As independent financial planners, we have direct access to financial instruments offered by Canadian mutual fund companies (Mutual Funds are available through Worldsource Financial Management Inc.), insurance companies, and a number of banks and credit unions. With over 5500 investment funds at our disposal, it is important to use screens, filters, and quantitative analysis to recommend only those financial instruments that meet our criteria for performance and volatility.
Each month we assess the investment products available, and screen them down to approximately 30 funds. The Hatch & Muir Preferred list reflects the following considerations:
- How the fund is rated by Morningstar;
- Experience, education, and length of time that the fund manager has managed the fund;
- Positive Sharpe ratios over a 3 and 5 year period;
- Consistent 1st and 2nd quartile performance relative to the fund’s peer group over the 2 to 10 year time frame;
- Management style. Our bias is towards value.
- Our level of trust and confidence in the portfolio manager, based upon face to face interaction.
Because we use a financial planning approach, an overall portfolio yield is determined that will meet the clients objectives. Once a return is established, we assess the client’s risk tolerance using our risk questionnaire to ensure it is consistent with the return required to meet their objectives. The response is quantified, and each fund that we recommend is assigned a risk rating. The portfolio risk is a weighted value, depending upon the asset mix. We manage to these risk ratings and periodically adjust the asset mix to ensure that the portfolio reflects the clients risk tolerance, return expectations and time frame. Individual portfolios are reviewed quarterly.
Other financial products, such as annuities, term deposits or GIC’s are reviewed, based upon:
- Competitive returns;
- Financial strength of the financial institution;
- The “fine print” contained in the contract, which may create cost or duration of commitment to a particular investment product or institution.