October 22, 2020- Join our discussion with the portfolio manager of Cumberland Private Wealth and host of Take Control of Your Wealth podcast, Shawna Perron, where we talk about wealth management, touching on:

  • Her journey to becoming a portfolio manager and what drew her to the industry
  • Portfolio management strategies
  • Asset allocation in today’s market environment
  • The future of investment management

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Welcome investors to the Absolute Return Podcast. Your source for stock market analysis, global macro musings and hedge fund investment strategies. Your hosts Julian Klymochko and Michael Kesslering aim to bring you the knowledge and analysis you need to become a more intelligent and wealthier investor. This episode is brought to you by Accelerate Financial Technologies. Accelerate, because performance matters. Find out more at www.Accelerateshares.Com.

Julian Klymochko: Welcome to The Absolute Return Podcast ladies and gents. Have a special guest episode today with Shawna Perron from Cumberland Private Wealth. She works as a Portfolio Manager there, she’s also a podcaster. Started a new podcast called Take Control of Your Wealth. So, Shawna, welcome to The Absolute Return Podcast. Thank you for joining us.

Shawnalynn Perron: Thank you for having me. 

Julian Klymochko: So, to start off, why don’t you fill in our listeners with a bit about your background, how you became portfolio manager and what drew you into the industry?

Shawnalynn Perron: Absolutely. So just over 10 years ago, I joined the financial industry. I have a background in sort of investment relations, business development, and strategic sort of strategic business allocation. And I did some training at The University of Calgary doing the Masters in Business Administration program there and slowly started drifting back towards the family roots and joining my father, Gary Perron and his private client business at [Inaudible 00:01: 11] initially, and then became an independent shop at Perron & Partners. And then we just recently merged with Cumberland Private Wealth from Toronto. And so that brought a lot of experience and depth to the team to help provide information and asset allocation and portfolio management to our clients there. And so, I became a little bit more interested in the client relationship management and portfolio management side, as the years went on and help manage the book there.

Julian Klymochko: That’s an interesting background going from, you know, one of the big firms BMO to becoming an independent. Is that part of your, say value add for clients always wondering, because specifically in Canada, the financial advisory, financial planning businesses really dominated by the big Canadian Banks? Interesting to get a perspective from an independent firm on, you know, your value add and how you stand out. I mean, basically these giants.

Shawnalynn Perron: For sure, that’s a really great question. For us, what it really came down to is, are we doing what’s best for the client? And for us, we felt that being an independent shop allowed us to have a little bit more of an open architecture to create innovative product, innovative solutions, and to really focus on what the client needs are. So being independent really separated us from a lot of the other offerings perhaps that you would see at the bank level. And in addition to that, we were able to really create some internal strategies and portfolio management and asset allocation strategies that we believe are in the best interest of the client.

Julian Klymochko: Right, go ahead.

Michael Kesslering: So, with some of your focus on the asset allocation portfolio management side. As an investor, would you consider yourself more value focused, more focused towards growth or income or what’s the, I guess, underlying philosophy for you as an investor?

Shawnalynn Perron: For sure. You know, I think that’s what the beauty of the team that we sort of put together now brings to the table. We have different portfolio managers that run different strategies and some might be more focused on value. Some might be more focused on growth at reasonable prices. Some may be more focused on sort of the small cap entrepreneurial space, and some may be more focused on global equities. So, for us, really, it’s bringing the whole team together to put the right asset allocation together for the client. You know, using those different strengths of our portfolio managers now on the investment counselling team and putting a portfolio that makes the most sense together for the client and the client’s needs.

Julian Klymochko: The interesting aspect these days is say international diversification, obviously over the past 10 years, US equities, specifically US growth equities have really dominated investor portfolios. And they’re really top of mind, the Fang Stocks, Facebook, Apple, Amazon, Google, Microsoft, et cetera. You know, how does that framework and that leadership come into your asset allocation process when specifically dealing with say Western Canadian clients who historically have probably been overweight in local oil and gas companies, which have been absolutely decimated at the same time as these tech giants have absolutely gone up probably like 10-fold.

Shawnalynn Perron: Good question, so I think, you know, probably about six, seven years ago, we really saw the need for more global equities within the client’s portfolios. And that’s kind of when we started, you know, suggesting an asset allocation sort of switched to more global equities from Canadian equities. I think one of our jobs to as portfolio managers is to understand the entire financial picture of our clients and make sure that we’re not overweight any particular asset class and sort of to reduce that risk. So, you know, particularly being in Calgary, you know, a lot of the clients are overweight. Their energy and their energy investments. So, part of our job was to sort of diversify away from that core investment for them. And, you know, we did create some internal strategies that were a lot more focused on global equities in more specifically, you know, encouraging a stronger concentration to technology and healthcare. A couple,  two sectors that have sort of had the most growth potential over the last several years.

