajectory of your life.

 

Jonny Imerman:

It really did change me in every way. Like I quit my corporate job. I used to work in commercial real estate in Detroit. I moved from Detroit to Chicago. I was there for 15 years, I’m so glad I did. It was an incredible journey there, I started something I never thought I would. Never thought I’d be a co-founder of an organization; I would have been too scared to do anything like this. But then you go through cancer and you’re like, wait, I could die. Or I could start this, and I still won’t die. Even if it fails. It’s not that bad. Everything seemed in perspective to be not that scary anymore. I think it’s very common for young adults who go through cancer, or any trauma, it can be a lot of different traumas. But your tolerance for risk and doing what you love really changes. They both go up a lot. People can do what they love because they realize life is not forever. You’re able to tolerate more risk because I’m not going to die if this whole idea turns out to be a dream that just can’t really work. And so, I changed a lot. I was also dating someone for a while. We broke up. Great girl. She’s now married, lives in Detroit, and has three kids. But, you know, it wasn’t the right girl.

Everything sort of became clear in my mind what I wanted out of life at that time, and I think a lot of us as young adult survivors, feel if you go through it younger, it’s actually better because you have more of your life to live differently and enlightened. At least we feel we have more percent of our life to live a little more grateful.

 

Kevin Parton:

I’m kind of glad you used the term better because I was going to ask if there’s a silver lining in it. You talked about realizing there’s nothing as grave as death and so you can be a founder, you can start something. There are many people who don’t have a cancer diagnosis, who don’t have a near-death experience and who live their lives in perpetual fear of whatever the biggest thing is that could happen to them, relatively speaking. So, when you said it’s better that it happened younger, and well, you’ve had almost half your life now, which still baffles me. If anyone looks you up and sees how good you look, they’ll realize that what you’ve done for your body since 26 years old, is astounding. You look younger than me and have more energy than five of me.

 

Jonny Imerman:

No, listen, you’re taller, faster, and stronger. Have better hair than I do!

 

Kevin Parton:

So, what would the lesson be to take away from you? And I won’t put words in your mouth but having gone through this diagnosis and the experience you’ve had for the last 20 years, talking to anybody who’s maybe feeling stuck or is fearful of making a decision because that’s too scary for them at this point in their life. What would you tell them?

 

Jonny Imerman:

One of my favorite words to answer this question, Kevin, is the word: Connect. I think you just got to connect when you’re going through life’s hard times. Connect with other people who are further down the road, maybe a mentor, other founders, or other creators, and learn what they’re about. Explore what that’s like and meet other people that have been through similar traumas or journeys, but that are just further along. I’m such a believer in the power of humans connecting where everybody benefits. Because at some points in life, when we were younger for example, we were mentees, we needed to learn and there are people further along that we connect with to figure out our trail.

As you get older, you realize being the mentor feels equally as good, maybe even better in some situations. Where you can give knowledge back and steer the younger or newer people to something better. And so, when you’re in doubt or there’s a trauma, or you’re considering making a big life change, I think it’s all about having conversations and connecting with other similar people who’ve had similar journeys and learning from them.

And a lot of the time doing this gives you the courage if you want to be a co-founder, or whatever it is you want to pursue. It sometimes gives you courage to know that can be done and you realize “Whoa, look at all these other people, look what they’ve built. Maybe this is possible?”

I was definitely scared when we started Imerman Angels and I was scared years again when I co-founded CLŌZTALK because I thought, it was scary again and I had to get myself back in a mindset that in some ways I’d forgotten. And I realized when I was sick, I wasn’t scared. But that fear of starting something new can still creep back in over all the years just because you’re separated from it. It had been 22 years since 2001 when I was diagnosed. Being a Co-Founder I think is scary, at least for me it is. But I’m so glad I’m doing it. It’s not for everyone, it’s scary. There are some people out there that love that risk right away. But I think the goal in life is if you’re able to do what you love and overcome your fears, that’s the greatest life because you get to wake up every day and do what you want to be doing. I think life is too short to live in other ways unless you have to for other reasons, but I try not to live that life.

 

Kevin Parton:

You’re right. and that advice seems so much more impactful coming from someone who’s had a serious cancer diagnosis like you’ve had. That internal dialogue with yourself of “What if this is it?” and then you made the choice to start two separate organizations and now you travel the world, you see so many things, and that advice of do what you love and follow that passion is so important. And you’re a living example, you did two things that maybe you weren’t phenomenal at the beginning…

 

Jonny Imerman:

I’m still pretty bad at it. I found a good team. That’s the key. You have to be bad at some things and own that you’re bad at things sometimes, as a co-founder. I think we are all bad at the beginning because we’ve never done this before, it’s hard.

 

Kevin Parton:

A lot of our listeners are entrepreneurs and are also philanthropic and want to give back or maybe start their own foundation, and you’ve kind of done both. You’ve created a not-for-profit foundation, and you now have another organization. For someone who’s looking to start a start-up or found a company, what’s the biggest takeaway you could give them at that stage of branching out and starting something new?

 

Jonny Imerman:

The number one thing I tell people before you ever try to be a co-founder or build something is you have to pick the right idea. You have to love the idea. I don’t mean for like a week or a month or even 6 months, it should be around a year. You got to think about this idea for about a year and then a year later, two years later, if you’re still passionate about that idea after you’ve looked at other ideas and still feel like “No, I’m coming back to this idea”. That’s how you know that it’s the one for you. Because there are many founders out there, unfortunately, where it’s a flash in the pan, I can be like that. I get too excited about an idea, but two weeks later, you realize I like this other idea better.

It has to be an idea that you are more passionate about than anything else and you have to also understand that you’re going to be working – which is great, again, if you picked the right idea – but you’ll be working seven days a week, all the time. And I’m so impressed with people like you Kevin. I’m single, I don’t have any kids. I’m impressed Kevin, that you’re married, have children, run a company, take care of the family. I mean, I think it’s so hard to do without those things, but for people like you who do that in addition to having a life outside of work, and still get it all done, I give big props. Because when you’re starting something especially, you got to be all in and the ones who can juggle all of it, those are much bigger people than me. I’ve never had to do that part. And you want to be a great dad, involved, you’re still a super healthy guy, and you go to the gym. I mean getting it all in and being a co-founder is tough. You better love the idea because it’s going to be hard to get it all in, but you can do it, again, if you pick the right idea.

 

Kevin Parton:

That’s great advice. It reminds me of the story of how sometimes you feel like your time is fully taken up. The image I have in mind is a glass jar with rocks in it, and you can’t fit any more rocks in it, so you try to pour some sand in, and then you think it’s full and you pour some water in. So, you’re as busy as you are until something else comes along and fills your cup further. I thought I was busy till I had kids, then I thought I was busy until I owned the business. But you just have to grow with it. And what jumps to mind is you must be willing to do whatever it takes. Rarely will you have to do everything that you could conceive of. But if you’re willing to do whatever it takes to make that special thing succeed, and if you’ve got the passion for it, then you’ll be able to take it as far as it needs to go.

 

Jonny Imerman:

How did you know that this business was the right one for you? Was that a quick decision? Did you take your time? How did that whole process happen?

 

Kevin Parton:

It took 14 years to get my feet wet. Where I was working before, there was a little bit of entrepreneurship but not to the extent that I think I learned I loved, but it was still in the finance industry. My passion for finance came from my upbringing and seeing how money is at the epicenter of everyone’s life in different ways. It means different things to different people, and there’s a psychological component to it and it just fascinated me. And there isn’t a ton of education out there about it in the standard avenues. And one of my core values is leadership and another core value is education. So, this profession offers me an opportunity to lead by example, to lead in life, and to educate.

But then to leave where I was before and become a partner in an independent financial wealth management firm and build that, that scratched another itch as well. Because the things that I think are most important in this industry, to the average person, and to business owners; which being one myself makes it easier to help. I can have the largest impact on the environment I am in now. It’s been a labor of love. I need to educate, it’s something that I want to do, and I have been willing to do whatever it takes.

You can talk to my wife about it. We still negotiate when I should be checking emails and replying to things. There isn’t necessarily an off switch. And I walk that line trying to make sure that it’s not to the detriment of my mental health. But when you don’t feel like something is work because it’s the only thing you could see yourself doing, then it just becomes this constant feeling of as long as I’m giving my attention to everything else that’s important; as long as my daughters and I get to connect and I can create a life with them, as long as my wife and I can connect, as long as I get to spend “me time”. Then it doesn’t feel like I’m punching in and punching out of a job. It’s just the ebbs and flows.

So, I think you’re right. Everything is a spectrum and at some points in my day or the week I spend more time with my kids, there are other times when I spend a lot more time doing work-related things, but you have to be passionate for all that to make sense.

 

Jonny Imerman:

That is a great answer and I love how you’ve been at this for 14 years. You’re the perfect example of knowing what you were getting into and making sure it was something you love. You gradually had the buildup and then ultimately made the decisions. That to me is a well-thought business owner where it wasn’t rash because it’s really easy to think, this idea is cool, then two weeks later, you’re jumping for it. And I’ve unfortunately seen too many friends of mine do that and then six or eight months later, they shut down and it’s not because it wasn’t going to work, it’s because they didn’t love it enough.

 

Kevin Parton:

Well, I could talk to you literally forever, and I hope that there’s not nearly as much time in between. I want to end with one question because purpose has come up a lot over the course of this conversation. You may have had more time to think about this, and if not, then Jonny on the spot; when you are gone, what do you hope people remember most about you?

 

Jonny Imerman:

Thanks for the question and I’d love to hear your answer to that too. When I’m gone, I hope that the people served by my friends, my family and the people that co-founded these social impact movements have built. I hope that they continue to get help. To me, that’s what it’s all about. You can take out any one single piece of the wheel, but the wheel keeps turning. Hopefully, these missions with CLŌZTALK and Imerman Angels are so much bigger than any one person, and that’s the goal. And that’s how I hope that I’ll be remembered. Let me ask you the same question. It’s a good question.

 

Kevin Parton:

I’ve done a lot of reflecting on something like this over the last little bit. So maybe it’s unfair that I asked you the question, but six months ago I would have answered that question based on what I wanted people’s opinions of me to be and I heard somebody say something recently where they said, “if they were to be remembered, it was to be unapologetically themselves”. I don’t necessarily know exactly what I’m going to love to do in five, ten, or twenty years, but when I’m gone, if someone was to remember me by saying, “he cared immensely about the things that he cared about, and he was more concerned with pursuing those than making everybody happy”. I think that was that would be a life well.

 

Jonny Imerman:

Well said. It’s just authentic, right, and pure. You’re a good person. Your intentions are pure, Kevin. I can tell in the first 3 minutes we hung out. But you just keep doing you and be unapologetic about it. I think that’s beautiful.

 

Kevin Parton:

Jonny, thank you so much for taking the time to share your story. You’re doing amazing things for people who deserve it so much. Take care and I’ll catch you soon.

 

Jonny Imerman:

You too, keep spreading the love and I’ll be back there in Vancouver soon. L

Take care, brother. Stay well, hug your kids. Thanks, buddy.

 

Kevin Parton:

Thank you. Cheers.

#21 Innovative Legal Solutions with Digby R. Leigh

Friday, May 17th, 2024

In the latest episode of the Polestar Podcast by VELA Wealth, host Jason Boudreau speaks with Digby R. Leigh about the challenges in the current legal system. They explore solutions Digby has initiated that put clients first, providing price certainty by switching away from the standard hourly model and implementing an alternative fee structure.

 

 

Podcast Highlights:

  • The inspiring journey of tenured Lawyer Digby Leigh and his family.
  • Dive into Digby’s remarkable 40+ year legal career and his visionary quest to revolutionize efficiency and pricing structures in the legal industry.
  • The creation of the “Frank Fee” model – a step away from the traditional hourly legal pricing model.
  • How the Frank Fee model has built confidence and transparency for clients that are looking for legal services.
  • The AltFee platform’s evolution and its transformative impact on digital pricing models in the global legal industry.
  • AltFee’s victory in the start-up tech award at the Legal Tech Conference, one of the largest conferences in the United States hosted by the American Bar Association, marks a significant milestone for this innovative idea.

 

About the Guest – Digby R. Leigh

Digby started his 40+ year career at a large downtown Vancouver law firm. When the time was right, he opened his first law firm with his partner in 1992 and then founded Digby Leigh & Co in 2005.

He’s passionate about making things around him a little bit better every day. Life and the practice of law have been varied and exciting for Digby over the last years, but no matter what the issue, Digby brings a practical, cut-to-the-chase, people-oriented approach to any solution. The experience of acting on very significant transactions lends itself to solving any issue.

Digby is focused on building and maintaining relationships as he genuinely enjoys meeting new people and learning about what makes them unique. Learn more about Digby, his work and follow his newsletter Let’s Be Frank on LinkedIn.

 

About the Host – Jason Boudreau

Jason has built VELA Wealth into an established life and estate planning firm, guiding families as they make meaningful choices at the intersection of life and wealth. Jason’s areas of expertise include intergenerational wealth transfer and estate planning with a focus on advanced insurance-based solutions that incorporate philanthropy and legacy planning. Leveraging these specialties, Jason brings a fresh perspective and outside-the-box thinking to the strategic planning process. To read more, please visit the VELA team page.

 

The episode is also available on:

  

  

 

 

 

 

The Podcast Transcript:

 

Jason Boudreau:

Welcome everybody to the Polestar podcast by VELA Wealth. I’m your host, Jason Boudreau, and I’m excited to have a longtime friend and our trusted legal counsel, Digby Leigh, on the call today. Debbie, thanks for being here.

Digby R. Leigh:

My pleasure. Looking forward to it, Jason.

Jason Boudreau:

We go back quite a ways, I guess, 13 years or so.  We met and connected through the UBC football community. I’m excited as today we get to talk about you, your profession, and in particular the experience you’ve had being a lawyer for decades, and how you’ve taken this approach towards the future of the legal profession. What I’m hoping we could start with, Dig, is you taking us back from when you sort of had this “aha” moment about the legal industry itself and what led you to get to where you are today with the current offering at Digby Leigh and Co., I know it’s called Frank Fee. So, we’ll talk a little bit about that and then lead of course, into AltFee as well.

 

Digby R. Leigh:

That’s well. It’s a topic that I have spoken about many times and I’m passionate about it, believing that it is fundamentally changing the legal industry. Let me take you back even further than where Jason started. I’ve been practicing law for 41 years as of May 11th of this year [2024] and that’s actually a long time. For a guy in his 40s, it’s incredible.

 

Jason Boudreau:

You started practicing the year after I was born!

 

Digby R. Leigh:

Isn’t that crazy? Just to start with when you called me “Dig”, it took me back to my youthful days. I’m not called “Dig” so much anymore, I get “Pops” now, as I have grandchildren! So, it puts a big smile on my face, and it shows how close we are.

 

Jason Boudreau:

Definitely!

 

Digby R. Leigh:

So, I started my career practicing law at a large traditional downtown Vancouver firm with just about 100 lawyers and I had a great experience. And that was a traditional hourly model system. Then I went and started another business called Hobbs and Leigh in 1992 with a friend of mine, just after Jason was born!

And then again, I started another business a third time in 2005 called Digby Leigh & Co. So, I’ve had a few iterations in my profession, and I was always one who was not doing things the way others have done it, just trying to be thoughtful and forward-looking.

