​The Client's Take: Bryan Kelly, proprietor, White Top investor

Bryan Kelly learned the hard way how to invest properly. The experienced and sophisticated player talks with Jeff Sanford about the pros and cons of the modern investment advisory industry

Bryan Kelly took his first sales job when he was just five years old. “I’m an old-time hustler,” he says. Over the years he has restructured companies around the world, working in Canada, Germany, the U.K., Japan, Switzerland and the Caribbean. That is to say, Kelly knows business — he can read a balance sheet and understands the ins and outs of corporate finance. He considers himself a sophisticated investor, though the journey to market enlightenment did not come without taking his lumps.

Kelly began investing in the 1970s through mutual funds. At the time the cost of getting into the market was high, the spreads on product were wide. “I was playing an aggressive game,” Kelly says. “I made all the mistakes. I learned the hard way.”

Passing on the lessons learned to his daughters he found his advice being passed along again to friends. When questions started coming back, one thing led to another and Kelly started White Top Investor, an investor-focused website -- not exactly an idea most advisors endorse.

But today Kelly counts investment advisors among his friends, and he’s positive about the role advisors play in the life of the average investor. “There are a  lot of great investment advisors out there. Advisors are very important, they help the average person manage their financial future,” says Kelly.

But he is critical of some industry practices.

“The industry is structured around advisors who sell company product. Companies doing the corporate financing are shoving this stuff into client accounts, and that is not always right for the client,” says Kelly.

He is also critical of high-fee mutual funds. “Any advisor who recommends a mutual fund to a client to be in portfolio, I would have to ask why? Advisors will put someone in a bunch of mutual funds but when you dig down into those different funds you find a lot of duplication in there.”

Part of the problem is a lack of information and training among both investors and advisors. “I think the average client is naïve. Financial literacy has never been part of education in this country and that is a problem,” he says.

Kelly thinks companies do not do enough to train advisors to construct a proper portfolio. “I am not sure the average investment advisor today is trained in what is necessary to pick individual stocks.

Relatively few are capable of running a substantial portfolio, especially in Canada. Most are instructed on what to put their clients into and have no knowledge about how to pick assets,” he says.

There are bright spots, however. “If an advisor accepts a fiduciary role and manages money in the best interest of the client … then there can be a real business here. The one-stop approach, it takes a huge effort. But the guys that are fee-only are going to be there long-term,” says Kelly. “The CFP is a good designation. It has the breadth and is the designation providing value. The fee-based model is the only viable business model long term. That’s the certification that has value.”

Kelly uses a driving analogy to sum up the state of the industry: “A lot of advisors work on creating fear. They tell the client, ‘You don’t’ know how to drive, you need someone to steer.’ But the fee-based advisor helps the client understand, ‘There are always some crazies out there. This is how we are going to drive, if we stick to these rules we are going to get home.’”

Conveying the real risk in markets is key to maintaining the client relationship. “Advisors need to communicate with their clients. You have to tell them, there are risks, there are crazies out there. You have to tell that story. It’s not all sweet.”

Kelly recognizes being an advisor is a tough job: “I think you need a substantial book today. The guys with a small book, that’s rough. I don’t know how you do that now without buying a substantial book. Starting from zero, that’s really tough.” Nevertheless, he thinks the industry is at a critical point in terms of what its clients understand. “Advisors are going to be under pressure. The industry is at a critical junction. People have information today, and that is changing the industry. I didn’t have that when I started. I learned the lessons the hard way. But the Internet has changed things today. Eventually, the client is going to learn this stuff.”

At the end of the day, the smart advisor will realize wealth management is a vocation. “I think it is important that you are a thinker. You have to be in markets, you have to understand that things change, that the only constant in markets is change. You have to embrace this and manage that change. Client after client, you have to tell them that.”

This feature is from Wealth Professional Canada's Issue #2.3. To read more, please download the issue.