Peter Intraligi, president and COO of Invesco Canada, opens up about some of the challenges of being an independent investment manager in this country
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In addition to his role as president and COO of Invesco Canada, Peter Intraligi added more to his plate last year when he became Invesco’s head of North American retail distribution. The US market is obviously a lot larger than Canada’s, but as Intraligi explains, there are other important differences between the two neighbours.
“In the United States, there’s a view that advice should be independent from manufacturing,” he says. “That fundamentally is the biggest difference between Canada and the US, but also Canada and every other country – we pretty much stand alone in that regard.”
When selecting Intraligi to oversee distribution in the two markets, Invesco tapped someone well versed in all aspects of the business. Intraligi began his career as an analyst with travel company Thomas Cook before embarking on stints with Ernst & Young and the Loewen Group. He joined Invesco in 1999 as vice-president of marketing for Canada and has been on a steady climb since then.
A pivotal moment in that ascension was being named president and COO of Invesco’s Canadian business in September 2007. The timing of that appointment made for some pretty stressful days in his first year, but it was a formative period both for the company and for Intraligi personally.
“Every business goes through cycles, and we were going through a period of relative underperformance when the financial crisis hit,” he says. “That’s where being part of a global firm like Invesco was a massive advantage. Had we not had the backing of Invesco, and were a stand-alone firm in Canada, I think we would have been in a lot of trouble.”
Having the support of a worldwide enterprise meant that instead of cutting costs and shedding jobs like many of its competitors, Invesco Canada was actually able to expand during the dark days of the financial crisis. In fact, by 2009 the company was launching its PowerShares ETF suite in Canada, which now accounts for more than $4 billion in assets across 51 offerings.
According to Intraligi, the reason Invesco could weather the storm so well can be attributed to its rock-solid foundations.
“The best way to safeguard a firm is to make sure you have very strong governance and oversight,” he says. “I personally don’t think it’s a surprise that we had no exposure to the
From ETFs to PTFs
Currently, ETFs/ETPs have more than US$3.9 trillion in assets worldwide, and PowerShares accounts for $110 billion of that total. That leaves it fourth in the global rankings, but as Intraligi reveals, the brand has come a long way since it launched in the US in 2003.
“When we launched PowerShares, our competition was trying to use that as leverage against us,” he says. “They said we were walking away from active management and going passive – today, many of those same competitors have now launched ETFs.”
Since then, the company has also blazed a trail with its platform-traded funds [PTFs], which provide a lower-fee happy medium between passive ETFs and actively managed mutual funds. Since launching in 2015, Invesco PTFs have amassed close to $150 million in assets. Intraligi believes this vehicle has huge potential, although there are certain impediments currently limiting its progress in Canada.
“Operating as an independent in Canada is very, very difficult because we don’t own distribution,” he says. “When it comes to the banks, they are both a competitor as well as a client, so we take a holistic view in partnering with them. PTFs have not been adopted by the major banks, but we are making progress.”
The great compensation debate
For distribution, Invesco relies on a network of independent financial planners and brokers who operate under both commission- and fee-based models. As head of retail distri-bution, Intraligi has regular contact with advisors, which means he is tuned into the ongoing debate regarding the compensation model in Canada.
“If a financial advisor has to choose between two mutual funds with the same risk and performance profile, and one pays a trailing commission of 1.2% and the other pays 1%, I agree there is a conflict of interest there,” he says. “However, if you have one standard fee where it is always 1% for equi-ties, always 50 basis points for fixed income, then you have eliminated that conflict.”
Intraligi therefore recommends a mix of fee-based and consistent compensation for advisors, depending on the type of product offered. Financial planners perform a vital role in helping Invesco connect with its clients, in that they explain exactly what the client is getting with an ETF, PTF or trad-itional mutual fund. Speaking from personal experience, Intraligi believes banning commissions would be a step too far.
“There are a lot of investors who like working with a financial planner where commissions are embedded,” he says. “I sat down with my mom and dad recently. They are both immigrants, and English is their second language – it’s fair to say they don’t have a strong grasp of financial products.”
As with any professional arrangement, the cost of the service was discussed. In this case, Intraligi’s parents preferred to go the traditional commission route, which suggests that a shift to a strictly fee-based business may not be for everyone.