So that takes us to the current matter; I’ll go back to maybe 10 years ago. I came to the conclusion that the legal industry was broken. And I felt it was broken because of the hourly billing model, which is simple math: You figure out how many hours everybody works plus what their hourly rates are, add it up at the end to charge the service. This traditional model means a client should pay based on how long it took you and how senior you were. To me, that didn’t make sense at all.

And it didn’t make sense for all three stakeholders; 1) clients had no price certainty; they never knew what they were going to end up paying, estimates were not promises, 2) I feel like it didn’t make sense for the people working into the industry either, lawyers and paralegals especially. Because when your financial worth is only determined by how many hours you put in, it’s not scalable! It’s a grind-away way to exist. And 3) I believe even for the law firm as the third stakeholder, it doesn’t make sense. Because if you went away from the hourly model, you would be incentivized to create efficiencies which would make you more profitable in the end. And in turn, clients are going to pay for what they get, you’ll build great systems, and you’ll have the advantage because of these great systems.

 

So, I believed in my idea, even though I didn’t know it would be good at the time, and I had a student do some research for me on what firms worldwide were doing this.

 

We found one in Australia that was out there, it was a firm called Moores, and they continue to do it. So, I saw a video on their website, and it was the staff speaking about how much they enjoyed it [the new fee system]. They spoke about how the conversations with the clients were so good now and that really caught me.

And then I did what we often do as entrepreneurs or business people. I put the idea in a drawer and left it in a drawer!

I get back to everyday life thinking: “What am I going to do today”? “What tasks are more important”? “What do my clients need”? “What do I actually have to do”? It wasn’t until March 16th of 2020 that I was flying back from our place down in the desert at the very start of COVID-19. Everybody was being told to come back to Vancouver!

So, I’m sitting on an airplane with my wife and I’m talking to myself and the moment is still so crystal clear in my mind, and I say “You know, now’s the right time. Now’s the right time to convert away from hourly billing. Now is the right time to give price certainty.”

And what a great sound bite for clients, to be honest, so much certainty in these uncertain times. So, I did what a lot of entrepreneurs will do in times like those – I just decided to change. At that moment, in seconds, I was determined to go and do that.

 

Jason Boudreau:

And that was the start of Frank Fee, right?

 

Digby R. Leigh:

Exactly! But, of course, it wasn’t quite the birth of Frank Fee. It was the idea, the concept. There was not a manual on how to do it, so I made it up.

I guess that’s what entrepreneurs do, right? I knew what it was to practice, I knew a lot about pricing, and I knew about market rates. So, I had a really good starting point just with all my experience. But I didn’t know how we were going to convert the firm away from one that was primarily based on an hourly model into one that was not going to do any hourly billing any longer.

So that’s when the Frank Fee came along, and it was part of what happened in the next six months. I was lucky in some ways that my son Scott was leaving the legal industry as a practicing lawyer – because of the grind. So, even though he worked for a great boss, apparently not good enough!

 

Jason Boudreau:

Yes! I bet.

 

Digby R. Leigh:

So, with that, Scott had experience in the legal industry, he practiced law for five years. We decided that he would come and work for us and create the manual to implement this model shift.

This was a paper manual. Of course, we had it digitally as well. It was 40 pages long, and it took us six months to produce.

The first thing we did was move away from the traditional concept of billing and we set out to divide all our work into practice areas. Because there’s a ton of different work you do under corporate law or real estate, family law, etc. we divided it into 40 different project types.

 

Jason Boudreau:

Wow!

 

Digby R. Leigh:

We then created base amounts for each of those project types – which were basically what a person should pay for the simplest of these types of transactions – then we considered factors that were intended to be mostly value-based factors depending on a client vantage point considering a little bit about the work that has to be done at our end to produce the result at the end of the day.

 

So, I like to use corporations as a simple example because it’s just got a few things in there that are worth pointing out. So if you’re a single person with a numbered company and you’re incorporating one class of shares, one director, etc. It’s going to be the base price. But if you’re going to have three or four shareholders, if you’re going to have a name that you need to reserve, a trademark for example, etc. Those are all factors that increase the price slightly.

 

Jason Boudreau:

Right.

 

Digby R. Leigh:

It’s a different value you’re delivering, and if you have a robust class of shares as opposed to a simple “plain Jane” set of common shares, there’s value being delivered for that, therefore the price is a little bit more. So that’s the whole concept.

Jason, you mentioned the name “Frank Fee”, so I wanted to touch on that really quickly.

 

Jason Boudreau:

Yes.

 

Digby R. Leigh:

So, we decided a couple of things early on. We decided that first of all, we had to own it. We had to jump into the pool, and really go for it. We also needed it to be internally messaged and externally messaged. This was a very top-down driven initiative, and we had to go for it.

 

Jason Boudreau:

Yes, definitely. And how was it received when you guys communicated it?

 

Digby R. Leigh:

We hired a branding company that we’ve done a lot of work with to help us name the new initiative. They came up with about 40 names, and we ended up settling on Frank Fee because we thought it was partially descriptive – it was about fees and it was about being honest and frank, but it was also kind of cute. Now, many years later our client phones up and says, “Can I get the frank fee for that?” Like it’s second nature.

I laugh because that didn’t exist five years ago! So, we launched on the day after the Labour Day in 2020 with our manual and we just flipped the switch and started to do things differently.

The other thing I really believed in was that this had to be data-driven. So, we initially created an “outlier” program. This was where every file would go to that was over or under a certain dollar amount every month. These were the “outliers”. These were cases where either our billing realization rate was greater than we might expect or less than we might expect.

We then would debrief the people that worked on it and say, “This is why we think it happened”. The billing realization rate is the time cost of doing a project, so that’s all the old hourly billing model, who worked on it, what was the hourly rate, etc.

We wanted to know, percentage-wise, what the billing realization rate was, so we had demarcation points. As I recall they were between 110% and under 80%. So, we started thinking and we noticed that 84% was the industry average at the time (84% recovery on time cost), so we picked a middle point thinking 90% was a good middle point after looking at both sides. So, we really studied that data so that we could also have sort of a continuous learning and a dynamic process to how we looked at [creating the new fee structure].

 

Jason Boudreau:

Interesting! And obviously, we’ve done a lot of work together over the years as clients and with mutual clients. I can speak about our experience of it [as clients] in a minute, but I’m curious about how the client response was and did you pilot anything ahead of the launch with clients to get some feedback in real-time as you were refining the model?

 

Digby R. Leigh:

Yes, that’s a really interesting question. Because of course, you should pilot things!

Well, we flipped the switch from the get-go, and I think it was because I was so confident from a client perspective that certainty would be better and that we would be collaborative in our approach that it wouldn’t be an issue.

 

I think there are a few people who feel like they’re paying more for the price certainty, but it is so rare t. I think people value price certainty and they find our prices are mainly dictated by the market and we understand the market. So, we understand what’s an acceptable rate for a transaction, what’s an acceptable rate for an incorporation, and so forth.

So, the pricing really hasn’t been an issue. The real business issue at our end is just to keep getting more efficient and be able to produce the results we want and find ways to spend less time doing it. That’s how we become more profitable.

As of today, I have not had any pushback. And we rarely lose new engagements because of the price. If we lose it, it’s because it’s not a good fit on both ends; for example, somebody’s looking for something we don’t provide.

To answer your question, Jason. No. We didn’t pilot it. But we were very mindful of the client’s response, and right out of the gate, the response was positive. It couldn’t have been any better than it is.

 

Jason Boudreau:

I would say when I think about it from our perspective [as clients] and working with you on some recent engagements, as you know, having certainty around the pricing, there’s definitely value to that. It allows us to do budgeting and do it accurately, which is important for us, especially as we’re growing the company at the pace we are. We want to be as tight as we can be on our numbers and our forecasting. So, it helps with that.

One of the things that I was sort of comparable to when you have that dialogue where you say; “Hey listen, here’s our Frank Fee for this engagement. If you were to do this traditional way with the hourly rate in the market, it should end up being in the X, Y, Z price range.” I’m asking this because this is a new concept for people and it’s what they have to compare to. So how do you tackle that conversation?

 

Digby R. Leigh:

Right, so I don’t do it quite that way. I do tell people that we’re being fair to everybody. In other words, if we’re doing a project for the first time, it’s going to be billed at the same amount as if we do it the second time, even though the first time we’re investing more of ourselves. Our prices are based on the market. We have lots of conversations about what success looks like for the client. Those types of conversations are scoping. It’s funny, I was just talking to Maddy, one of our lawyers, today – We have a very small transaction that we’re doing, but it’s got a fair amount of complexity and what we’ve done is we’ve built a model where we review the scope and say “We can do A, B, and C. We could do these other things, you tell us, and we’ll make the price work accordingly.” So, I feel like because of the collaborative nature and because people have choices, that starts to dictate the market to some extent. I haven’t had hardly any conversations where people are saying, “Boy, if I went and got that done on an hourly basis, I think it would be a lot less.” It just doesn’t happen.

 

Jason Boudreau:

Right. Well, then there would be the uncertainty that comes with that, which is, like you said, a big part of the value prop, right?

 

Digby R. Leigh:

Yes. From a customer’s point of view, it seems to be only positive responses. The point you’ve made that price certainty is valuable, well, I think we’re also dictated by the market. In our minds, we don’t charge just for price certainty even though that has value for the client.

We’re dictated by the market, and we create our base amounts around the market, and we create most of our factors around a client-centric basis to be value delivered. We think about deliverables a lot, we think very little about inputs; how much and how long it’s going to take to run a business. You need to understand that.

 

Jason Boudreau:

What about the legal industry? How has this approach been received from other lawyers that you either are on shared engagements with or know about it or know you and what you guys are up to?

 

Digby R. Leigh:

That is such a cool question because I thought that I would get pushback. So, I write a regular article on LinkedIn called “Let’s Be Frank”. Anybody who doesn’t listen is welcome to sign up. I look at pricing from every different perspective and I’m very careful on how I do it. I try not to tell people that the bill by the hour is wrong. I try to be more of a thought sharer instead of a thought leader, and because I’m just trying to get the idea out there and share what I’ve learned, I invite people to disagree with me but nobody ever wants to disagree with me because I think what they’re thinking and doing makes sense!

They think, “I don’t think I want to do it. I’m too late in my career. Why would I want to fix something that isn’t broken in my mind and seems to be okay”. And I think in that part is where we’re a little bit forward of where the industry is.

 

But I’m going to tell you, and this is me being strong in my opinion, you better get on board. Because I go to a lot of conferences and I speak at a lot of places. One thing that everybody in the legal industry knows is that AI is a buzz.

Legal tech is a buzz and not a lot of people are talking about this yet. We’re unique in talking about it. And that’s something we’ll get to later and why it’s more than just me.

They’re all about using AI and becoming more efficient. But if you do that, what does that mean? Is it going to affect compensation models within large firms at some point? Why should somebody be paid less money because they have built great systems and invested in all that?

So, I think the compensation model is going to change, but so is the pricing of legal services. Why would somebody that’s competing with other people, doing the same work, don’t adopt a different pricing model, bill by the hour, take way longer, and pay more? Why should you be paid a lot less?

One of the themes that we feel since we started, is that the vision we had is like a big heavy ball we’re pushing up a mountain and people were saying, “I don’t know if what you’re doing sounds great”. But now it feels like we’re more on the crest of a wave, an AI wave, if you will. And the amount of people that want to talk about it is completely different than it was even a year ago.

 

Jason Boudreau:

Amazing. On the pricing side then, I’ll segue that into the creation of AltFee.

This is unique and we use it as a firm. It helps us price our planning engagements with the flat fee value-based model. With all these nuances underneath as you’ve talked about, our team has done a cool job of utilizing that tool and customizing it to what we need, which is great.

Tell us about AltFee and how you guys developed that. I’m sure that’s part of the “we” story, and I know you’re a legacy-focused guy, which is why you think a lot about this kind of stuff, part of that legacy is, of course, involving two of your three kids in it, I’m sure everybody’s involved to some extent, but I know Scott and Dig Junior are heavily involved in that. So, talk to us about AltFee and what you guys are up to there.

 

Digby R. Leigh:

So, I’ll go back chronologically. In September of 2020, we launched our new manual system. Just before that, maybe a couple of months before that, I had another client, a friend, a colleague who’s in the tech industry and he said to me, “Digby, you are going to turn this into an SAS product, right”?

I almost wanted to say, “What is an SAS product?” But I didn’t say that. Instead, I said, “Of course”! So, the idea was really generated by somebody who said it to me almost as the most obvious thing that you will do. So once we launched manually, Scott converted from working in our firm and helping our firm launch Frank Fee to incorporate a company called AltFee Solutions in October 2020. We embarked on turning this manual system into a SaaS product, a software product, where it would be available for the entire legal industry. That has been an incredible journey and what we had was a very unique experience in the industry, but what we didn’t have is tech. Most of the startup software companies have great technicians and developers, and they can do all that stuff, but they don’t understand the industry. We understood the industry at a deep level, but we didn’t have the tech support, so there’s been many pros and cons in that. We hired a lot of developers along the way. We’ve had our CTO from close to day one, which is great. So, between October of 2020 and October of 2021, we developed the beta version and the pilot – we did pilot this one.

Now it’s a very interactive program called AltFee and there’s all kinds of data in there about prices, projects, how many, and which projects. It’s a tool that works inner dynamically and interactively within our firm to price projects. So as an example, most of our pricing now is done by paralegals and junior lawyers. They’ll get the project, they’ll dig in on it, they’ll have conversations with the client perhaps, and then they’ll put it into AltFee by the project type and by factors. Then they can share that with whoever they want. I often don’t get very involved in pricing projects unless there’s a uniqueness to it or there are large sums of money involved or people want my input.

But it reminds me of a family lawyer that I was speaking to when we introduced the product several years ago, she said, “It’s always kind of hard because someone says how much is that going to cost?” And she says that for a divorce that’s going to be $5,000, it doesn’t become very granular. It doesn’t get broken down into, you know, what are non-resident properties, etc.

Jason, remember a transaction we did for you recently which was very long, had a whole bunch of things we’re going to do, and AltFee had all those things in there. What we find is people go, “Oh yes, that’s right”, like they can see what we bring to life. The value of what we’re going to do, and that is all generated from the thinking process and the recording process that we go through in putting the project into AltFee, allows us to communicate the start of our proposal.

We often have different scoping and pricing choices and one of the fundamental differences that’s come up as a result of this change is that it is a highly collaborative process. Clients have a huge say in what they’re going to pay. We don’t use terminology such as “we charge for our services.” It’s agreed-upon pricing upfront. Our whole language has changed. Our relationship with our clients has changed, and all for the better. Now we have been at it for a few years and it’s being used in 4 different countries, we’ve had people invest in our company, which is amazing! Very brave of them, to be honest, as we still have a lot of startup qualities.

To watch Dig [Junior] and Scott, my two boys, be in business and to learn and grow, to fall on their faces a bunch and pick themselves up, has been very rewarding. It’s not failure, it’s just another learning opportunity. I’m a big believer in the expression “action, learning, recalibration, action. Rinse and repeat.”

Life isn’t about failing or winning. It’s about really learning from the opportunities that arise.

