Wealth Management

Voted #6 on Top 100 Family Business influencer on Wealth, Legacy, Finance and Investments: Jacoline Loewen LinkedIn Profile

September 28, 2011

Gloria Steinem is too political in Toronto

Vanessa Grant, McCarthy Tetrault, kindly invited me to hear Gloria Steinem speak in Toronto. Gloria is an admirable person who has made a huge change in attitudes in society and I was excited to hear her speak and wondered what her message would be.
It was disappointing to hear her start with the right wing's attitude to women's reproduction. According to Gloria, the right wing only want hearth and home and sex is for the reproduction of the species, nothing more. This Footloose style attitude has certainly not stuck around in Canada and as I sat with a table of dynamic female lawyers, all partners at McCarthy, I wondered if Gloria's activist message no longer had the same urgency for North American women.
I also wondered if the American right wing did believe that sex was all around procreation. Quite the image painted by Gloria.

September 18, 2011

Business must be about values

Ultimately, the finance industry is about trust. The regulators and government can bind up the gigantic finance industry with the tiny ropes of many rules, but like Gulliver, the finance industry will find new ways to free itself.  Business in finance must come down to good human decisions made every day. These simply are too many to be restricted and guided by well meaning government and regulators hovering nearby.
I was at a recent finance event held by CIBC for their partners in the lending industry and was struck by how many of these industry leaders lowered their voices and expressed their concern about the values, or lack of, spreading across the banking industry. This decline in values is a contagion that threatens the investment industry and our economic health.
In the Nineties, companies did spend a great deal of time - and money on expert fees - discussing "Values" and building Values statements. The process of having employees ponder what makes the bank successful over the long run is what counts, along with the interest and sincerity of those executives managing the banks. At the same time, top bankers had to understand numbers and financial instruments like swaps, but to climb your way to the top, you also had to have a strong sense of people.
Sadly, Values consultants got a hold of the concept and many turned a valid part of working together into phony processes not run by the leaders and the output were oily values statements - just adding to cynicism.
I have mentioned before that my uncle ran the insurance division of the Royal Bank of Scotland, and was appalled at the upcoming leadership as the men were purely financially driven. Their lips would curl at the suggestion of having a process for employees to talk about what is the best code of conduct for bank traders to hold in their hearts.
Knights of the Round Table stills fascinates a large audience of young people. What is it about this ancient tale of a Kingdom long ago?
Perhaps it is due to the loyalty of all the knights to help each other and that invisible moral code that bound them all but also made them the best in the land.
As we think about our financial leaders, do they have a moral code that guides their employees? How involved are they at demonstrating daily how to behave? How does each bank leader demonstrate how to make profits? What is the message given on treatment of all clients of the bank - including those faceless traders on the other side of the world who were sold those viral derivatives with mold infested mortgages.
Here in Canada, we are fortunate in our bank leaders like Gord Nixon and Ed Clark. They have risen through the bank hierarchy and are what my uncle would call "true bankers", not the fast thinking corporate finance types who financial engineer profits.
Can the banking and investment system lead the way back from the edge of this madness and build back the trust? How will they demonstrate that business - everyone's business - needs to be built on strong values.
The UBS trader is the most recent rogue trader bringing down the value of a bank. His friends say he was a nice fellow so what happened in his mind? What was it? Greed or pride? I would prefer the latter. On his final Facebook page he asked for a miracle. Could he have done with more emphasis on values?

September 17, 2011

Roger Martin reinvents the finance system

What makes a the Dean of an MBA school effective? Personally, I appreciate Roger Martin, Rotman, because he puts his opinions down on paper and we benefit from his books but he also participates in public debates.
Here he is with Ed Clark of TD Bank and Arianna Huffington on a panel with The Economist and their video series on the financial markets. Arianna does not agree with Roger Martin's thesis that the system needs regular tweaking just like the NFA. As I am a Director on the board of the Exempt Market Dealers Association, I do agree with Roger Martin. Making changes in the finance industry takes a great deal of time to get through the system and encouraging incremental changes in the rules is good. The danger is that this tweaking will morph into an ever thickening rule book. I am in the private equity industry and as an example of the foolishness of government and regulatory rules, my small office must submit Anti-Terrorist reports every few months as part of our compliance. It is the over-zealous rule book making we all fear.
The comments by Ed Clark also make the video well worth watching, particularly where he answers the question, "Banks are hated by the public - do you think that view is valid?"

