A Valentine goes out to top-notch advisor

A Valentine goes out to top-notch advisor: "It has been a month since our Valentines invitation to happy clients to tell the world about their financial advisors. Interestingly, most of the candidates suggested by readers have come from the big bank-owned brokerages. But in more than one case, the banks did not grant permission for the advisor to be profiled for this feature.

Fortunately, not all wish to hide their light under a bushel. Our first subject -- pictured here -- is Nora McCallum, a Vancouver-based investment executive with ScotiaMcLeod.

After the article appeared, client Reg Nordman e-mailed to say, "I am very happy with my advisor over at ScotiaMcLeod." McCallum cold-called him when she was starting out more than 15-years ago. "Unlike my previous advisors, who called only around February RRSP time, she is very regular in her contacts and always has a plan and a reason for action," Nordman continued, "I have always lost money when I have ignored her advice." He ruefully cites as an example failing to sell Nortel at the peak.

More recently, "she read the oil and gas market to a T. She is very well certified and gives me great service."

When Nordman provided McCallum's co-ordinates, it was with the warning "she works all the time." Happily, we did finally connect. On her business card, four credentials are appended to her name; B.Sc., CIM, FCSI and CIMA. In addition to the science degree, the acronyms stand for Certified Investment Manager, Fellow of the Canadian Securities Institute and Certified Investment Management Analyst. She is also licensed as a Life Underwriter.

McCallum started our interview by emphasizing that clients get access to a team called "the McCallum Group at Scotia McLeod." It includes investment associate Daniel Chow, administrative assistant Anna Imperial, associate Rod Armstrong and insurance consultant Randy Soon.

Still, McCallum is the hub of the wheel. She views herself as her clients' "chief financial advisor." In that role she co-ordinates the team with external tax accountants, estate lawyers and other professional advisors.

Clients usually have at least $250,000 of investable assets -- typically business owners, entrepreneurs and retirees. McCallum boils everything down to a simple mission statement: "I help affluent families find smart, cost-efficient, holistic solutions for wealth accumulation and preservation concerns."

McCallum describes her investment philosophy as "essentially conservative in nature." Portfolios are crafted to work within each client's risk profile, so "both my clients and I sleep soundly each night."

That sentence comes from her marketing materials. In an interview she says, "the people I work with are concerned about keeping their money. They're happy when we do or if they get more than they have a right to expect. But the prevailing message is they don't want to go backwards."

McCallum subscribes to accessibility and education: She maintains a library of financial books she lends out to clients. Among the more popular titles are Barbara Stammy's Prince Charming Isn't Coming, Sandra Foster's You Can't Take It With You, Ron Dembo's Seeing Tomorrow and Moshe Milevsky's Money Logic.
McCallum says most clients understand the importance of long-term investing but find it easier to do the right things when markets are performing well. A common pitfall is holding either too few or too many securities in portfolios. McCallum asks clients to adhere to five disciplined investment principles: Establish goals, identify risk tolerance, diversify, invest rather than trade and understand market cycles.

Investments range from individual securities to index funds and actively managed mutual funds. "People would call me cheap, and [they] have. I don't base decisions just on fees. It all goes into a pot and we base decisions on whatever has the best metrics."

McCallum is gradually transitioning the business from a traditional transaction model to a fee-based one. For the latter she may use F-class mutual funds or exchange-traded funds (ETFs), particularly for global equity exposure. Her first choice is ETFs. "Following behind that would be low-cost conventional mutual funds and behind that individual stocks."

By the way, the Valentines offer is still open."

Books paint grim picture of U.S. 'empire'

Books paint grim picture of U.S. 'empire': "With just five weeks left in 2005, tax-loss selling, rebalancing and foreign content are all top-of-mind topics for advisors and their clients.

The three are, of course, related. Year to date, Canadian markets were up 17% as of Nov. 21, while the Dow Jones industrial average more or less broke even and the S&P500 and Nasdaq were both up 3% or more.

Adrian Mastracci, president of Vancouver-based KCM Wealth Management Inc., suggests it's time to tweak asset mixes and that many investors may be overweight in equities and light on fixed income.

One problem is that with the removal of the foreign content limit, it's more tempting to rebalance into global equities, as several fund fims have urged all fall.