Another expression for that in sports is relaxed focus. That means that you should be very focused on preparation, execution, and everything you’re about to do but relaxed about the outcome. If you’re Michael Jordan and you’re taking the last shot, it’s going to go in less than half the time. But you’re going to want to know you’ve done everything to prepare. You’re ready to take that shot. You believe in your preparation and then you go, oh, it went in. We should celebrate. We just won the NBA! Or we take a step back and think that it didn’t go in. That is okay, could I learn anything from that?

 

Jason Boudreau:

Of course!

Well, we got a couple of minutes left, and I just wanted to wrap up where you’re at now with all this. I know you got great recognition recently. So, please tell us about where you believe they’re headed, just overall in the legal industry and also in particular with what you are doing with AltFee.

 

Digby R. Leigh:

So, I’m going to go back again, because it makes me reflect on why we do this and so many people listening who are entrepreneurial feel this, and we all have balances of it. Sometimes we get into the “I don’t know if that’s going to work, I better research it” and sometimes we get more over to the other end of the continuum where we think we’re just going to go for it.

I have lots of good people around me that slow me down a bit, but I never realized where it came from [the entrepreneurial spirit], it probably comes from my father, who I didn’t know well for all kinds of reasons. Both parents split up and he died fairly early in life. But he was someone who believed that anesthesiology at the time needed to be reinvented and he brought certification of anesthesiology out to VGH here in Vancouver. Then they couldn’t keep up with him, so he moved down to LA to Children’s Hospital, and he invented new values.

He actually was incredibly entrepreneurial and I didn’t get to know him really well, but I know more of him. It sounds kind of funny to talk about it that way, but that’s true. And I think I have that in spades.  I’m a believer in making decisions, assessing pros and cons, and just going for it, I don’t have a fear of failure and I feel very fortunate. You just have to be mindful of the downfall or the downside to what you’re doing. So, that all goes back to where the journey started and how we ended up right now.

So, we’re now in 2024, you heard me say we launched in 2021. We’ve sold to several firms worldwide. Our data is starting to get really good. And we’re starting to see ways of using the data for our client’s benefit. So that’s where we are in the product.

I already alluded to the fact that this is so topical right now and the boys went to the legal tech conference in Chicago that the American Bar Association (ABA) puts on, and we’re in the startup category. We started competing with 25 other businesses for the Startup award, I don’t remember exactly what it’s called, but we competed for that award.

That got narrowed down to 15 companies that were at the Chicago Conference, and we ended up pitching at that. We did a 3-minute pitch and we really focused on the AI equals efficiency, which doesn’t equal the hourly model, etc. That was our theme.

And we won!

We won! And apparently going away, I think what people were intrigued about was a lot of people were thinking about AI and trying to incorporate it into what they’re doing. But very few people are thinking then what? And we stood out as the ones that were thinking about then what? And it was really cool.

Have that happen, the recognition, the number of connections and relationships, as well as being a start-up in business is hard and it’s like you’re always looking for the moment where you think, how did that all happen? This will be one of those things that happen in our journey that we’ll look back at and that was one of our demarcation points.

 

Jason Boudreau:

Amazing validation point for you guys!

 

Digby R. Leigh:

Yes! And validation by a huge organization too! All the lawyers in the United States, well not all were there, but there were lots of people and it’s their legal tech gathering that they have every year and to be recognized there, was a big win.

One interesting thing for those of you in Vancouver is that several of the top firms were from Vancouver. It seems like it must be the water we’re drinking here like we are producing legal tax products at a rate like nowhere else in North America. It’s interesting.

 

Jason Boudreau:

Really? Wow!

 

Digby R. Leigh:

And out of that, we’ve created a community in Vancouver of legal tech entrepreneurs and now we’re all communicating because we’re not competitive, we’re more aligned. If one does well, then the others probably do well, and somebody can be a referral source for us just like we can for them. So, it’s a real community.

 

Jason Boudreau:

Totally! Support the ecosystem.

Well, Dig, why don’t we leave it at that? That’s a high note for sure. And I appreciate you taking the time to be here today and sharing your story and the story of Frank Fee and AltFee. I’m looking forward to seeing how this all unfolds, and we’ll continue to use it and continue to experience that as clients of the firm as well. We’ll definitely have you back on in the next while for an update.

 

Digby R. Leigh:

Sounds great. I’m in. Always great to chat with you, Jason. Thank you for including me in your podcast. I’m looking forward to seeing how it turns out.

 

Jason Boudreau:

Happy to have you here and thanks again, Dig, for being here.

 

Digby R. Leigh:

My pleasure.

 

#20 Q1 2024 Market Outlook with Keith Allan

Friday, April 19th, 2024

In the latest episode of the Polestar Podcast, financial experts Kevin Parton and Keith Allan delve into the current market conditions and provide valuable insights for investors. The discussion revolves around the impact of interest rate movements and strategies for navigating market volatility.

 

 

Podcast Highlights:

  • Explore how market sentiment reacts to speculation about interest rate movements and its influence on investor decision-making.
  • Learn the importance of staying resilient during market pullbacks, maintaining a long-term perspective, and seizing opportunities to acquire discounted assets.
  • Discover the significance of disciplined investing habits like dollar-cost averaging and diversification in mitigating risk and maximizing returns.
  • Understand the necessity of removing emotion from investment decisions, and how it contributes to long-term investment success.
  • Gain insights into the mindset needed to navigate market fluctuations, focusing on long-term goals rather than short-term market movements, for sustained investment growth.

 

By understanding the dynamics of interest rates and adopting disciplined investment strategies, investors can weather market volatility and position themselves for long-term success. Tune in to gain further insights into navigating today’s ever-changing financial landscape.

 

About the Guest – Keith Allan

Keith Allan is a Portfolio Manager with Harness Investment Management. Harness has engaged in a strategic partnership with VELA Wealth and provides discretionary portfolio management for many of VELA’s clients. With more than 15 years of buy-side investment management experience, Keith brings a wealth of knowledge and experience to provide insight and guidance to clients regarding their investment portfolios. At Harness, Keith is responsible for developing and maintaining investment portfolios for VELA clients. Keith is dedicated to fostering long-term relationships with high-net-worth individuals and families by providing a clear and transparent vision to help them achieve their investment goals. To learn more, please visit Harness Investment Management team page.

 

About the Host – Kevin Parton

Kevin Parton, CFP professional, specializes in personal and business financial planning, tax reduction, and estate planning. Kevin is diligently concentrating on client education as a powerful strategy for building financial certainty. As no financial situation is the same, Kevin and his team monitor clients’ plans and implement personalized strategies to reduce their personal and corporate taxes, and protect their income, assets, and loved ones against the financial consequences of a serious illness, injury or death, ensuring clients maintain financial certainty and peace of mind. To read more, please visit the VELA team page.

 

The episode is also available on:

  

  

 

#19 Morgan Housel: On Wealth, Wisdom & the Pursuit of Happiness

Thursday, April 11th, 2024

In this episode of the Polestar Podcast, host Jason Boudreau speaks with Morgan Housel, author of “The Psychology of Money” and “Same as Ever.” Morgan shares insights from his unique journey from a ski-racing youth to a leading financial writer, emphasizing hard work, curiosity, and the realization that personal inadequacy led to greater efforts in his education and career.

Morgan explores the balance between optimism and pessimism in wealth management, drawing from his professional experiences and his writings. He highlights the critical role of understanding human behavior in financial decisions and discusses the complexities of entrepreneurship, the pursuit of happiness, and parenting in the age of social media.

This episode is a deep dive into Morgan’s philosophy on financial psychology, the importance of self-awareness, and the challenges of navigating success and satisfaction in today’s digital and materialistic world.

 

 

Key highlights of this episode:

  • Morgan Housel’s unique journey to acclaimed financial writer, highlighting the value of hard work and the impact of early life experiences on career choices.
  • The importance of balancing optimism and pessimism in wealth management.
  • Insights into behavioral finance, emphasizing the psychological aspects of money management and the power of understanding human behavior in financial success.
  • The role of entrepreneurship and the realities of managing a business, addressing the challenges and rewards of navigating the business world.
  • The impact of social media on happiness and self-comparison, with a focus on the challenges of parenting in the digital age and fostering a healthy relationship with technology.
  • Morgan’s perspectives on the pursuit of happiness, success, and fulfillment, offering listeners a guide to navigating life’s financial and emotional complexities.

 

About the Guest- Morgan Housel

Morgan Housel is a partner at The Collaborative Fund.

He’s the New York Times Bestselling author of The Psychology of Money and Same As EverHis books have sold over five million copies and have been translated into more than 50 languages.

Morgan is a two-time winner of the Best in Business Award from the Society of American Business Editors and Writers, and winner of the New York Times Sidney Award. In 2022, MarketWatch named him one of the 50 most influential people in markets. He serves on the board of directors at Markel.

 

 

About the Host – Jason Boudreau

Jason has built VELA Wealth into an established life and estate planning firm, guiding families as they make meaningful choices at the intersection of life and wealth. Jason’s areas of expertise include intergenerational wealth transfer and estate planning with a focus on advanced insurance-based solutions that incorporate philanthropy and legacy planning. Leveraging these specialties, Jason brings a fresh perspective and outside-the-box thinking to the strategic planning process. To read more, please visit the VELA team page.

 

The episode is also available on:

  

  

 

#18 Alternative Investment Insights with Keith Allan

Friday, March 1st, 2024

In the new episode of the VELA Wealth Polestar Podcast, Kevin Parton, Partner and Senior Advisor, and Keith Allan, Portfolio Manager at Harness Investment Management, explore the world of alternative investments, offering a behind-the-scenes look at how VELA Wealth, Harness Investment Management, and Purpose Investments collaborate to unlock unique opportunities. They challenge listeners to rethink traditional portfolio strategies, emphasizing the importance of diversification with private assets like equity, debt, and real estate.

 

 

In this episode of the Polestar Podcast, you’ll learn:

• how VELA Wealth, Harness Investment Management, and Purpose Investments collaborate to unlock unique opportunities,
• why traditional portfolio strategies are being challenged,
• how alternative investments can revolutionize your portfolio,
• the power of diversification with private assets like equity, debt, and real estate.

 

About the Guest – Keith Allan
Keith Allan is a Portfolio Manager with Harness Investment Management. Harness has engaged in a strategic partnership with VELA Wealth and provides discretionary portfolio management for many of VELA’s clients. With more than 15 years of buy-side investment management experience, Keith brings a wealth of knowledge and experience to provide insight and guidance to clients regarding their investment portfolios. At Harness, Keith is responsible for developing and maintaining investment portfolios for VELA clients. Keith is dedicated to fostering long-term relationships with high-net-worth individuals and families by providing a clear and transparent vision to help them achieve their investment goals. To learn more, please visit Harness Investment Management team page.

 

About the Host – Kevin Parton
Kevin Parton, CFP professional, specializes in personal and business financial planning, tax reduction, and estate planning. Kevin is diligently concentrating on client education as a powerful strategy for building financial certainty. As no financial situation is the same, Kevin and his team monitor clients’ plans and implement personalized strategies to reduce their personal and corporate taxes, and protect their income, assets, and loved ones against the financial consequences of a serious illness, injury or death, ensuring clients maintain financial certainty and peace of mind. To read more, please visit the VELA team page.

 

The episode is also available on:

  

  

 

 

The Podcast Transcript

 

Kevin Parton:

Hello. This is Kevin Parton from VELA Wealth, and this is the Polestar podcast. I am lucky enough to be back here in the interview seat with portfolio manager Keith Allan. How are you doing today?

 

Keith Allan:

Doing well, Kevin, thank you for having me.

 

Kevin Parton:

All right. I’m excited about what we’re talking about today – alternative investments for a variety of reasons. In the last couple of years, it’s become quite a hot topic and I think there’s much to be explored both in the scheme of where alternative investments fit and how it relates to the average person. But, firstly, I want to talk about three different entities: VELA Wealth, Harness Investment Management, and Purpose Investments. Can you please provide some helpful context and explain the relationship between the three companies?

 

Keith Allan:

I can understand from a client’s perspective how it can get a bit confusing and convoluted at times when we’ve got several entities all commingling. I’d be happy to shed some light on each entity and explain what they provide and how they fit into the client’s overall financial landscape.

VELA Wealth is the wealth manager in the sense that they are the relationship manager for the client. They focus on planning the client’s entire financial landscape, including insurance and all other types of needs. Purpose Investments or Purpose Unlimited, as it’s called now, is the portfolio management entity and Harness Investment Management is the registrant under that umbrella. So, Harness acts as the fiduciary. As the portfolio manager, while I work exclusively with VELA clients, my licensing is through Harness Investment Management as the registrant. So that way I’m licensed with the Securities Commissions across Canada through Harness, which falls under the Purpose Unlimited umbrella. So, you can think of Purpose almost like a Black Rock or a Vanguard. Their whole MO is to bring products to market, ETFs, funds, and portfolios. They’re separately managed account portfolios, which are the same accounts we use for our clients. So, Harness was branched off from Purpose to provide these products to high-net-worth or ultra-high-net-worth clients and the retail landscape, which is where VELA comes into play. VELA has entered into a relationship or a strategic partnership with Harness to allow its clients the opportunity to invest in Purpose’s product through Harness. I’m hoping clients aren’t more confused after I explain that than they were before I explained it. I did my best to hopefully demystify the whole relationship between the three entities.

 

Kevin Parton:

From where I’m sitting, I think you did a pretty good job. It’s unique right now in the Canadian landscape, but this sort of platform makes what VELA is doing more and more accessible to the Canadian market. Historically, there have been large entities where everything was under one umbrella, but to operate in that space, you had to kind of preexist as a massive entity. And we’re in the age now of more boutique-style firms that can tailor and cater more specifically to their clients. This is the mechanism by which it’s done at a level people are familiar with.

 

Keith Allan:

Yes, exactly. I think the whole thing about the relationship and how this is structured is to give the clients the best of all worlds because it allows each person to focus on what they do best and to give that to the clients in context so that clients are ultimately enhancing not just their portfolio but their overall financial situation, whether it’s planning insurance investments, which are the three main entities of the family balance sheet. We want to be able to give our clients the best in class and this is the relationship that allows us to facilitate that.

 

Kevin Parton:

“Aces in their places” comes to mind as you are saying that this allows us to ensure that we have the best people for the job. This brings me to the next point and the purpose of this conversation – alternative investments.

So, as I was saying, alternative investments have become a common word or term these days to sort of fad level after 2022 when stocks and bonds went down in the same year and one of only a few historical years in which that’s been the case.  It began a big conversation around the different assets you can invest in what are the alternatives? What do you do? I think a problem with it becoming such a common term is that it loses its meaning and where it originally came from, what it describes starts to sort of take on a mind of its own. And sometimes far worse as it gets used so commonly that that people think that they’re supposed to know what it means and then they don’t do the research into exactly what it is, or they try and delve into things themselves.  This is where I want to start. What exactly is an alternative investment so that our listeners can be clear on the definition before we dive a little bit deeper into this subject?

 

Keith Allan:

So, alternative investments can be described or defined as an investment asset class outside of your traditional bonds and equities in cash. So, anything that doesn’t fall in that traditional stock blue chip equity, small cap, large cap stock, or your traditional bond, your fixed income, corporate bonds, government bonds, GICs, cash, or other money market instruments, would be considered an alternative investment. It can be anything from commodities to real estate to derivatives, private equity, private debt or private real estate, hard real estate infrastructure, or synthetic instruments that mimic real estate and provide a yield. Many different types of products can be defined as alternative investments, but the reality it should be something to be looked at outside of your traditional asset classes. And for us, that’s what’s important and what we feel will help drive returns for our clients moving forward.