Julian Klymochko: And how do you view that in the context of say a balanced portfolio equity mix and perhaps not just equity, but bonds and a more fulsome asset allocation, if you guys are considering alternatives and things such as say, you know, precious metals or hedge funds, or, you know, any sort of the wide selection of alternatives available if you guys take a look at any of those.

Shawnalynn Perron: Yeah, for sure. We definitely do. I think part of our equity allocation, we are always assessing different types of tactical asset allocation. And so, whether that’s looking at, you know, ETFs that are in sort of hedge fund space or private equity, or whether that’s more in sort of commodity-based names or whether it’s just overlaying with emerging markets. So, for us, it’s, you know, the team really tries to address where we’re seeing the most growth potential, but also taking into consideration the risk associated with the asset class. So, when it comes to sort of doing a balanced allocation for clients, that’s really, really dependent on the client’s needs, you know, how much risk can the client take on? At what point in their life cycle are they at? And can sort of wait out any sort of volatility within the portfolio. So, aligning the risk and the return expectations and the financial needs of the client are really important when it comes to determining the asset allocation for them.

Julian Klymochko: There certainly has been a tremendous amount of volatility lately specifically in early 2020. So, did you find that from a high-level perspective where your clients fairly okay with that? Do you have any allocation or, you know, did it really take a lot of effort to keep people invested in and not making any major mistakes as all of these crazy scary headlines at the screen?

Shawnalynn Perron: Yeah, great question. So, I think a lot of times we do get the questions, you know, should we be changing up the asset allocation? Should there be more bonds? Do I need more risks in the portfolio? And a lot of times we come back to, okay, what is your financial picture look like? What’s coming in? What’s going out? Has something materially changed to your financial picture? And if the answer is no, you essentially say, okay, well then, the asset allocation that we have set for you in a little bit of a longer-term view, you know, still make sense. And if you have different needs at different times, and we can address those along the way with sort of some tactical overlay. 

Julian Klymochko: Right. 

Shawnalynn Perron: But in general, you know, I would say, you know, you talk to the macro environment and talked to what’s being highlighted in the media. And then at the end of the day, you basically have to ask, okay, what are you invested in? Do you understand what you’re invested in? Are these aligned with the goals and requirements that you need? And if so, then you continue on that path. Because as we all know, turning over a portfolio a hundred percent every year, doesn’t necessarily you know, return or have great returns longer term, right? So, sticking with the core strategic allocation and putting sort of that overlay of the tactical allocation on top, I think really helped build some comfort around you know, the goals and the strategic allocation that has been put in place for clients.

Julian Klymochko: It’s certainly the worst thing an investor can do is bail out at the bottom. Sell everything, go to cash. Basically, in mid-March. You know, it’s unfortunate if people really can’t control their emotions, but that’s certainly where the diversification comes into play. People don’t need to necessarily be long, a hundred percent equities. They could have some, you know, counter balance in the portfolio. And speaking of that, especially in the environment of record low interest rates, say a client’s are looking for yield, what sort of asset classes or investment strategies could they be looking at to get more of a yield-based portfolio with the ten year at like 75 basis points?

Shawnalynn Perron: Yeah, good question. I think unfortunately the fixed income market has definitely presented sort of a little bit of a headwind for us when it comes to income into clients’ portfolios. However, having said that, you know, there are some really great blue-chip names out there that pay dividends and have a dividends growth track record. And a lot of that plays into some of our strategies that we use at Cumberland, for sure. And over time, what we see is as the dividend income increases in the portfolio, along with the capital appreciation, the income needs are definitely met. Now, not to say that, you know, a hundred percent dividends equities in an income portfolio, you still need that preservation side of things, but there some other strategies that you can overlay to kind of help, still provide an income stream to those retirement portfolios.

Michael Kesslering: So, looking a little bit higher level in the industry as a whole as well. Where are you seeing some fundamental shifts in the wealth management industry and how are you looking at that moving forward in wealth management. There is a variety of different factors that are kind of a confluence of events here that we’re seeing some pretty fundamental changes.