You might well conclude that some of those Canadian profits should be parlayed into more equities from that bastion of capitalism: the good ol' U.S. of A.

After all, the United States still makes up more than half (52.5% as of last week) of the MSCI world index. And there is a long-standing argument that the giant U.S.-based multinationals provide Canadians with all the global exposure they'll ever need.

On the other hand, the trials and tribulations of General Motors Corp. might give advisors pause for thought before recommending wholesale shifts into the U.S market. Based on its MSCI World weighting, you could argue that for every $1 rebalanced into the U.S. market, at least another $1 should go into EAFE (Europe, Australia, Far East) and Emerging Markets.

The relative levels of the Canadian and U.S. dollars also need to be considered. But in the long run, you have to assume such moves are as unpredictable as calling the next direction of interest rates or the stock market in general.

Advisors interested in global economics and top-down themes might want to get hold of two recently published books that question the United States' long-term preeminence in the global economy and stock market.

One is The European Dream, by Jeremy Rifkin (Penguin, New York, 2005). Rifkin is a Wharton School fellow famous for writing, among other things, The End of Work. The subtitle of Rifkin's latest effort is "How Europe's vision of the future is quietly eclipsing the American dream."

On the one hand, Rifkin chronicles what he describes as "the slow death of the American dream." He bemoans the end of the can-do spirit of America's pioneering days, which has been replaced by a "Getting something for nothing" mentality. He sees a country where citizens spend too much time hoping for the big score via lottery wins or a shot at fame and fortune via reality TV. "Today, for a growing number of Americans, risk-taking has been reduced to little more than gambling." Rifkin also sees a decline in civic participation and volunteering, as American youth become more distracted by a myriad of electronic gadgets, such as TV-enhanced cellphones and iPods.

He believes the United States is being usurped by a new "economic superpower" -- the 450 million citizens of the European Union. In a compelling thought exercise, he invites readers to equate the economy of Germany to that of California, the U.K. to New York, France to Texas, Italy to Florida, Spain to Illinois and so on.

For every world-class corporation domiciled in an American state, there is an equally fine company located in a European country. "European-based global companies are able to match their American counterparts more often than not," Rifkin writes. He adds that Europe "also sports more small-and medium-sized enterprises than America."

I promise you that after reading this book, you may have an entirely new perspective on European equity funds and international equity funds or exchange-traded funds that own European stocks.

An equally compelling read is Bill Bonner's Empire of Debt: The Rise of an Epic Financial Crisis (Wiley & Sons, New Jersey, 2006). Bonner, perhaps best known for his Daily Reckoning Web site and daily newsletter, paints a chilling picture of how the American "empire" has been built on a paper currency no longer backed by gold bullion.

He recounts the creation of the U.S. federal reserve system, the imposition of income tax to fund the First World War and subsequent wars, and finally Richard Nixon's infamous decoupling of the dollar from gold. The result is the "largest edifice of debt ever built up." In the two years since the Bush administration launched its war on terror, it has "added more debt to the nation than had been built up in the first 200 years of its existence."

Consider the long-term investment implications of the following paragraph: "On the one side of the globe [the U.S.] are the consumers. On the other side -- principally in Asia -- are the producers. One side makes, the other takes. One saves, the other borrows. One produces, the other consumes."

Looking at foreign ownership of U.S. financial assets, he suggests China or Japan "could bring the U.S. economy to its knees with a single word." [Sell.] The final two words in the book are: "Buy gold."

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A few weeks back, we asked advisors to fill the rest of us in on a visit by Fidelity mutual fund legend Peter Lynch. I'm told it was a primer on investing fundamentals, most of which can be found in his books.

So while the above-mentioned books on the United States make interesting reads, remember, too, Lynch's dictums: "It is futile to predict the economy, interest rates and the stock market."

He reminded advisors "there is always something to worry about" but "you have plenty of time." There is a correction every two or three years and a recession every seven to 10 years. Fortunately for those with a long-term perspective, time is our ally.

My source also noted a message implicit in Lynch's visit: "By spending big bucks on this event (the open bars and endless hors d'oeuvres in the Thomson Hall lobbies), Fidelity was saying to advisors, 'We admit we have mostly ignored marketing to both advisors and the public over the past few years. We want you to know we're back, and in a big way.' "
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