 

Kevin Parton:

It sounds like there’s quite a large array of things that fall under the alternative asset classes, which kind of make and I think sort of lends itself to where the conversation 2022 is going is stocks, bonds, and cash are traditional, but a much smaller shelf relative to everything that falls under alternate assets. Then the next evolution is well, how are alternative assets being included in the design of a portfolio to sort of work in conjunction with the traditional non-alternative assets and who makes those decisions?

 

Keith Allan:

Traditionally, if you go twenty-thirty years back, alternative investments weren’t a part of the portfolio. Everyone talks about your classic 70/30 portfolio, 70% equities, 30% bonds, or your classic 60/40 portfolio, 60% equities, 40% bonds. Set it, forget it, move in. In our opinion, that type of portfolio structure is a very antiquated approach to investment management because the reality is we want to achieve alpha for our clients, and alpha is defined as the excess return above and beyond your benchmark. To do that in today’s environment, you need to be able to have other asset classes, uncorrelated asset classes to your traditional equities and fixed income. That’s how we look at alternative investments. And now it’s peeling back the layers of what type of alternative investments we want to use to achieve that alpha that we’re looking for. Like I said before, there are many different layers there, but for us, we want to drive return for our clients.

There’s an efficient market hypothesis where all available information is priced into the market at any given time. So, to truly achieve alpha, it’s almost impossible because all the information is showing in the market at that specific point in time. So, portfolio managers are somewhat obsolete if you believe this because there’s no chance to add alpha if you’re looking at public markets and traditional markets. If all the information is there. So, whether we believe that efficient market hypothesis or not, that’s a whole other discussion. But what we do believe is that we are not obsolete as portfolio managers, and we indeed can achieve that excess return. But we need to do it in non-traditional asset classes like alternatives. So, I just wanted to throw that little tidbit in there because I think it’s important that people listening to this understand -if you are a believer in efficient market hypothesis and all information is truly reflected in public markets, there is still a chance for us to return that alpha to clients and earn our keep, so to speak. We believe we can and we believe we’ve done that. So that’s a little bit of a sidebar, but I want to throw that in there.

 

Kevin Parton:

I appreciate you throwing that in there because of that. That is a common conversation around index investing and what people want to do with their money, and I think this is where alternatives play a role as it opens up the portfolio to sort of a litany of other as you said noncorrelated assets that are important and something that again keeps coming up now with sort of the big seven tech companies.  Nvidia (NVDA.O) just almost reaching or passing 2 trillion as these indexes are made up by fewer and fewer companies or the moves that occur in there are as a result of what’s happening in fewer and fewer companies. So, I think to your point, the opportunity to add value is starting to grow because of the fewer and fewer companies in these indexes… but that is a conversation for another podcast.

 

Something that I know to be true at least, and maybe this is more of a question than anything, but alternative investments used to be only accessible to pension funds or institutional investors maybe because of technology or just sort of necessity has changed. I think that’s also why it’s become a more common discussion as alternative investments are becoming more and more accessible to retail investors. Can you talk a little bit about why that evolution has happened?

 

Keith Allan:

So that’s a great point, Kevin. And what we’ve done with Purpose and Harness is we’ve been able to bring product to market that normally to your point would only be offered in the biggest pension funds or the biggest money managers in the world managing billions and billions of dollars in a pension fund or a hedge fund. So, why should it just be the largest funds in the world getting access to these types of investments? We feel that our clients should be able to get access to those, maybe not in the same direct manner, but certainly very close in terms of how they hold it, and how it represents the overall asset allocation for their portfolio. So, what we’ve done is we’ve taken private assets, private equity, private debt, private real estate and unitized it to our clients so they can gain access to these types of investments. We feel very grateful that we’re able to do that through our partnership with Purpose and Harness and VELA because not a lot of investment managers out there can offer this to their clients in the unitized form. So, that again separates what we’re able to do for our clients outside of a lot of other investment managers.

Kevin Parton:

Which brings up two interesting points. The first one is – is this sort of a unique offering through Purpose, some different alternative assets that are available in this unitized mechanism? Is that unique for Purpose or unique with VELA or are these accessible at a litany of different firms in the market?

 

Keith Allan:

The answer to your second question is no. They are not readily available to other outside firms in the market. There are other private investments. If your portfolio is being managed by another firm, you may have access to other types of private investments.

Because of the strategic partnership we have, we’re able to gain access to these particular funds, but also at a price point that is very accessible for clients and they’re not paying unreasonable management fees to get access to this. I think that what separates us from other firms is that we’re able to get access to them, but at a price point that is very enticing for clients and they’re not paying a gigantic management fee like they would be elsewhere.

 

Kevin Parton:

Fair enough. I guess that the barrier to entry into these products as far as a dollar amount isn’t so high that it limits who can access them.

 

Keith Allan:

Yes, exactly.

 

Kevin Parton:

I know that Purpose has a relationship now with three different alternative investments. Are you able to speak a little bit to those three at this point?

 

Keith Allan:

Yes, absolutely. So, Purpose has partnered with three firms based in the United States that specialize in private assets. In that partnership, they’ve launched three separate funds, private equity, private debt, and private real estate. Purpose has now been able to bring this to the Canadian marketplace for clients that are partnered with Purpose, Harness, or VELA, and provide these funds for them.

The private equity fund is partnered with a firm called Pantheon in the United States, the private debt is with Apollo and the private real estate is with a firm called Blue Rock. So, together with each of those three firms, Purposes has created a fund that is sub-managed by those aforementioned firms, but available to Canadian retail investors. The track record for all these firms is remarkable which is why Purpose decided to partner with each of them respectively, for that particular asset class. Due diligence has been done and the companies have been vetted after a lot of research, it was decided these were the best partner firms to go with to provide these private assets for the clients.

 

Kevin Parton:

If I’m hearing you’re right, when we started talking about alternative investments, there was a very large array of available things that fit under that category and what Purpose is done is to acknowledge all the options that exist and kind of distill it down through a rigorous process and now said, “So, these sort of three options are the best that we want to offer on our platform or to our clients within the alternative asset space?”

 

Keith Allan:

Yes, exactly. So, I think there is a huge appetite from investors for private assets. I know in the beginning I talked about how commodities, derivatives, and other types of assets could be deemed alternatives. However, the largest appetite amongst retail investors is for private equity, private real estate, and private debt. It is difficult to be able to access that in the Canadian landscape. So, Purpose knowing that there is a huge demand for this from investors across Canada, focused on the initiative to be able to establish 3 funds in those private assets and be able to bring them to market for retail investors.

So, we feel that the private equity, the private credit or private debt, and the private real estate sort of tick all the boxes in terms of increasing diversification for clients from traditional asset classes, as well as providing a reliable income stream because all of these funds pay a distribution quarterly and enhanced returns or achieve the alpha that I spoke about earlier. Those three funds do all three of those things, which is why these are the ones that we feel are best suited for our clients moving forward.

 

Kevin Parton:

Right, okay. Now that we talked about that, how do you decide what fits into a portfolio? You talked about the traditional 60/40 or 70/30 portfolio structures earlier. What the mix is supposed to be if you incorporate alternative assets in there?

 

Keith Allan:

I think ultimately it comes down to each client, their appetite for risk, and their ability to take on risk because undoubtedly these private assets do carry more risk than perhaps your traditional equities and bonds, which is why they’re able to ultimately achieve higher returns. It’s a direct correlation between the risk you’re willing to take and the return you are getting. Now there is some volatility and there are certain restrictions within these funds in terms of being able to get your money back, being able to put money in, and withdrawing it. They’re not overly restrictive. It’s not like you put your money in and you’re never going to get it back, but there are some restrictions in place and clients need to be aware of that when they do invest in these types of funds as they aren’t as liquid as traditional public equity or public debt. So, we are being able to weigh that for clients. What is their appetite for risk? What is their asset allocation? What are they looking for? And for some clients, it might not be appropriate. We feel that for most clients it is because again, we want to be able to drive return for clients, and to do that, we need to be able to diversify the portfolio. Certainly, for clients that rely on taking income out of their portfolio every month or have a huge upcoming purchase, we may not look to go private as much as we would for a client that has a long time horizon and does not require true liquidity needs at this point. So, every client has looked at it on a case-by-case basis to truly understand if these types of investments are appropriate for them.

You asked me what is the traditional or the new asset mix that we should be looking at. Well, I can’t answer that because as I said, every client is different. We feel that it’s entirely appropriate, or else being equal, for clients to have roughly between 8% and 12% in private assets just given the current climate, and for some clients, it will be less. I don’t necessarily know if we would ever go more than that, but 8% to 12% is what we look at in terms of private assets and alternative assets. Right now, those alternative assets are made up primarily of private equity, private debt, and private real estate.

Kevin Parton:

Great. I guess with the change in interest rates, cash is a little bit more of something you’d consider in a portfolio. So, the traditional mix was equity fixed income and now it looks like alternatives and cash can be in positions three and four within the building of a portfolio. I only mentioned that to say that when you talked earlier about alpha and adding the values of portfolio manager, well, when you double the assets, you tend to consider putting in a portfolio that adds a little more complexity. Can you tell us what sort of the changing environment both in bringing alternatives into portfolio management more readily and fluctuating interest rates does when you’re looking at portfolio construction?

Keith Allan:

Well, we’ve said for some time now that cash is an asset class, whereas before it was kind of just a sidebar, right? We always hold a little bit of cash in client’s portfolios, but we did not truly look at it as an asset class because there was virtually no yield on it. But now when you’re seeing banks offering very high interest rates and we have our cash product that we offer for clients that yields well north of 5% you can say that this is an asset class for clients. When we build out a portfolio, we’re looking at equities and fixed income, but cash falls right next in line to that, and again, alternatives, private equity, private debt, and commodities. Are we going to go ahead and hold 20% cash for clients? Well no. That will not be a good job as portfolio managers If we’re just going to say, “We’re going to hold 20% cash across the board”. We might hold a little bit higher than normal in client’s portfolios in cash to provide us the opportunity to act when there’s an asset or a particular name we like and we want to be able to deploy that money easily and readily. You’ll be getting a 5% yield on that, while a lot of bonds weren’t offering that. So, we can put that money there, get the tidy yield on it, and have it readily available for us to deploy, right? But again, it’s not stagnant and it’s always dynamic. We’re always thinking about what are we going to do in two to three months from now, do we want to have cash available, and what other types of assets are we looking at to enhance the return and drive return for our clients. So, yes, cash is an asset class. It’s not always going to be an asset class.

I think to your point about interest rates, we’ve seen interest rates drop to historical lows during COVID-19 and now they’ve jumped back up to highs that a lot of the population haven’t seen in their lifetime. What’s going to happen next? Well, inevitably, interest rates will come down. I know they haven’t yet. The Bank of Canada has gone on record saying that probably at some point this spring, the US Fed same deal. So, as the interest rates come down, fixed income is going to rise, and the value of fixed-income assets moves inversely to what the interest rates do. So, there may be an opportunity to hold more fixed income or other types of assets that are going to increase in value. But right now, we’re still active in holding cash for clients and we think it’s prudent to do so.

Kevin Parton:

Great. I’m going to try and summarize some of the points we went over today. So, we started with talking about alternative assets, which are effectively anything outside of cash, stocks, or bonds. The list was quite large, but we sort of narrowed that down to where the appetite is, which is private debt, private equity, and private real estate. Purpose has done its due diligence and found three big players in each of those spaces such as  Apollo, Pantheon, and Blue Rock, which have been unitized to give our clients access to really good quality private assets as a part of their portfolio, especially through 2022. It’s become apparent that the traditional mix of stocks and bonds isn’t necessarily what’s going to be advantageous going forward. So, it’s becoming more and more prudent to include alternative investments or private assets in the portfolio. That is a decision that’s made on a case-by-case basis based on clients, but being somewhere where you can gain access to that type of advice is what’s going to become a differentiator or a difference maker.

So, I think that’s kind of where we can summarize everything we’ve talked about so far. I’m going to turn it back over to you, Keith. Can you please give one or two bits of advice or talking points to your perspective on alternatives before we wrap this up?

Keith Allan:

Thanks, Kevin. Everything you said there is a perfect summary of what we spoke about. The one piece of advice I would give is to be open-minded and be able to think outside the box and outside of the antiquated 70/30 or 60/40 portfolio. If you’re looking to drive value moving forward and enhance return in your portfolio the 70/30 portfolio will do its thing but ultimately you need to be able to look outside traditional assets to truly drive return. We as a team have done a lot of work on this and really done our due diligence in terms of understanding what private assets mean in portfolios, and how they can diversify portfolios and provide uncorrelated returns to traditional asset classes. So, I think for people that don’t know a lot about private assets or have a negative connotation as they have heard a friend who got into some private fund and lost all… Well, no, that’s not the private assets we’re looking to add, it doesn’t work like that as these have been vetted, due diligence has been done and we truly believe that they are going to drive value for our clients.

Kevin Parton:

Awesome. I appreciate it. I think this is great information for our listeners so that they can get a little bit of an inside scoop and understand more about alternatives and private investments. We’re always available if there are additional questions. Thank you for your time and I look forward to talking to you again soon.

 

Keith Allan:

Absolutely. Thank you for having me, Kevin.

 

 

Disclaimer

The information provided in the podcast transcript is designed for general informational purposes only and is not intended to provide specific advice or recommendations for any individual or on any specific security or investment product.

#17 Kevin England – A Life Steered by Passion And Community

Thursday, February 15th, 2024

Kevin England, President of the England Group, shares his journey from a dairy farm upbringing to a successful career in real estate and philanthropy on the recent Polestar Podcast by VELA Wealth. Raised with strong family values and a work ethic, Kevin’s early experiences taught him the importance of integrity and community involvement. His transition to the real estate sector led to innovative approaches to property management, emphasizing long-term thinking and transparency. Kevin’s passion for making a difference is evident in his philanthropic endeavors, including organizing car shows to raise funds for cancer research and hospice care, showcasing his commitment to giving back.

 

 

Key highlights of this podcast:

  • Childhood Lessons: Discover how Kevin’s upbringing on a dairy farm instilled in him strong values of work ethic and community involvement, shaping his approach to business and life.
  • Career Evolution: Learn about Kevin’s transition from working in construction and the tar sands to a successful career at IBM, where he honed his skills in communication and long-term thinking.
  • Real Estate Innovation: Explore Kevin’s innovative strategies for property management, including his focus on transparency, long-term planning, and adding value to properties through amenities and services.
  • Philanthropic Passion: Hear about Kevin’s deep commitment to philanthropy, from organizing car shows to raise funds for cancer research and hospice care to supporting recovery centers for young men in need.
  • Building Trust: Gain insight into Kevin’s approach to building trust and rapport with clients, emphasizing integrity, transparency, and a long-term perspective in all his dealings.
  • Legacy of Impact: Discover how Kevin’s dedication to giving back has created a lasting legacy, inspiring others to follow their passions and make a difference in their communities.

 

About the Guest – Kevin England

Kevin England: A conservative, innovative, and bold entrepreneur with over 30 years of success. From his roots on a Pembroke farm, he embodies hard work and determination. After graduating from Carleton University, he honed his skills at IBM Canada Ltd. and Qualico Developments before founding the England Group in 1986. Based in Vancouver, Kevin England leads with integrity, ensuring everyone wins in the deal. To learn more, please visit the England Group website.