Shawnalynn Perron: Yeah, I wish I had a crystal ball, but that’s a tough question to the answer, right? Because things are always changing and this industry is definitely going through some disruption and some structural changes. You know, is the end client asking for more and wanting to pay less, a hundred percent? I mean, the ETF revolution has definitely, you know, structurally changed this industry. Wealth management for me though at the end of the day and for our team and the people that I work with are really about helping the client navigate some of these more challenging financial situations, more complex situations, and really helping to probably transition, you know, this wealth to the next generation to ensure that, you know, wealth is not destroyed and education for me personally. And, you know, for my colleague Christie, who was joined to do this, Take Control of Your Wealth Podcast is really the foundation of what we believe is needed. You know, you need to virtual connection number one now because of sort of what has structurally changed in our world in the last eight months, but you also need a platform for clients to learn, for investors to learn and to have a resource for them to sort of fall back on, to make sure that they’re navigating the world alongside you, if they require your help. So, I think the industry is going through some fairly big changes. I think for the next 10 years, we’re probably going to iron out a lot of what wealth management looks like to the end client. But at the end of the day, they just, you know, some clients still require sort of the handhold and the education and the need for active management to help get, you know, help make sure their asset allocation is appropriate and their risk level and time horizon has been assessed to help meet their financial needs.

Julian Klymochko: It’s an interesting point with respect to producing educational content. Obviously, you’ve got the new podcast out and it’s appears that you’re looking to provide more to clients and investors, than just beyond say a quarterly letter or some manager commentary. So how important do you think a role that sort of continuous education and near real-time updates and more and more content than was previously provided? Just given the environment that we’re in that seems to be rapidly changing?

Shawnalynn Perron: Well the new investor coming up, I think requires so many different outlets. You know, the millennials are used to using technology in so many different ways and they have information at their fingertips if they require it, or if they want to find it. And I think for us having different outlets for information, for contact, for providing any sort of financial help is necessary because that, you know, any given point the client or the investor is going to look for different ways of connecting. And so, the more outreach you have without being too over the top or too, what’s the word? flamboyant I suppose. You know, I think the new investor will gravitate towards it. And I think at any point, you know, where is the value? Well, if you can educate first and you can provide the, sort of, the value there and they connect with you initially through that, and once they actually require the help, it’s an easier introduction into you know, active management and asset allocation because they have sort of this resource already to fall back on and to learn from.

Julian Klymochko: Right, so getting more into the asset allocation standpoint, one thing that we like to discuss in our blog and our podcast is the notion of 60/40, that portfolio, that traditional asset portfolio of equities and bonds has worked well historically, however, with bond yields so low and equity, so volatile and valuations very high, it perhaps may not offer investors the same returns as it has historically, which is that 8 to 10% at a reasonable volatility. What are your views on that type of traditional portfolio going forward? Do you implement, you know, is that your idea of balanced or do you have a more sophisticated view of asset allocation than just the basics?

Shawnalynn Perron: Yeah, great question. I think it was back in April or May this year, we did an internal podcast, so to speak, not from Take Control of Your Wealth, but an internal one on to clients around what that balance portfolio looks like. We addressed how the balance portfolio has slowly migrated from, you know, your traditional 50/50 to that 60/40 allocation. And we’re thinking that that trend is going to continue because the interest rates are so low and the return yields on fixed income are sitting at again, new lows. It is a tougher asset to get some of that income out that retirees are looking for. It’s still has that preservation mandate. However, you know, perhaps the appetite is the more dividend blue chip names is going to increase the equity portion of the balanced portfolio over time. So, is the traditional balanced portfolio at 50/50, you know, 20 years ago. The same as it is today? No. Do we argue that it’s going to be different again, going forward? Absolutely. Until perhaps bond yields return to a slightly higher level and, you know, the retirement community of investors can get a decent yield off of that portion of their portfolio. So, you know, we take that into account, for sure, when it comes to our asset allocation. At the end of the day, though, you know, it still depends on the risk level of the investor, the time horizon, the financial needs of the investor. And so, a lot of other components play into whether or not a 60/40 portfolio will make sense for them.

Michael Kesslering: And so, would it be accurate to say that just because you may be increasing or seeing an increase in equity waving, it doesn’t necessarily mean that there is more risk being added perhaps within that equity portion. You’re looking at a little bit more lower volatility income paying or dividend paying stocks, things of that nature to bring down some of that portfolio risk. Would that be accurate?

Shawnalynn Perron: Absolutely, and, you know, part of something that we’re really quite proud of actually creating internally and being sort of an independent shop and being able to be a little bit more innovative is our, what we call our Kipling long short strategies, our enhanced equity strategies and what we’ve done there. We essentially set them up to reduce that equity volatility and still get decent returns. So, taking out a lot of the downside risk and still producing equity, like returns that we’ve seen over, you know, 40-50 years.

