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A Smart Approach to Balancing Risk and Return for Your Clients

Higher returns often mean higher volatility — so how do you know when it’s worth it to be more aggressive and when you should settle for a lower, but more stable, return? And how can you help clients trust that you’re taking the right approach? Today’s guest is always thinking about risk and return and has a framework to help you balance the two.

Martin Pelletier is a portfolio manager and managing director at TriVest Wealth Counsel, a division of Wellington-Altus Private Wealth. He is a Chartered Financial Analyst (CFA) charterholder and has extensive investment industry experience, including senior roles in capital markets, private banking, venture capital, wealth management, and family and multi-family office.

Martin is regularly featured in the media and is a weekly contributor to the Financial Post’s Investment Pro section. He is a member of Thomson Reuters Canada’s top 40 social influencers in finance, innovation and risk (2017), was a top-10 finalist for the BlackRock Award for Canadian Portfolio/Discretionary Manager of the Year (2018) and was recently named to Wealth Professional Canada Magazine’s Leading Portfolio Managers (2019).

Listen in to hear what Martin has to say about risk, return, and the foundation of his success.

What You’ll Learn in This Episode: 

  • How Martin (accidentally) avoided the financial crisis (2:05)
  • How goals-based benchmarking removes unnecessary risk (6:25)
  • How asset management differs between high net worth and ultra-high net worth clients (12:30)
  • Building trust at scale (17:00)
  • How thinking big and building small has contributed to Martin’s success (21:55)
  • How advisors need to reposition themselves to succeed in a changing industry (28:20)
  • How Martin has eliminated the most challenging aspect of his business (33:40)
  • Why he thinks you should never get comfortable (40:40)

Links and Resources:

TriVest Wealth

Martin Pelletier

Email Martin

Quotes by Martin: 

“With ETFs coming out, it’s democratized the investment industry, and commoditized it.”

“It’s all about building relationships. The number one reason why someone’s going to decide to go with you is trust.”

“If you really want to impose change, you have to think big and build small.”

Martin Pelletier’s financial advice is sought after both by the media, and high and ultra-high net worth families. Today, he’s sharing his expertise with us.

Below, we’re sharing three key ideas from this episode:

  • How goals-based benchmarking removes unnecessary risk
  • How asset management differs between high net worth and ultra-high net worth clients
  • Building trust at scale

For the rest of the episode, find the podcast on iTunes or Stitcher, or hit the link above.

How goals-based benchmarking removes unnecessary risk

It’s pretty clear at this point that the value proposition of financial advisors needs to change — with technology and new products making do-it-yourself investing easy and inexpensive, advisors have to offer something more.

For Martin, that something more is a holistic planning solution that tailors investment portfolios not to an index, but to a client’s specific goals.

Every investor has a goal they want to achieve, whether it’s retiring in five years, travelling, spending their time volunteering, or working part-time. Martin starts by understanding what it is his clients want to achieve.

Next, he derives a cash flow statement and comes up with a target return. Finally, he designs a custom portfolio and structures it to provide that return.

If a client needs a 5% rate of return to achieve the lifestyle they want, there’s no reason to have a more volatile portfolio. Beating, or even matching, an index isn’t the point — the point is meeting the client’s goals while minimizing risk

Client reactions

You may be reluctant to try this approach with your clients because you’re worried about how they’ll react. Wouldn’t anybody want to squeeze as much out of their portfolio as they can? Why settle for a 4% or 5% rate of return when you could shoot for 7% or more?

Martin hasn’t found that to be an issue. First of all, he interviews prospective clients to ensure they’re a good fit for one another, and this is one thing he looks for — if someone is trying to outperform the market, they aren’t the right client for him. And once his ideal clients get to know him, they trust him to focus on their specific goals rather than beating some kind of average.

Hint: To hear from another advisor who personalizes portfolios to his clients’ goals, listen to our episode with Peter Cishecki on the one change you can make to your practice to really put clients first.

How asset management differs between high net worth and ultra-high net worth clients

With most of his clients’ AUMs falling between $1 million and $20 million (with one family at $500 million), Martin’s specialty is around the high and ultra-high net worth segments. And while the two might seem similar, Martin has found a big difference between managing $1 million and $20 million portfolios.

With more assets, he’s able to introduce more unique investment products, like private equity. That often doesn’t make sense to someone with $1 million — you often can’t invest a meaningful amount while keeping the portfolio weighting reasonable. Just $100,000 is a full 10% of their portfolio, and the risk can be too big.

That’s not to say that a high net worth client can’t have a well-diversified portfolio or achieve similar goals — of course they can. The process might just look different.

And the ultra-high net worth clients don’t just allow for more customization — the sophistication of their profile often demands it. Typically, they have far more complicated financial situations, with cross-border companies, unique compensation structures, assets in various currencies, and multiple holding companies. As such, the planning needs to be more in-depth and personalized.

Building trust at scale

When it comes to marketing himself and acquiring clients, Martin gets right to the heart of the matter. “It’s all about building relationships,” he says. “The number one reason why someone’s going to decide to go with you is trust.”

And with social media, you can start building trust before even meeting a prospect by creating and sharing good quality content online.

You might worry that writing down and sharing your best advice and tips is giving away your secret sauce. Sure, there will always be people who will read your work and apply it themselves — but those aren’t real prospects because they aren’t people who want to work with an advisor anyway. The clients you are targeting are people who want you to manage their money for them, not people who want to do it themselves.

Martin has been a longtime contributor to various media outlets, including a weekly column in the Financial Post. But with social media, you don’t need a platform like that to reach potential clients — you can provide good quality information straight to your own audience.

Hint: Whatever information you want to convey, make sure you connect it with something topical — something in the headlines or that your audience is already thinking about. You can have the most important advice in the world, but if it doesn’t grab their attention or seem relevant, they’ll never read it in the first place.

To hear more from Martin about his practice, the habits that have made him successful, and how he managed to neutralize the most challenging aspect of his business, listen to the full episode. You can find it right here on this page or subscribe on iTunes or Stitcher so you don’t miss any future episodes. 

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