 

 

About the Host – Jason Boudreau

Jason has built VELA Wealth into an established life and estate planning firm, guiding families as they make meaningful choices at the intersection of life and wealth. Jason’s areas of expertise include intergenerational wealth transfer and estate planning with a focus on advanced insurance-based solutions that incorporate philanthropy and legacy planning. Leveraging these specialties, Jason brings a fresh perspective and outside-the-box thinking to the strategic planning process. To read more, please visit the VELA team page.

 

The episode is also available on:

  

  

 

 

 

The Podcast Transcript:

 

Jason Boudreau:

Welcome, everybody to the Polestar Podcast by VELA Wealth. Today we have the pleasure of having Kevin England. Kevin is the President of the England Group, the company focuses on a diverse portfolio of real estate assets and has been around for many years. Welcome, Kevin. Thank you so much for being here today.

 

Kevin England:

Hey, Jason.

 

Jason Boudreau:

Great to have you here and looking forward to the conversation.

I know you have lots of neat things on the go today with exciting projects you’re involved with and your non-profits and your passion around that. I’ll lead into that a little bit later in the conversation. What I’m hoping we could do today is start way back as far back as you can remember. I want to hear about the journey of Kevin England and how you got to where you are today if that works for you.

 

Kevin England:

Sure, Jason. Let’s do it.

Well, I was the fifth child of 10 and I was raised on a dairy farm just outside Pembroke, ON. In the early years, everyone had a job, everyone pitched in. So you learned work ethic and family values very early on. My grandparents were farmers as well. Interestingly enough, my grandfather and his brother, my uncle, had bought a steam engine in 1922, and we’ll be talking later about my passion for vintage cars… so they bought a massive 22-horsepower Sawyer-Massey steam engine machine and they went around to the various farms to help them do the threshing.

As a child, I remember that it was a big part of our family culture – my grandfather was doing that. As I said I had nine brothers and sisters. I was boy number 5 and then there were two sisters, a boy who took over the farm, my brother, and then two younger sisters. What’s a bit unique was being raised on a farm in Renfrew County, I went to a one-room schoolhouse. So, I had grade one all the way to grade eight in one room. We just had a school reunion for one of the teachers who taught there. She had 35 kids in this class at one time and she was 18 years old. She was a very capable person. Having had many siblings, I had brothers and sisters all across the classroom, so it was a unique way to start. We would walk to school in the farming community and then eventually by grade eight, we started to be bused to the larger schools. But that was the beginning of how we were getting educated.

When you grow up on a farm you learn a lot of things. You witness a lot of things – my dad and my mom were very involved in the community, very involved in the church, and very involved in helping neighbors. I got to see my dad do many things for neighbors that he would not want anyone to know about, he wanted to keep it private. We knew all our neighbors, their parents, and the grand their kids, so you grew up with a strong sense of self-identity in that community. Of course, they did not realize it at the time.

I was fortunate enough to hang out with a group of guys who went on to university. So, I took a gap year and went to Europe, which at that time was a big deal. I went to Europe for six months with a buddy and came back and decided to not just do a trade, but then I would go to university. I went to Carleton University, Ottawa, Canada.

I was fortunate to get hired by IBM on a career day at the university. It wasn’t my intent. I had just decided to have this interview for the experience, and they decided that I was probably a good rainmaker. They decided to hire me and that kind of surprised me as well because I was just enjoying the interview. I remember it was the third day of interviewing and I was the very last interview. And I said to the interviewer “Let’s go get you a coffee.” So, I took him to the university coffee shop. My friends were there, they saw me there with the interviewer from IBM, who was the Senior Manager, and they knew I had the job. They said you had him laughing and eating out of your hand and they said, “Who takes the interviewer to the coffee shop to do the interview?” So, that was very fortunate for me. They sent us to Toronto for training and that is where a lot of my business success came from learning communication skills, the approach to thinking long-term, and thinking bigger.

 

Jason Boudreau:

How old were you when you started at IBM?

 

Kevin England:

I was 25 when I started at IBM. At that time, I had already started the business on the side. I have worked in construction. I remember in my high school days I had hitchhiked out to Fort McMurray and got a job in the tar sands. I was making like two and three times more money than you could make in my hometown. The next year there were 17 of us. So, I was alone there for the first year and then I told all my friends from high school. The next year there were seventeen of us in Fort McMurray. That was pretty cool, we kind of owned that town, and it was a pretty special and spectacular time. So that’s how I got my university money. I was there for two summers and got my university money. Also, I got experience driving a gravel truck, and I had farm experience already, right? So, I got the job.

While I was in university, I got a loan from two of my brothers and bought a diesel gravel truck which I was operating in the summer. I hired a family man to drive it while I was back at university finishing my credits. So, when I went into the IBM interview, what made me different was that I already had an operating business. So, that made me kind of unique, because they interviewed hundreds of young people at the time who, I thought, had much better degrees. And of course, I ended up with the job because of my personal and practical experience. That probably changed the course of my life.

I won the Gold Pen for the Top Sales Award at the end of the six-week training in Toronto. All the students were competing for the top sales award. I won what’s called the Gold Pen – an award that recognizes building relationships, rapport, trust, and connection with someone in just five minutes. Turns out I had a natural aptitude for that.

So, then I had friends leaving IBM and going into the real estate sector and making a lot more money with a lot more upside there in their future. Those were the guys I worked with every day. And I thought “They’re doing it, I can do it.” So, I went into the real estate field, first with a company called Imperial Group as a Branch Manager and then they transferred me from Vancouver to Edmonton. After  I came back to Vancouver and worked with a company called Qualcomm for two years. There I learned a lot. I try to always make a lot of extra contributions to the company that weren’t in my job description, but where I could learn as much as possible from the other divisions and the other people. That paid off when I decided to start my own real estate syndication investment company. That paid off in spades.

At that time the opportunity was to buy real estate in Texas, US. You can’t be an expert in every market, so I decided that Texas would be a market I would get to know inside out.

 

Jason Boudreau:

Anywhere in particular in Texas?

 

Kevin England:

In the North and the Northwest, in Plano.  I decided to go into a more expensive white-collar area because I felt it would be safer. If something did go wrong, you had an asset and you could get out and break even, right? It was in the early 90s when those markets went through a huge crash, a huge recession, and a huge overbuilt situation. We’re buying properties that were eight, ten, or twelve years old for half price. Of course, going in the North and the Northwest of both Dallas and Houston – those areas came back first. That’s where all housing prices came back.

I preferred to buy conservatively. So, I prefer not to build but to buy existing ones, so, we could know what our mortgage was going to be in advance of buying it. We had a good idea of the rent and we knew that we could make improvements and make a big visual impact. We’re buying the nicer properties that were gated communities and had tennis courts and if they didn’t have a gym, we would add a gym. We would add lots of amenities because I know people will pay for quality and they will pay for

the extra bells and whistles. We would buy a property only 85-90% occupied and we would increase the service. The rent would be more than our neighbors but we would be full. We added simple things such as having a young family of police officers move in for half-price rent, just so people would feel that it was a safe and secure community and all those little.

I remember we had a property of 502 units on the waterfront in Toronto. We were in a situation where there was a vacancy problem, and we were always at 10% vacant. As we would fill them up, we would end up with another 50 notices, so we would always be behind the game. So, I came up with the idea that we would give away a car. We figured out that the rent for a one-bedroom for a year was going to bring in about $17,000 or $18,000, and while I was having coffee in Toronto, there’s a brand new 4-door Saturn for sale, for $17,000. So, I reckon that if we took the revenue from a one-bedroom unit, we could have a contest. So, we said that for the next 50 one-year leases, one person will win a car. It created so much excitement among our onsite staff and amongst the public that we got 50 leases almost in the first weekend because we’re doing something entirely different.

We got a local politician to come and do the draw. That got us ahead of that cycle where we’re always chasing the vacancy. We always tried to be creative and bring more services. Always add full gyms, tennis courts, volleyball courts, adding padding greens. So, we were making ourselves nicer as opposed to trying to cut costs. Right. We were bringing more value and making ourselves unique. We had signature services: people could drop their dry cleaning off at our front leasing office and pick it up the next day. We just make life easy for our tenants and all those things paid off.

The other thing, I said to my investors, “I manage your properties as if you were family. So, instead of paying you out dividends to make myself look good, we spend more money on those properties to make sure there’s no deferred maintenance to keep them in pristine condition.” That paid off when we went and sold the portfolio because we had no deferred maintenance. You run a property and you can get more cash out but then eventually you have to pay the piper, right? You’ll have deferred maintenance and that can sneak up on you and be a big problem.

That was part of the philosophy, the conservative approach. There were some years when the properties were going into a recession, especially in 2008. So, I would defer my management fees and no one else was doing that in the industry, but I would just not take management fees so that the properties would have more cash flow. Then I could be paid back in the future when the property is sold.

Another thing I did that was kind of unique is I had what was called a cash flow loan. We set money aside when we did each deal and we mastered about $1,000,000. We kept an account at the Royal Bank. So anytime a property needed improvements, it could be borrowed interest-free from that pool, so I didn’t have to go and do any cash calls to my clients. And then when the property would be refinanced, that money could be paid back.  Even through tough times and some of the properties being in trouble, we’re able to get ourselves out of trouble and turn it all around and eventually sell the portfolio and make my clients a lot of money. When they went in, they were leveraged into loans at the bank but the tax write-off and the cash flow would cover their interest payments for their loan at the bank. Of course, the ultimate security was an asset that looked good and in a good location. So, always keep the risk to the minimum, and at the same time, we ended up with a tremendous upside.

I had a formula that if the clients had to get all their money back at a 10% return, then as a general partner I could start to share in the profits. So, we are all in the same boat. I have just as much focus and attention on my first properties as on my last properties because I’m in all of them, whereas I had seen other syndicators – they would just keep moving on to the next property. They don’t care about the original ones, because they’ve already gotten their profit out and moved on. This was a much better formula that became a win-win for everyone. So, we ended up with something like a cash-on-cash return of just over 19% annually over the 25 years. It was very gratifying for me to be in a room with several 1,000 investors who are older than myself, but who were telling me that that was probably the best investment experience of their life. Because when things were tough, I would tell them that things were tough and that we would work to solve the problem right and turn it around.

 

Jason Boudreau:

Just being transparent about it.

 

Kevin England:

Yes. Another thing we did differently was that we audited financial statements every year and the audits were in our books and on site. So, always the transparency the keep everybody real and honest in the deal. It ended up being very gratifying for me.

One of the best ideas I ever had was when we were selling the portfolio. I got involved in a recovery center that helps young men who find themselves on the streets and find themselves with an alcohol or drug problem. I wanted to raise money for that so we could do more good, especially in the province of British Columbia. I came up with the idea that we would ask the investors that 1% of the gross of the deal could go into a foundation that would help these young men who wanted to turn their lives around. We made a benchmark that we would get $20 million more than the last appraisal for the properties before the 1% would kick in. Well, in the end, we ended up getting $68 million more than the last appraisal. So, in the end, we raised $4 million with this 1% formula.

We’ve gone to this recovery farm that has had 1300 young men go through it. It is non-profit. We work with government agencies, we have private donations, and it is free and holistic. There are farm animals and people can stay there for a year. We helped these young men who have gone to many other treatment centers that didn’t work, but because of our formula, it worked for them. Now they’re out, having regained their lives and being productive citizens personally as well as helping other young men who struggle with the same kind of demons.

That’s been very gratifying and that’s where I got the bug that it’s fun to do properties to make money, but it’s a lot more fun to go out and bring people together and do good in the community. That has become my passion. I get a bigger charge out of that.

That led me to my work with Canuck Place. As I mentioned earlier, my grandfathers and their steam engines sparked my interest. Well, I got the bug to start collecting vintage cars.

 

Jason Boudreau:

When did that start for you?

 

Kevin England:

Well, that was about 12 years ago. The first car was a 1931 Model A. I’m buying these cars that are primarily Fords and Lincolns, that are called bread and butter cars. Nothing too fancy, but those are the cars that can be mechanically restored. The second car I bought was called the Sears Horseless Carriage one of the original cars that were essentially horse buggies with a motor under the seat. This car has an air-cooled 12-horsepower motor which I rebuilt, with wooden buggy wheels. It’s a buggy, but in the early 1900s, almost every car on the road looked like a horse buggy with a motor. That was how the car industry started. And then, of course, Henry Ford came along and started to make cars. He went into mass production with his Model T in 1908. So, I have 3 Model T’s and I like the older cars. I have a 1908 Model S. That’s given me great pleasure and along the way, I got invited to go out to Canuck Place to take a young family for a ride in my Model T. My 4-seater convertible Model T, it’s 1911, bright red. It was a profound experience for me because this young family has three boys and the youngest boy was a patient at Canuck Place. I took the dad and the older two boys, 8 and 10 years old, for a ride in the Model T.  They got a break from the stress and burden this family was going through. They got to go into this other space including the dad. When we came back the boys were climbing underneath the car looking at the drivetrain and involved in it. It was amazing.  I have a conversation with the dad as father to father. My youngest grandchild, Leo, was the same as the young 3-year-old Sawyer at that time. The young Sawyer was a patient and had a very rare form of cancer and basically, there was not a lot that could be done for him. So, he was having his last weeks at Canuck Place. The dad was telling me the boys keep asking why this happening and what is going on. And while talking with him I realized the huge support that Canuck Place brings to these families that have a child that’s struggling with cancer. Canuck Place not only helps that child, but they help the whole family because it’s life-changing for the siblings to go through this.

I was driving away from having had this amazing experience as I got invited into the family journey thinking “Thank God, there’s Canuck Place to be here for families that have this challenge in their in their lives.”

That inspired me. I saw the pleasure that this car brought to this family and decided that we should do a car show. My good friend Luigi worked with Canuck Place at the time. He had invited me out and he was encouraging me to do it. I said “Ok. I know other people with vintage cars. Let’s do a car show and put them to work to help children, and raise money for Cancer Research, raise money for the Hospice.” So, that was the idea and we put together the first car show in five weeks.

 

Jason Boudreau:

Great. When was the first show?

 

Kevin England:

It was in September 2021. We were just coming out of COVID. We were one of the very first events. We had a full crowd on a Saturday afternoon in Ambleside Park, North Vancouver, and we were unique, no one was doing this kind of car show. We were under the tent with the red carpet. It was an invitation-only event, and we people would not have to pay an entry fee or purchase food, as it was donated. There was no silent nor live auction. It was all done on the basis: come in, see the cars, hear the story about the good work Canuck Place is doing, and then we just asked you to pledge towards the cause. Our goal was to raise $100,000 and we raised $600,000.

Since then we’ve done two more car shows and now we do them every June on the Saturday before Father’s Day. This year, it will be Saturday, June 15th. So, the second year we raised $900,000, and last year we raised $900,000.

What’s notable is we give away a Cup. We have a People’s Choice where people who go to the car show decide which card is the most impressive car for them and they get to vote and put their vote in a ballot.  The car will be chosen by the most votes and it will win the Cup and the Cup will be on display at Canuck Place for the year.