Julian Klymochko: Yeah, we’re not shy about introducing investors and advising them to incorporate perhaps some alternatives, long, short equity, et cetera, as you indicated in portfolios, they can not only mitigate the downside risk and volatility, but introduce alternative return streams into a portfolio, which can certainly help meet client goals and mitigate that volatility when times get rough as they did in Q-1, you know, having those short positions and those hedge fund positions in portfolios certainly helped quite a bit assuming that they were, you know, true hedge funds. These days certainly are not, but with that being said, looking forward, what excites you the most in wealth management?

Shawnalynn Perron: Oh, I, you know, I think I have to come back to why I even got involved in the business in the first place. I think for me really what it comes down to is what I saw. I sort of saw this, like this need for education. And there was this discomfort when it came to investing and understanding your investment portfolio. And really, so for me, it’s the educational piece. How can we create knowledge and confidence and to help clients navigate through this? I think for me seeing a client come into that kind of confidence level of understanding what their portfolio is doing, understanding what they’re invested in and understanding what they can get out of it. You know, is probably the most rewarding. So, to me, that’s exciting. To me, this world is changing too, which is exciting. So, you know, I’m excited to see what kind of innovation comes out of it, for sure. And I’m, you know, I’m hoping to be a part of that too. And there’s a few little projects on the side going on, but, you know, it’s an interesting world. People are still going to need to save and invest their money and plan for retirement and plan for a wealth transition to either the next generation or to whomever there, you know, estate beneficiaries are. And for me, I think from a very high-level perspective, you know, where do we see this country even, you know, going forward? And if we can kind of maintain and grow that wealth that we’ve created already through various industries across the country, and, you know, pass it onto the next generations to encourage entrepreneurship and to encourage innovation and to encourage, you know, new investment and maybe different sectors that would be, what would be exciting for me. So, wealth management has so many different aspects to it, and I probably went a little off target there, but I’d love to see, you know, more commitment to entrepreneurship and innovation in this country. And I think the wealth sitting in various places across this country can do so.

Julian Klymochko: Yeah, it appears that there’s so many, so much uncertainty out there, and so many different ways that the economy and markets can go. On one side, you look at where long-term treasury yields are. They’re saying perhaps at deflationary environment. More so if you look to Europe and Japan, I mean, the investors thinking the US and Canada are heading that way. Then on the flip side of the coin, you know, dramatic amounts of money printing, monetary stimulus, fiscal stimulus, and order of north of $10 trillion dollars. And so, there’s this interesting dichotomy on where things are going, that are really opposing forces. So, Shawna, if I were to put you on the spot here, and you can only hold one investment for the next 10 years, what would it be for you? What would your pick be?

Shawnalynn Perron: I would pick, well, given my age group too, and how many more years I have to invest and save. I would pick global growth equity.

Julian Klymochko: Global growth equities, and just to give our listeners some context here, you would be fairly young in your thirties. So, you got a long time in your investment horizon, correct? 

Shawnalynn Perron: Correct. 

Julian Klymochko: Okay, great. All right. Well, thank you for joining us on the podcast today. Want to give you an opportunity to allow our listeners to know where they can follow you online. You want to give a shout out to your podcast or any social media feeds and things of that nature.

Shawnalynn Perron: Awesome, well thank you so much for having me. Really grateful to be a guest on your guys’ podcasts. You can find me through our podcast that Take Control of Your Wealth. We’re online, we have a website, we’re on Instagram, we’re on LinkedIn. So, any one of those mediums, you can connect with us and we look forward to your fellowship. 

Julian Klymochko: Okay. 

Shawnalynn Perron: Thank you so much.

Julian Klymochko: Great, thank you, Shawna. Thank you for being on the show and listeners hope you enjoyed it. Cheers.

Thanks for tuning in to the Absolute Return Podcast. This episode was brought to you by Accelerate Financial Technologies. Accelerate, because performance matters. Find out more at www.AccelerateShares.com. The views expressed in this podcast to the personal views of the participants and do not reflect the views of Accelerate. No aspect of this podcast constitutes investment legal or tax advice. Opinions expressed in this podcast should not be viewed as a recommendation or solicitation of an offer to buy or sell any securities or investment strategies. The information and opinions in this podcast are based on current market conditions and may fluctuate and change in the future. No representation or warranty expressed or implied is made on behalf of Accelerate as to the accuracy or completeness of the information contained in this podcast. Accelerate does not accept any liability for any direct indirect or consequential loss or damage suffered by any person as a result relying on all or any part of this podcast and any liability is expressly disclaimed.