Fee-based practice built on discipline, diligence

  • Protect portfolios from emotion and speculation through diligent adherence to asset allocation targets.
  • Focus on clients who see the value in your investment approach to grow your practice.

What are some of the characteristics that make your practice distinctive?

We have a unique asset allocation model that guides my practice and our model portfolios. I believe that good portfolios are constructed intentionally, through diligent adherence to a clearly defined strategy.

"We have a model that provides a disciplined framework. When the markets corrected in 2008, it worked very well".

Well over half of the assets we manage are with high-net-worth families. Many of these relationships have been built over 10 or more years, which is a testament to our investment approach as well as to the excellent service support our team provides.

In your view, what are the most important foundations for investment success?

Be consistent and be disciplined. Have a prudent long-term plan and stick to it.

The focus should always be on the overall portfolio. I meet so many people who have portfolios full of investments that come from randomly collected ideas. Without intentional targets to guide the portfolio, you are susceptible to emotion and speculation, which are not friends of the successful investor.

One of the first things we do when we meet a new client is to take their existing portfolio and put it into our asset allocation model. More often than not, they’re completely surprised by what they have.

"If you are considering transitioning your practice from a transactional to a fee-based model, get it done as quickly as possible".

On your website, you quote John Bogle: “Forget the needle, buy the haystack.” How do you implement this philosophy into your portfolios?

History has demonstrated that it can be very difficult to beat an index consistently over time. In many cases, an advisor’s time is better spent monitoring portfolios to ensure that risk is reduced through prudent re-balancing.

We have a model that provides a disciplined framework. When the markets corrected in 2008, it worked very well. People were afraid, but during that time, we were able to sit down with our clients and say, “We’re now overweight cash or overweight fixed income, because equities have done poorly. We need to incrementally expand our exposure to equities.” It is a much different conversation than when an advisor says, “Hey, the market can’t go down much further; let’s buy some stock.”

Without a model that dictates the rebalancing, the advisor’s advice basically comes down to, “I think it’s a good time.” And the client says, “Well, I don’t think it’s a great time.” Last year it was Europe; this year it’s emerging markets. It could be gold or any other asset class.

What is your best advice to less senior advisors who aspire to build a successful fee-based practice?

You can’t just take your existing practice, flip the compensation arrangements on your clients and be universally successful. You have to have a portfolio model that supports the fee structure. I believe in the approach we are using to manage money, and it only works with a fee-based practice.

"...we increased our assets by about 25 per cent in the process, because other people saw the importance of having someone who could look at the big picture, and consolidated their assets with us".

If you are considering transitioning your practice from a transactional to fee-based model, get it done as quickly as possible. Our transition was less than six months from beginning to end. You are doing a disservice to your clients and to yourself if you try to be all things to all people.

In January 2006, I developed our asset allocation model, and I called each of my clients in for an hour or two and presented the model. At the end I mentioned that, in order to do this, we’d adopt fee-based compensation.

There were two or three clients who said, “No, I like it the way it is.” But we increased our assets by about 25 per cent in the process, because other people saw the importance of having someone who could look at the big picture, and consolidated their assets with us.

Brad Hummel

Brad Hummel

First Vice President,
Investment Advisor
CIBC Wood Gundy

Based in Edmonton, Brad Hummel is an investment advisor with CIBC Wood Gundy. He manages more than $250-million in assets for 200 high-net-worth clients.

One More Thing

When I moved to CIBC Wood Gundy six years ago, I did a client segmentation and found that about 94 per cent of the assets we had under administration was with 150 households; the balance was with another 150 households. Paring my book to those 150 households that were on board with our investment approach enabled me to spend more time with each client and on each individual portfolio than I did in the past. Our assets under management have since grown by 150 per cent.