What’s interesting here is that young Sawyer passed away the morning of the first car show. That was uncanny. We did not have a name for the Cup that we giving away and I got the idea to name it after Sawyer. So now we have the Sawyer Cup. In essence, this young boy inspired this car show that we can do every year now and hopefully, we can make it better each year. I’m in close touch with the family. They spoke at the last two car shows they attended and it’s been huge for them and their healing journey that their son was able to bring something really, really positive.

 

Jason Boudreau:

…and create a legacy in his name.

 

Kevin England:

…and create a legacy at his early age and you know. I said to them “he’s almost the same age as my youngest grandchild, so I could relate and put myself in that position. What would I do? Where would I turn if my family was in that same situation, right?”

This car show is quite a fun event. I went to my friend, Dave Lede, who also has a passion for vintage cars, and asked him if he would put a car in. So, he said, “Why wouldn’t I Co-Chair? ”. He is one of my best friends and we get to do something and work together and bring a lot of good. So, it is about having real meaning – it creates meaning in our lives, children’s, and families’ lives. It does a lot of good. We also have a lot of fun because of our passion for these cars.

We’re working on having Jay Leno. He’s a car guy and my goal is at some time have him attend and give the Sawyer Cup to the winning car. So, that’s where we are at.

 

Jason Boudreau:

Thank you, Kevin. Thanks for sharing that story and such a neat journey. Early on conversation, you mentioned when you worked for IBM you learned about building trust and rapport. Can you share a little bit about that? What are all those attributes and how do you deliver on that?

 

Kevin England:

Well, building credibility and trust with people it’s something that was ingrained in my childhood because I was raised in a small farming community and you were as good as your work. Your reputation was everything. So, no one had to teach it to me. I didn’t even know I had it.  I would always bring that to the table. I remember being with the purchasing agent at UBC and having a frank conversation with him, and he said “You are different. Your whole approach is different.” We became quite good friends and he had a very important role there, but I brought that to the table – “I’m not here to make a sale. I’m here to create a relationship. And if making the sale isn’t right for you, then we’re not going to do it.” With my clients, I would say “We’ll just buy one unit.” They would get excited and want to buy two, but I would say “Just buy one now, there’ll be more properties.”

It is a long-term relationship and if you think long-term you’ll never go wrong. Never worry about the financial reward or the financial payback. If you do a good job and you bring your integrity to it, and quite frankly, if you’re having fun doing that, everything else will happen organically. It will happen automatically and that is the story of my life, I guess.

 

Jason Boudreau:

I was going to say that earlier, Kevin. While I was listening to your story especially about how you built the portfolio and even the little things such as deferred maintenance and advising clients that this is the best way for it to go. It sounds like you’re playing the long game and clearly, that’s paid off.

 

Kevin England:

Absolutely. Especially with the real estate. When we brought the investors in, the idea was that we would flip the properties in five years and make some money, right? We realized we could refinance, improve the properties, improve the cash flow, increase the mortgage, give back money to our investors tax-free, and think long-term as opposed to making a profit and paying taxes on it.

Pretty much all these properties when we sold them, the client had received all of their money back, got it, and we hadn’t figured any taxes per se, right? And, of course, when you hold real estate long-term and you keep it well maintained, you’re going to do quite well financially. Also, of course, we were doing U.S. dollar play. We got lucky along the way when we sold the portfolio, oil was $104.00 per barrel. I was telling people we were the prettiest girl at the dent. So, it became a bidding warrant, which is what you always want. Then we went and locked the deal down with an $8 million deposit. And three weeks later, oil started dropping $10 a barrel. It wasn’t long before it was down to $47 a barrel, but we had a committed deal with a very strong purchaser. As Canadians, we’re getting U.S. dollars. The Canadian dollar got weaker, but we were paid U.S. dollars. So, my clients made another 20% return on their investment. Besides that, they were part of this legacy of raising $4 million for a recovery firm. We are going to expand our efforts globally, not limited to just one recovery firm, but also to engage in various other initiatives to assist our governments in addressing the homelessness and addiction problem.

 

Jason Boudreau:

Got it.

 

Kevin England:

So that’s it’s something everyone involved should be proud of because we get to take a good situation and make it even better.

 

Jason Boudreau:

Thank you for sharing, Kevin. Just to close our conversation today, if you were speaking to the younger generation and maybe it’s your kids or your grandkids or just people you meet, specifically around philanthropy, and obviously, this is something that’s been woven into your DNA for many years about the sense of community and giving. What sort of advice or words of wisdom would you give people today who are maybe building towards something in the future and may want to get back but don’t know how or where to start? What would you share with them about that consideration?

 

Kevin England:

Go with your passion. Pick something that you’re passionate about, that moves you and you will be able to galvanize others to come together with you to make a difference. If you go with your passion, it will manifest and all will come around.

 

Jason Boudreau:

Love it. Well, thanks again, Kevin. I appreciate your time today. It was great to connect and hopefully, we can do this again someday.

 

Kevin England:

Thank you for the opportunity, Jason.

 

#16 VELA Wealth: Navigating Wealth, Legacy, and Financial Innovation

Wednesday, January 24th, 2024

In this Polestar Podcast episode, Kevin Parton engages in a dynamic conversation with Jason Boudreau, unraveling the unconventional journey that laid the foundation for VELA Wealth’s creation and evolution. From Jason’s diverse professional background to VELA Wealth’s distinctive approach to wealth management, the discussion navigates through the pivotal role of mentors, the firm’s dedication to Canadian private business owners, and the importance of independence in financial services.

 

 

Key highlights of this episode:

  • The VELA Wealth story.
  • The transformative power of mentorship and coaching.
  • VELA Wealth’s trailblazing approach.
  • The importance of independence in financial services and curation of platforms and partnerships.
  • Commitment to client fulfillment.
  • Declaration approach instead of a traditional mission statement.
  • What future unfolds for VELA Wealth.

  

About the Guest – Jason Boudreau

Jason has built VELA Wealth into an established life and estate planning firm, guiding families as they make meaningful choices at the intersection of life and wealth. Jason’s areas of expertise include intergenerational wealth transfer and estate planning with a focus on advanced insurance-based solutions that incorporate philanthropy and legacy planning. Leveraging these specialties, Jason brings a fresh perspective and outside-the-box thinking to the strategic planning process. To read more, please visit the VELA team page.

 

About the Host – Kevin Parton

Kevin Parton, CFP professional, specializes in personal and business financial planning, tax reduction, and estate planning. Kevin is diligently concentrating on client education as a powerful strategy for building financial certainty. As no financial situation is the same, Kevin and his team monitor clients’ plans and implement personalized strategies to reduce their personal and corporate taxes, and protect their income, assets, and loved ones against the financial consequences of a serious illness, injury or death, ensuring clients maintain financial certainty and peace of mind. To read more, please visit the VELA team page.

 

The episode is also available on:

  

  

 

#15 Navigating M&A Dynamics in Professional Services: Insights from Faramarz Bogzaran

Monday, January 8th, 2024

We are excited to present this insightful episode of the Polestar Podcast by VELA Wealth, featuring Faramarz Bogzaran, the Managing Partner at F&M Management Ltd. and CE3C Management Ltd., just ahead of the highly anticipated CE3C Conference scheduled for January 24th and 25th, 2024. Faramarz’s expertise sheds light on critical aspects of mergers and acquisitions (M&A), setting the stage for enriching discussions at the upcoming conference.

Throughout the conversation, Faramarz provides key insights into the crucial role of M&A advisors in streamlining company sales, navigating the intricacies of valuing professional services firms, and understanding the significance of strategic planning for post-sale expectations in the environmental consulting and engineering sectors. These insights offer valuable guidance for business owners and executives navigating the complexities of M&A dynamics.

 

 

Key highlights of this episode:

  • Delve into the mechanics of seamless company sales with a focus on the pivotal role of an M&A advisors.
  • Explore the valuation methods for professional service firms, focusing on financial stability and managing working capital.
  • Learn essential post-sale strategies: from strategic planning to adjusting to new ownership dynamics for a smooth transition.
  • Gain insights into the factors influencing M&A in the Canadian landscape, shedding light on industry trends and future implications.
  • Importance of strategically plan your exit beyond the sale to ensure a successful transition.

 

About the Guest- Faramarz Bogzaran

Faramarz Bogzaran, the founder and Managing Partner at F&M Management Ltd., brings over four decades of expertise to the forefront of Canada’s management consulting scene. Specializing in M&A and Corporate Advisory services, he has successfully navigated environmental consulting, waste management, and remedial contracting sectors. A seasoned M&A advisor, Faramarz is celebrated for his adept leadership in ownership transitions. He played a key role in founding CE3C Management Ltd., the driving force behind executive conferences uniting leaders in Canada’s environmental and engineering consulting sector. At F&M, he provides strategic advice on growth, financial management, buyouts, exit strategies (M&A), corporate governance, and project management. To read more, please visit the F&M Management Ltd. Website

 

About the Host – Jason Boudreau

Jason has built VELA Wealth into an established life and estate planning firm, guiding families as they make meaningful choices at the intersection of life and wealth. Jason’s areas of expertise include intergenerational wealth transfer and estate planning with a focus on advanced insurance-based solutions that incorporate philanthropy and legacy planning. Leveraging these specialties, Jason brings a fresh perspective and outside-the-box thinking to the strategic planning process. To read more, please visit the VELA team page.

 

The episode is also available on:

  

  

 

 

The Podcast Transcript:

 

Jason Boudreau:

Welcome, everyone, to the Polestar Podcast by VELA Wealth. It’s my pleasure to have Faramarz Bogzaran today. Faramarz is the Managing Partner at F&M Management Ltd. and the CE3C Management Ltd. companies. Hello Faramarz and welcome to the conversation today.

 

Faramarz Bogzaran:

Hi, Jason. Nice to be on your podcast. It’s the first time I’m doing it.

 

Jason Boudreau:

Could you please give us a bit of background about F&M and CE3C?

 

Faramarz Bogzaran:

Sure. So, I founded F&M in 2010 as a corporate advisory services company, specifically working in the environmental consulting and engineering sector. Over the past thirteen years, we’ve provided a range of services encompassing governance, mergers and acquisitions, effective project management, business optimization, and integration services. Our focus has remained on the environmental consulting and engineering side. In 2017, we decided to organize a conference that would bring the leaders of these companies together under one roof. So, we formed a company called CE3C Management Ltd. and started doing a pilot test in 2017, which led to their first conference in 2018. We had around 40 CEOs, Presidents, and Vice Presidents of innovative consulting and engineering firms attending the Conference for a two-day collaborative conference by organizing panel sessions and discussing some of the challenges and opportunities for these leaders in this sector or this industry.

So, we’ve been organizing these conferences since 2018. The upcoming 2024 conference is on January 24th and 25th. We are very excited about holding the 5th Conference. One of the reasons we decided to do this was that a lot of the work that we do as corporate advisors under F&M Management comes from these leaders attending the conference. It seemed to be a mutual benefit to F&M Management and at the same time, we are trying to create a platform where all the CEOs or Executives of these companies get together. We are the only organization that creates that kind of platform for these leaders to get together and talk to each other rather than compete. It is kind of a genesis of how F&M came about in 2010 and how the CE3C Management bring us closer together.

 

Jason Boudreau:

So, what does the CE3C stand for?

 

Faramarz Bogzaran:

CE3C stands for Canadian Environmental Engineering Executive Conference.

We wanted to have a name for it that sticks. So, we thought about it a lot, and I believe it was my idea – I said, “We’re going to have a lot of the executives coming here. So that’s an E. We will be dealing with a lot of engineers and the environment. So that’s another two “E”s. It’s Canadian, we have three “E”s and the last “C” stands for the “Conference”. So that’s how the name was created.

 

Jason Boudreau:

Very well. Thanks for sharing this, Faramarz. It sounds like it’ll be an exciting conference this year. I know that Rob, my business partner, and I were there last year and we like what you’re doing in the space. It’s great and very niche and unique.

One of the things that I thought we’d start with is what is the key role that an M&A advisor plays for executives, and business owners, whether it’s in the environmental and engineering space or outside. You’ve had decades of experience in the sector. What do you believe the key role of an M&A advisor is?

 

Faramarz Bogzaran:

That’s a very good question.  In my opinion, the number one reason why people or companies hire an Advisor is when they decide to entertain the possibility of selling their company. You want to call them an advisor or corporate advisor. I say it is the main reason because a good M&A advisor helps you streamline the process. There is a process to have your company organized or prepared to go into the market and go through the process of obtaining interested parties in what you offer as a business owner or as a shareholder, and bring it home at the end and signing a sales purchase agreement that is acceptable to the shareholders or to the owners of the company that the M&A advisor represents. One of the things that good M&A advisors do is, as far as they’ve done their homework, they create a lot less disruption in the process where people still have to do their jobs. You need to have somebody to come and help you, to guide you through this process because it can be anywhere between three to six months before you complete the transaction. During this process of three to six months, you don’t want to be distracted from your ongoing business because you don’t want to harm the business by wanting to sell the business. If you end up doing that you’re going to be at a disadvantage to sell the company because the people that are trying to buy you, they’ll monitor you while you’re going through this process. So, one advantage of having an M&A advisor is to lessen the disruption. I’m not suggesting that there will be no disruption, but lessening it and also going through the process of educating the shareholders, managing expectations, and obtaining letters of intent that are conducive to the process and are acceptable by the owners who are trying to sell their company and finally help with other advisors such as legal and accounting work together as a team to bring it home. It’s a team effort. It’s not wise for one advisor to do the whole thing.

 

Jason Boudreau:

It sounds like the M&A advisor plays that quarterback role to help tie it all together.

 

Faramarz Bogzaran:

Absolutely yes. We found ourselves in most cases as the catalyst in the process. At the beginning, we start representing our client who’s trying to sell their company. As we move forward, we end up working with the lawyers, and accountants, and we end up dealing with a lot with the potential buyers and the final buyer. We found ourselves that we become almost the gel or a catalyst to make sure that things went smoothly. At the end of the day, there has to be a willing seller and a willing buyer. And I’ve seen one too many transactions, that have gone through the process, but unfortunately, that catalyst did not really gel things together and things fell apart.

 

Jason Boudreau:

I see. How would one assess the need to retain maybe an external M&A advisor versus trying to manage that process internally? What are the pros and cons or maybe just some considerations around that?

 

Faramarz Bogzaran:

I have a perfect answer for this. I was the President and CEO of a company called Secore Environmental for about 8-9 years. I joined the company and then orchestrated a management buyout of that company shortly after. Once we owned the company, we decided to put the journey of five years ahead of us to grow the business and sell the company in five years. It just happened that we bought the company in 2002 and we sold the company in 2007. So, I have done a lot of M&A work and have been involved in a lot of mergers and acquisitions before that. Also, I acquired the company while we were growing Secore, before selling it. However, when we decided to sell the company and I was President and CEO of the company, my board asked me “You’ve got the experience, why don’t we do this internally. Why do we go externally?”. My recommendation to them was “No, that’s not what we want to do”. I would still do a lot of the heavy lifting, but we need to have an advisor. At the minimum have an advisor that creates competition there. At least the picture of competition. So, the people who are interested in the company don’t think “Ok, these guys are just selling the company, so we can just do everything ourselves” or “They don’t know what the process is”. So, even though I had the experience, I ended up hiring an advisor. In that process, I did most of the heavy lifting, but I had that advisor working with me throughout the process to the successful sale of the company in 2007.