“I described how their advisor was being paid – they had two options: paying it all in with the price of the mutual fund, or paying separately,” Intraligi says. “I didn’t lead them on in any way, and both said they preferred the one fee.”
“In the United States, there’s a view that advice should be independent from manufacturing,” he says. “That fundamentally is the biggest difference between Canada and the US, but also Canada and every other country – we pretty much stand alone in that regard.”
When selecting Intraligi to oversee distribution in the two markets, Invesco tapped someone well versed in all aspects of the business. Intraligi began his career as an analyst with travel company Thomas Cook before embarking on stints with Ernst & Young and the Loewen Group. He joined Invesco in 1999 as vice-president of marketing for Canada and has been on a steady climb since then.
A pivotal moment in that ascension was being named president and COO of Invesco’s Canadian business in September 2007. The timing of that appointment made for some pretty stressful days in his first year, but it was a formative period both for the company and for Intraligi personally.
“Every business goes through cycles, and we were going through a period of relative underperformance when the financial crisis hit,” he says. “That’s where being part of a global firm like Invesco was a massive advantage. Had we not had the backing of Invesco, and were a stand-alone firm in Canada, I think we would have been in a lot of trouble.”
Having the support of a worldwide enterprise meant that instead of cutting costs and shedding jobs like many of its competitors, Invesco Canada was actually able to expand during the dark days of the financial crisis. In fact, by 2009 the company was launching its PowerShares ETF suite in Canada, which now accounts for more than $4 billion in assets across 51 offerings.
According to Intraligi, the reason Invesco could weather the storm so well can be attributed to its rock-solid foundations.
“The best way to safeguard a firm is to make sure you have very strong governance and oversight,” he says. “I personally don’t think it’s a surprise that we had no exposure to the
From ETFs to PTFs
Currently, ETFs/ETPs have more than US$3.9 trillion in assets worldwide, and PowerShares accounts for $110 billion of that total. That leaves it fourth in the global rankings, but as Intraligi reveals, the brand has come a long way since it launched in the US in 2003.
“When we launched PowerShares, our competition was trying to use that as leverage against us,” he says. “They said we were walking away from active management and going passive – today, many of those same competitors have now launched ETFs.”
Since then, the company has also blazed a trail with its platform-traded funds [PTFs], which provide a lower-fee happy medium between passive ETFs and actively managed mutual funds. Since launching in 2015, Invesco PTFs have amassed close to $150 million in assets. Intraligi believes this vehicle has huge potential, although there are certain impediments currently limiting its progress in Canada.
“Operating as an independent in Canada is very, very difficult because we don’t own distribution,” he says. “When it comes to the banks, they are both a competitor as well as a client, so we take a holistic view in partnering with them. PTFs have not been adopted by the major banks, but we are making progress.”
The great compensation debate
For distribution, Invesco relies on a network of independent financial planners and brokers who operate under both commission- and fee-based models. As head of retail distri-bution, Intraligi has regular contact with advisors, which means he is tuned into the ongoing debate regarding the compensation model in Canada.
“If a financial advisor has to choose between two mutual funds with the same risk and performance profile, and one pays a trailing commission of 1.2% and the other pays 1%, I agree there is a conflict of interest there,” he says. “However, if you have one standard fee where it is always 1% for equi-ties, always 50 basis points for fixed income, then you have eliminated that conflict.”
Intraligi therefore recommends a mix of fee-based and consistent compensation for advisors, depending on the type of product offered. Financial planners perform a vital role in helping Invesco connect with its clients, in that they explain exactly what the client is getting with an ETF, PTF or trad-itional mutual fund. Speaking from personal experience, Intraligi believes banning commissions would be a step too far.
“There are a lot of investors who like working with a financial planner where commissions are embedded,” he says. “I sat down with my mom and dad recently. They are both immigrants, and English is their second language – it’s fair to say they don’t have a strong grasp of financial products.”
As with any professional arrangement, the cost of the service was discussed. In this case, Intraligi’s parents preferred to go the traditional commission route, which suggests that a shift to a strictly fee-based business may not be for everyone.
“I described how their advisor was being paid – they had two options: paying it all in with the price of the mutual fund, or paying separately,” Intraligi says. “I didn’t lead them on in any way, and both said they preferred the one fee.”