 

Jason Boudreau:

So, you’ve been through it in the CEO seat as well and seen the value of having that external advisor working with you and the internal team supporting the process.

 

Faramarz Bogzaran:

Correct. You have a very good point. If you’re a CEO, I can assure you that you can’t pull the whole thing out of yourself. You are going to work in a team setting internally, you may have to seek help from your CFO, and get some help from your human resources or IT departments, as long as these people are inside the “nest”. What I mean by that is, as long as they’re shareholders, they know what’s going on because there is confidentiality involved, and keeping everything confidential is an utmost importance.

 

Jason Boudreau:

In terms of preparing for the sale, as you mentioned earlier in our conversation about the timeline being sort of a three-to-six-month window before you transact, how much time is usually spent leading up to that three-to-six-month window on average where a company is preparing for some sort of M&A activity?

 

Faramarz Bogzaran:

That’s another very good question. Well, I can tell you this. Over the past 13 years, I do not have the exact number but we probably had at least five or six companies that reached out to us to become their M&A advisor. The first thing we do is look at the company’s performance, we look at the whole picture of what this company is all about. And in all those instances we came to conclude that they’re not ready. What we meant by “not ready” is that when you’re trying to position your company for potential sale, whether it’s a professional service or anything else, one of the things that potential buyers look at, in particular, if they’re buying the shares of the company, at what sort of consistency you have had over the years based on financial performance. If you have had a lot of ups and downs in financial performance over the years that is not a very good sign. You’d want to have a nice trajectory of really healthy growth followed by a very nice earning, the bottom-line performance. So if your growth and earnings are not stable, what we normally do before we take the company to market, we look at it and see what we can do to optimize the business to get it to a level where it is working consistently, generating reasonable growth top line and also reasonable bottom line performance.

The rule of thumb as far as we are concerned from the M&A side, is that you need to have anywhere between two to three years of good consistent top-line and bottom-line growth. And if you don’t, we would like to work with you to get you to that level to make sure you are prepared to do that. Otherwise, a lot of the buyers in the market see inconsistency, and since it is not consistent, you’re going to subject them to some onerous earnout provisions. So those are the things that we try to avoid. We prepare some of these companies before we take them to the market.

 

Jason Boudreau:

So, that’s obviously about trying to maximize the value. Could we talk a little bit about the valuation particularly in your area of expertise as professional services companies? How complicated is the process of valuing professional services companies?

 

Faramarz Bogzaran:

It is not really that complicated. A lot of companies out there are professional companies that are certified valuators to value your company. Now you’re talking about professional services, let’s say engineering company or environmental consulting company as an example or even let’s assume they are accounting or legal professional services. For the most part, the value of these companies hinges on the earning capacity of these companies. What I mean by earning capacity is that you look at it and see what your performance bottom line is, not the net income. In our industry earning capacity is captured under EBITDA which stands for earnings before, interest, taxes, depreciation, and amortization. When you factor those out, you’re talking about the true earning capacity of the company. Then you look at that and apply multiple. So, EBITDA multiple 4,5,6,7 or 8. Now, EBITDA is based on the performance of the company that we try to make consistent so the EBITDA number is showing a nice upward trajectory. However, one that kind of complicates it – is that multiple because that multiple is not fixed and it varies from the size of the company, If the size of the company is X, multiple might be different; the services that the company provides; their management; even the age of the shareholders, the people that hold the key to the vault in terms of the clientele base; reputation and so on. So, there’s a variety of different geography and factors that may influence that multiple.

So, if you have a company X with let’s say EBITDA of $5,000,000 and an advisor like us goes to market, we may end up getting letters of intent with the multiple of what $5,000,000 is, as long as it is a true reflection of what that earning is, fully normalized and all things equal. So, what is going to happen, is that we may end up getting letters of intent that may vary from one to another based on that multiple. Some may apply 4 multiple, some may apply more. However, these multiples also can be influenced by the buyers’ interest in the company. If they’re looking for a boutique, niche-oriented company that they don’t believe they can find anywhere else, they’re prepared to throw in another multiple on it, so you end up getting it. For the most part, based on at least historical numbers that we see in the professional services in the engineering consulting side, the multiples range anywhere from as low as 3. I’ve seen as high as 10 and slightly high, but as for the medium – the majority of them happen between multiples of 4 to 7.

That’s one aspect of putting a value on the company – giving somebody a value for your income statement, which is using the EBITDA number. You take the EBITDA number, multiply it by a factor, then you have to bring the balance sheet into the equation to come up with the market value of your company. Another element that becomes extremely important in any M&A transaction is working capital adjustments driven from your balance sheet, not from your income statement. For a company to go into the market, it has to have a healthy EBITDA as well as a healthy working capital. Otherwise, buyers are not going to come and buy the company and write a big fat check for you on your income statement performance when you have very little working capital because if you do not have adequate working capital, you have to put more money into it.

Therefore, we bring the EBITDA together with the working capital adjustment as long as the advisor manages to negotiate a good working capital adjustment. When you look at the letter of intent the buyers always indicate that it is a debt-free, cash-free transaction which means that they’re not taking on any of the debt because it got subtracted from the value and they don’t want to buy your cash. Why they are paying you dollar for dollar, right? They want to have adequate working capital in there at closing when they buy the company. That’s how it works.

 

Jason Boudreau:

Got it. So, it will impact the valuation then, right? One of the things that I see with a lot of business owners that we work with is considerations around post-sale expectations from the buyers. I’d love to hear about your experience what do you see out there? Are the trends whether it’s been in the past year or two or even over your entire career which you see going forward in terms of expectations of keeping key people management in place for a certain amount of time? What dictates that and maybe a couple of examples that you’ve seen where the buyer said they don’t need you to stay on versus they need you to stay on and both transactions happen but there’s a different impact to the leadership group post-sale. Just curious if you could share a little bit about that with us.

 

Faramarz Bogzaran:

It’s an integral part of the process. I’ve seen many letters of intent that clearly say they have the provision or a clause in the letter of intent where they have identified who exactly needs to be signing and non-compete, non-solicitation or whether they have to stay with the company, post-closure or post transaction for a period time. At the end of the day what professional services are they buying? They’re not buying desks and computers. They’re buying people. The people are the ones that are turning the wheels in all these companies. So, if they’re buying the people who are generating the capital and they’re willing to pay high multiples for that value, they don’t want to lose these people. Because if they go, if they leave especially, it gets worse if they are tightly attached to clients or accounts. So, usually, it is customary to see that there’s a provision for retention for those individuals, in particular, senior shareholders.

I don’t know if you remember last year, I held the M&A panel session at the CE3C as a preamble to the panelists, I asked everybody the question, “How many of you do planning or budget or strategic planning for your company?”. Just about everybody raised their hand, right? And I asked, “Within that strategic planning, how many of you have exit strategy planning?”. Not a lot of people have raised their hands, because “why would I put an exit strategy in there? I’m not prepared to sell my company.” Nobody’s asking you to sell the company. But at some point, you’re going to retire. So, you should be putting exit strategies that show how you are going to sell your shares to your colleague who works for the company. If that doesn’t exist, it doesn’t present itself. Then you have a problem.

The second thing that I always tell people is if you’re trying to sell your company, don’t wait until you are in your 60s and 70s. Especially if you’re a single shareholder. It gets worse if you get older and the majority of the clients are with you – you get a problem. It will have a diminishing factor impact on your value because the buyers are going to say, “Well, wait a minute, he’s 70 years old, doesn’t have much fuel left in the tank, so he’s gonna retire the next day. And all these coins are going to go away. So what did I buy?” So, people must think about when should they enter the market. I always recommend that if you want to think about the possibility of selling your company and retiring, tell me when you want to retire first.

 

Jason Boudreau:

Right, and work backward.

 

Faramarz Bogzaran:

Somebody says they want to retire at the age of 60 and they are at 59 at this time, my answer would be “I think you’re going to retire at the age of 63 maybe because whoever is going to come up to buy you is going to put handcuffs on you for a minimum two to three years.” It is an integral part of the process that people have to understand. There is an expectation that you’re going to stay with the company for some time. That time sometimes is a year, from two to three or sometimes five years, but usually around three years.

I’ve seen transactions or letters of intent saying “no retention at all”. However, if you want to leave, you can leave. You don’t want people who don’t want to be part of the company – they can just leave tomorrow. So that’s to me a little bit riskier from a buyer’s point of view.

Another thing that I should say is once you sell your company set the expectation wise. I always use this analogy, especially if you’re the single owner or you’re the President of the company and you have majority control of the company. As soon as you sell the company, you’re not the King anymore. So don’t behave like you’re still the King or the Queen. You’re going to have to adapt to the new regime, new criteria, new process, new administration of the buyer. And while you’re in that period of retention of two to three years, I always tell my close friends that come to me asking what they should do after the sale – I say, “Never swim against the water”. All you’re going to do is frustrate yourself. It’s not your company anymore – it is somebody else’s company now. They have protocols, systems, procedures, objectives, and goals that may or may not meet what you want. So, you saying “Oh no, I disagree” – that’s not going to work that way. All you’re going to do is you’re going to be very frustrated for the next three years.

 

Jason Boudreau:

That’s an interesting perspective. It would probably be a very emotional journey as well for these people, right?

 

Faramarz Bogzaran:

That is one of the parts where we go beyond what most M&As usually do. You become close to people,  you get to know them. All of these companies that people have built over 30-40 years, become their babies. You just can’t let go. You know what I mean? It’s tough to let go. I’ve been in that position twice. It was excruciating to let go. But you have to let go. Because that’s the process. If you don’t let go, all you do is frustrate yourself.

 

Jason Boudreau:

That’s such an interesting perspective. Faramarz, thanks so much for sharing that.

We’re in this really interesting time, where interest rates have shot up, I know there’s still quite a lot of M&A activity going on out there, but obviously multiples and expectations have shifted. Curious to hear what are some recent activities in the sector and then maybe a trend or two that you’re seeing for the year ahead.

 

Faramarz Bogzaran:

Speaking from our own experience, as F&M advisors we recently completed 2 transactions in the environmental consulting and engineering and contracting industry. Right now we are in the process of completing three more. We see a lot of letters of intent coming in with very varying degrees of multiples and valuation in there.

You’re right, there are kind of interesting economic dynamics if you want to call it, the high-interest rates… Even though there are some indications that it is softening and it’s possibly stabilizing. US interest rates seem to be going down and all the indications are. So the Canadian market and the economy have a very strong influence on the way people get into the M&A market, especially it has an impact on that multiple that I told you about. If there is not enough capital for buyers or cheap capital for the buyers to acquire companies it may have an impact. However, there are some big publicly traded companies out there that are willing to pay the high multiples. For instance, I’m sure you’ve heard of a company called WSP [WSP Global Inc.]. They acquired a company called Golder Associates and they paid a high multiple, I think they paid roughly around 10.5 times the multiple of earnings which is the highest I’ve seen in years. There are several reasons they paid for that. I believe one of the reasons is that they didn’t have a very strong footprint in the environmental sector where they wanted to strengthen their presence. That brought somewhere around 5,700 professionals into that mix. Right after that, you are on the map with a very strong company. It was a strategic acquisition. Another thing is the market cap of the company. As soon as the announcement went out, the market value went crazy. So, there are a lot of factors that come into play depending on who the buyers are.

What we see, based on the transaction that you’re involved in and based on the transactions that have happened over the past 12 to 18 months -usually the multiples range anywhere between four to seven times more, but people tend to gravitate towards thinking that their company is worth 8 or 9 or 10 just because another company was sold at 8 or 9 multiple. That’s another responsibility of the advisor to control expectations, try to provide adequate information, and try to put some rationale as to why the norm is hovering between 4 to 6 to 7 to 8. Anything above that is really out of the norm. In the end, the market does what the market does -, people want to buy, they will go sometimes and provide some outlandish multiples for a variety of different reasons. But the reality is that we cannot compare company X with company Y and expect the same results in terms of value, multiples, and expectations. The economy and politics have a lot to do with that.

In the upcoming conference on January 24th and 25th, amongst all the excellent speakers, we teamed up a renowned economist, Michael Campbell, with Nick Nanos, who’s a nationally recognized pollster. I would like to know what the economists are saying and what the pollsters saying about politics that we’re going to go through elections in about two years in Canada. I would like to know how these two intertwine to impact or influence the M&A activity because they do influence it.

 

Jason Boudreau:

Right. Totally. That would be a fascinating conversation to hear.

Well, thanks so much, Faramarz. I appreciate you being here today. It’s been an incredibly interesting conversation. I’ve certainly learned a lot. Appreciate your time.

 

Faramarz Bogzaran:

Well, thank you, Jason. I appreciate it. And I thank you and your partners and VELA Wealth for this opportunity.

 

Jason Boudreau:

All right. Take care. Thanks so much.

#14 Market Outlook with Keith Allan from Harness Investment Management

Thursday, November 9th, 2023

In this episode of the Polestar Podcast, Kevin Parton, who recently joined VELA Wealth as a Partner and Senior Advisor, interviews Keith Allan, Portfolio Manager at Harness Investment Management, discussing their partnership with VELA Wealth and their unique approach to financial management. They address the challenges posed by rising interest rates and geopolitical events, highlighting the need to stay invested and avoid market timing. The conversation highlights the value of a balanced and diversified portfolio, offering valuable insights for podcast listeners.

 

 

About the Guest – Keith Allan

Keith Allan is a Portfolio Manager with Harness Investment Management. Harness has engaged in a strategic partnership with VELA Wealth and provides discretionary portfolio management for many of VELA’s clients. With more than 15 years of buy-side investment management experience, Keith brings a wealth of knowledge and experience to provide insight and guidance to clients regarding their investment portfolios. At Harness, Keith is responsible for developing and maintaining investment portfolios for VELA clients. Keith is dedicated to fostering long-term relationships with high-net-worth individuals and families by providing a clear and transparent vision to help them achieve their investment goals. To learn more, please visit Harness Investment Management team page.

 

About the Host – Kevin Parton

Kevin Parton, CFP professional, specializes in personal and business financial planning, tax reduction, and estate planning. Kevin is diligently concentrating on client education as a powerful strategy for building financial certainty. As no financial situation is the same, Kevin and his team monitor clients’ plans and implement personalized strategies to reduce their personal and corporate taxes, and protect their income, assets, and loved ones against the financial consequences of a serious illness, injury or death, ensuring clients maintain financial certainty and peace of mind. To read more, please visit the VELA team page.

 

The episode is also available on:

  

  

 

 

The Podcast Transcript

 

Kevin Parton:

Hello there. I am Kevin Parton, and welcome to the Polestar Podcast by VELA Wealth. My guest today is  Keith Allan, Portfolio Manager from Harness Investment Management. Harness has an ongoing partnership with VELA Wealth. How are you doing today, Keith?

 

Keith Allan:

I’m well, Kevin, thank you for having me. How are you doing?

 

Kevin Parton:

I’m doing alright, thank you. I’m excited to use this as an opportunity to find out a little bit more about Harness as well as your perspectives on things that are going on in the global economy and markets. I am going to start off with a real quick question as I am new to VELA: how is Harness Investment Management and VELA different from others in your experience?

 

Keith Allan:

Well, I come from working almost close to a decade at one of the largest institutional money managers in Canada. So, coming over to Harness four and a half years ago allowed me to take a broader lens in terms of how investment management should be done, and especially for our client base. For us we’re very focused on the client experience. So, in terms of the overall, the values that lies in the family balance sheet and taking that sort of overarching approach to find out what’s important to families, and not just from an investment perspective but from planning, insurance and the path to where their family wants to be and where they want to get to. So, we are taking a top-down approach and looking at the overarching relationship and the portfolio, and the portfolio itself is just one part of the overall process and I think that’s what separates us – is being able to look at everything holistically and doing what’s best for the clients.

 

Kevin Parton:

In your experience, that is what attracted you to being a part of this relationship?

 

Keith Allan:

Yes. From a corporate standpoint, not having to pull the strings from the higher-ups that is what attracted me. We have an approach that we stand by on how we view financial management and we want to be able to not only articulate that to our clients but be in a position to execute it. Jason and Rob [Jason Boudreau, Founder, and Rob Wallis, Partner, at VELA Wealth] and obviously yourself not only approach investment management, but overall financial management and overall financial planning, and that is what attracted me. I’ve known Jason and Rob for a long time as individuals and professionals, and I am really aligned with their beliefs.

 

Kevin Parton:

I can’t agree more. I mean, having been in the business for 14 years myself and having consistently taken a holistic approach, I’m really excited to be able to have this partnership with you and bring a little bit of a higher level of sophistication to that pillar of financial planning or investment management. I’ll sort of use that as a segue into the next question about investment philosophy.

Can you distill your investment philosophy or Harness Investment Management philosophy into some core components or explain how it drives your investment decision-making?

 

Keith Allan:

For sure. When we talk about investments nowadays, we sort of see it coming out of COVID, right? We talk about the meme stocks, and we see people investing on tilt whether it’s cryptocurrency or any sort of the latest greatest fad in the investment world. That is not what we’re about. We’re very fundamentally driven, so we believe in long-term investing. Maybe that’s not going to win style points or have a credible amount of attractiveness, but it’s empirically proven that this going to hold true for the long term. We believe that proper diversification, whether it’s sector or country-specific, is important to your portfolio. We’re very, very strong believers in asset allocation. Not your typical antiquated or archaic structure such as a 70/30 portfolio, 70% equities, and 30% fixed income – no, we believe that there are other components to a portfolio.

Alternative assets are a big component of our portfolios. Right now cash is a yielding asset – all our clients hold a certain amount of cash. When we talk about alternatives, we talk about real estate, commodities, or using derivatives when appropriate in some circumstances. So, for us, it’s all about diversification. It’s all about asset allocation. It’s about incorporating those investment assets with your overall family balance sheet. Is your family heavily involved in or heavily invested in real estate? Well, we’re not going to hold 15% of your portfolio in private real estate or REITs, we’re going to take that into account. If you have a lot of insurance policies unwritten to your family or other types of fixed income or pseudo-fixed income assets – we’re not going to hold 50% bonds in your portfolio, right? We’re going to look at your overall balance sheet, where you’re at and what makes the most sense for you and your family.

 

Kevin Parton:

So, it seems that you’re really able to customize what’s held within the portfolio specific to the client and to everything else that they own.

 

Keith Allan:

Yes, 100%. So that’s, again, what separates us. We can offer those bespoke or customized portfolios to our clients, which allows them to feel that we are really taking the time to understand what’s important to them and what allows them to really benefit in the long run from achieving that excess return. So, we definitely take a customized approach to that. We do have model portfolios we use, but we’re able to tailor them and tweak them to meet the client’s needs. What separates us is our product shelf and what we do all for it is quite vast, so we have a lot of different options. I sort of compare it to an ice cream parlor. You go to a Baskin Robbins that offers not just chocolate, vanilla, and strawberry. You have 30 flavors to choose from. We like to think of ourselves as the investment management firm, that’s got a lot of different options at our disposal and meets the client’s needs.

 

Kevin Parton:

Fantastic. I want to circle back to something you said a little bit earlier about coming out of COVID and the meme stocks. It feels like there’s a lot more of a conversation around trying to invest in the next hot topic. And you talked about not wanting to do that and it’s not necessarily the coolest. How do you manage client expectations when it comes to having these discussions with them? I have to imagine that these things come up in conversations more often than maybe they did pre-COVID.

 

Keith Allan:

It is tricky, right? Everyone knows someone, got a brother-in-law, cousins, friends, or neighbor who made 40% plus off this stock or that stock. Now, in my experience, and I’ve been in the industry now for 20 years, I would say 90% of the time it’s not true. People love to exaggerate when it comes to that sort of stuff and in reality, there are just not that many people getting that wealthy off one or two hot stock tips.

Setting expectations is the key. Managing expectations is the key. Rob Wallis, who’s a Partner at VELA and someone you and I know both very well, uses a quote that I love, is that Warren Buffett made more money in the last 10 years than the previous… I can’t remember what it is… the previous 30 or previous 40 years. And I think that shows the effect of compounding interest and compounding return.

For us it’s really preaching that longevity and really advocating to stay the course, put money in, allow it to compound, allow it to grow, and look, if after five years you’re generating 10-11% annualized per year, well, that’s pretty good. Doing that over a long-term, two or three decades for a lot of our clients who are in their 30s or 40s, they are going to have a meaningful portfolio when it’s time to retire. I think having clients trust that and showing them what that actually means, understanding the effects of compounding return, it’s very challenging, right? For someone that investments may not be their first language, they’re trying to understand how the effect of compounding works, and showing them that can certainly be impactful.

 

Kevin Parton:

Well, along those same lines, I heard recently that PIMCO prides itself in any given year having the best portfolio, but over 5 or 10 years, it always being sort of in the top five or ten percent because they’re consistent because they practice good fundamentals and their goal isn’t to try and be the hot topic or sort of swing for the fences and I think to a degree that can feel maybe boring or anticlimactic in the short-term, but in the long-term, obviously that’s what you’re going for.

 

Keith Allan:

Absolutely.

 

Kevin Parton:

So, in a year like this one, we’ve seen some up and down swings in the markets and there’s been this perpetual conversation around interest rates and what that might have to do with the market trajectory. What’s your future outlook going through the last two months of this year and into 2024 based on everything that’s happened so far this year?

 

Keith Allan:

There’s no doubt that this has been an incredibly challenging year and incredibly challenging 18 months, right? We’ve had unprecedented interest rate increases. I should say, when you see interest rates rise that dramatically, that quickly, that is really a heavy load on risky assets, most notably fixed income assets, whose price and value move inversely to interest rates, so as interest rates continue to rise, we see fixed income really sell-off. It’s just the nature of the asset class. But also equities, right? Because if people can get that guaranteed five, six, seven, sometimes more percent at their bank, well, why are they taking the risk of putting their money in risky assets such as stocks? They can get that guaranteed yield from their banks sitting in cash where there’s virtually no risk. So, naturally, we see risky assets sell off and that’s what we’ve seen over the last 18 months. So yes, it has been a very, very, very challenging market. What do I see moving forward?

Well, I think last week [October 30 – November 3rd, 2023] was really telling because effectively the US Fed came out and said that they are standing pat. I know they said that a few times with mixed results, but they do sound like this time it’s certain. And we saw the market react accordingly – we saw a nice rally last week, and sort of from what I hear and read and see, there’s a really good chance that’s going to be sustainable here as we go into the new year. We might see a little Santa Claus rally earnings are better than expected, right? There are some really strong earnings that come out where a lot of analysts and a lot of folks on Wall Street have said “OK, this is better than we thought”, which is sort of been the impetus for the market to react favorably.

As we get into this holiday season, the spending season, that’s going to be very telling. I believe people are willing to go out and spend at Black Friday and Cyber Monday leading into Christmas. And if so, are these companies that rely on consumer discretionary spending going to really see an uptick in their profitability as we go into Q1 2024? Are people willing to spend $1,500 on the newest iPhone?

Are they willing to go buy whatever the latest and greatest PlayStation or Xbox is out there? Are they willing to really splurge this year on family trips and maybe buy a new car? And do other things that they’ve otherwise been putting off? Again, that could be the impetus or sort of the push for a strong Q1. Especially if interest rates stay status quo, people might say “Look, the worst is behind us now”, but a lot of people are saying no, we’re not even close, there’s going to be further interest rate hikes.

The problem is that as mortgages come due, if interest rates continue to go up, people are not going to be able to renew and we’re going to see some really challenging times from a real estate perspective. At the end of the day, the Federal Bank and the US Fed don’t want to see people default on their mortgages, they don’t want to see people not be able to renew their mortgages. So they will have to weigh that with any future interest rate hikes.

I remain optimistic. I like to consider myself an optimist despite what some folks may say. I’m optimistic that we will see a catalyst here leading into the end of the year in the beginning of Q1 where we’ll see a little bit of bounce back in the market. I still think there’s a lot of volatility left, I don’t think it’s going to be clear sailing and the next bull market is right around the corner. But I do believe there will be a bull market at some point here in the next 18 to 24 months and that’s something that we’re really preaching to clients – “Look, you going to sort of ride the waves here. You kind of got to keep your head above water. Don’t panic. Can’t take the money out of the market. Let it do its thing. So, you can capture that bull market when it does happen because that’s when you can really start seeing some meaningful returns.”

 

Kevin Parton:

Well, I was going to ask about that because with interest rates being as high as they are, cash is returning more than it has in a long time. But relative to what? What we saw last week in two days, there was a big uptick in the market. And if you’re in cash and on the sidelines you miss those moments. How do you position in conversation or within your portfolios taking advantage of a high interest rate environment from a cash perspective, but also being cognizant of the fact that you can miss some big equity days and lose out on growth there?

 

Keith Allan:

It can be a challenging conversation with clients because our job is to enlighten them. At the end of the day, it’s the client’s money. I can’t say to a client, you have to do this and you have to do that, right? All we can do is offer guidance and perspective, and show empirically what returns mean what asset classes do, and what it means that if you are sitting in cash and you missed the first two days of a three or four-week rally, what that means to your portfolio. At the end of the day, the client has to make the choice and if we haven’t enlightened them and we haven’t shown them, then that’s on us. We haven’t done our job. But if we have and they still decide to go against our advice that’s their prerogative. I think for us it’s really important that we show them that cash is important to have and now it’s probably a higher weight than we otherwise would, whether that’s 5% or 7% or 10%. But at the end of the day, you want to be diversified and you want to have exposure. To your point when those risky assets do rally you’re really capturing it. So, sitting down and understanding what their cash needs are, making recommendations in terms of what we feel is an appropriate cash balance. Right now, that’s anywhere between 5 and 10% for clients depending on their situation.

Now, of course, if clients need cash imminently, if they’re buying a house or doing a renovation they’re going to hold more cash and that’s entirely appropriate because they need that cash. So, we’re not going to invest it and put risk on the table when they need that cash. But all other things being equal, we need to show them that they want to have cash available and some dry powder available to take advantage of positions that we feel are undervalued. At the end of the day, we want them to still remain fully invested, and that might mean diversifying in other asset classes. That might mean underweighting or overweighting certain positions, but we’re never advocates of trying to time the markets such as selling everything you got. If a client has a $1,000,000 portfolio, put it all in cash and try and time it on the way up, and try and get it out on the way down like that’s a fool’s game. Nobody going to win at that game. Not even the most sophisticated investors can win at that game.

 

Kevin Parton:

Absolutely. Well, in the interest of time, I have two more quick questions here. One in relation to what happened when rates went up? When rates went up, fixed income went down, but we also saw equities go down at the same time and there’s only been a number of years in history we’ve seen fixed income and equities go down at the same time. Is it likely, if not possible, that as interest rates come back down, we’re going to see the opposite happen? We’re going to see businesses that have lower interest rates to pay on their debt and so business growth will happen and retail investors can get into the markets more, but we’ll also see the opposite in fixed income when interest rates go down, fixed income yields get better.

 

Keith Allan:

Yes, in theory, your logic is correct. The one thing that I would caution about is that there are a lot of… and again I remain bullish and I do think there’s opportunity ahead. I do think that people will be compensated and rewarded for staying the course and staying in the market. But what I do caution is that there are all other variables that play geopolitically right now. We have two very large wars unfolding, unfortunately. One that continues to rear its head in Eastern Europe and Ukraine and the other one in Israel and that sort of leads to all bets being off. When you have these significant geopolitical events that are unfolding, and yes they are half a world away from what we’re here in North America, but it’s kind of the knee bones connected to the ankle bones connected to the elbow, where all does cascade itself down. I would caution against interest rates going down, we’re going to see a massive bull market rally and everything’s going to go up, fixed income is going to go up, currency is going to go up, and equities are going to go up. I would say let’s just maybe pump the brakes a little bit because we do have two wars that are going on that from supply chain standpoints, from energy, oil is still largely driven from the Middle East and Eastern Europe, especially Russia. Oil has such a cascading effect on the rest of the global economy.  When that’s impacted as much as it has been, we have to caution there. But yes, in theory, if interest rates start getting cut like you would think, risky assets would perform well. But we’re living in a world where there are so many other variables that it’s hard to make that type of forecast.

 

Kevin Parton:

Well, it’s like you were reading my questions because that’s what I was going to ask you – how do the geopolitical events impact what’s going in the market? And as you said a little bit earlier, I think there’s always something to consider in the short-term, but in the bigger picture, trying to time the market based on what’s happening locally or geopolitically isn’t necessarily the strategic move.

 

Keith Allan:

Just to reiterate what I said – we never advocate timing the markets like it’s time in the market, not timing the market. My good friend Jason Boudreau, Founder of VELA, likes to use that phrase. I actually quite like it. It’s time in the markets, right? We want to be in the market. You want to be deployed. You want to allow your assets to work for you. I think that’s the biggest thing that we advocate. Again, we’re going to diversify, we’re going to balance the portfolios accordingly, and we may shift weights around, we may be overweight or underweight just depending on what’s going on.  But we’re never going to say “Ok, we are going all cash” to our clients and then “Nope, now we’re going back in”, because that doesn’t make us look sophisticated and makes us look like we’re reactionary in our investment management and not proactive. Again, statistically, it’s showing that is not the correct way to manage money and certainly to make meaningful returns for our clients. It is not going to allow us to do that.

It’s unfortunate what’s unfolding in the rest of the world, and my heart goes out to these families and to what’s happening it’s tragic. It is something we have to be cognizant of, what effect does that have on North American markets and global markets, as we do deploy capital for our clients?

 

Kevin Parton:

Yes, absolutely. I think a really important point to consider is when we’re having those conversations with clients, being able to talk directly to someone like you who can explain how that impacts the construction of their portfolio or the investment philosophy or decisions, understanding why things are the way that they are in your portfolio. I think it is going to make a big impact on how you react. We talked earlier about people wanting to move to cash, but we need to sort of enlighten them on how to structure their portfolios. So, if you’re sort of able to guide them through that process, it becomes a much easier decision for them to make good long-term choices.

 

Keith Allan:

Absolutely.

 

Kevin Parton:

Well, really appreciate your time today, Keith. Thank you so much for sharing all this valuable information.

 

Keith Allan:

Yes. Thank you, Kevin. Thank you for having me, Kevin, and I hope our clients enjoy it and if they’re not clients, hopefully they enjoy it as well.

 

Kevin Parton:

Absolutely. Take care.

 

Disclaimer

The information provided in the podcast transcript is designed for general informational purposes only and is not intended to provide specific advice or recommendations for any individual or on any specific security or investment product.