September 16, 2011

Why do entrepreneurs drop out of school?

A list of top entrepreneurs will reveal that many do not stay in university for very long. What is it that makes them less likely to follow the usual path?
A study of 5,000 business innovators, described in the recent book The Innovator's DNA by Hal Gregersen, Jeff Dyer, and Clayton Christensen, identifies five mental habits that characterize how successful entrepreneurs operate:
  1. questioning, 
  2. experimenting, 
  3. observing, 
  4. associating (that is, making connections among disparate ideas), and 
  5. networking. 
It is clear that curiosity is at the heart of these mental habits—the desire to find out more about something that one finds interesting, to tinker with it, and to forge something new from ways that have grown stale. Curiosity is fueled by a passion to explore the world.
What did Jobs himself have to say about the genesis of his amazing career? He shed light on this question during his 2005 Stanford commencement address.
Jobs recounted the story of his brief college experience: at seventeen years old, he enrolled in college and then dropped out six months later. He recalled that "I couldn't see the value in it. I had no idea what I wanted to do with my life and no idea how college was going to help me figure that out." Yet he did not disappear entirely from the college scene. He stayed in town, sleeping on friends’ floors and dropping into some college classes that he found interesting. First and foremost among these was a calligraphy class.
This is the part I like in particular as Jobs dos the terrible act of dropping out but then gets to experiment with learning because he is just curious. I often wondered what Bill Gates thought of Steve Jobs' speech when he talks about Microsoft's copying ways.
"Because I had dropped out and didn't have to take normal classes," Jobs recalled, "I decided to take a calligraphy class...I learned about serif and san serif typefaces, about varying the amount of space between different letter combinations, about what makes typography great. It was beautiful, historical, artistically subtle…and I found it fascinating." At the time, he thought that his interest was just in fun, without "even a hope of any practical application in my life." But it turned out differently, with world-transforming consequences. "When we were designing the first Macintosh computer, [what I learned in that class] all came back to me. And we designed it all into the Mac." He added that, since Windows copied the Mac, it's likely that no personal computer would have the elegant typography that they all now share if Jobs had not dropped in on that college calligraphy class during his free time of intellectual soul-searching. "Much of what I stumbled into by following my curiosity and intuition turned out to be priceless later on."
 Three points from Jobs' commencement address are noteworthy for an understanding of youth entrepreneurship and how it is fostered. First, consistent with evidence presented in studies such as The Innovator's DNA, a principal factor in entrepreneurial achievement is persistent curiosity. Second, many young entrepreneurs are unable to satisfy their curiosity in the context of today's schools and colleges, so they drop out. This has been the response of not just Steve Jobs, but of founders of Microsoft, Facebook, and a host of other contemporary business icons. Third, there is a vast store of useful knowledge available in our academic heritage that can prove invaluable for entrepreneurs who learn it. Jobs found useful ideas in calligraphy; others have found useful ideas in science, engineering, economics, history, art, music, psychology, ancient Egyptian studies, and the list goes on.
Putting these three points together leads to an inescapable conclusion about educational priorities today: They are poorly suited for cultivating the entrepreneurial genius that lies nascent in many young people today. At the K-12 level, amid the frantic pressures to raise student test scores on basic (and usually remedial) skills, stimulating curiosity is barely on the classroom radar screen these days. Many of the subjects that could evoke interest among all of the students who find memorizing basic skills dreary—subjects such as art, music, theater, or emerging media technology—have been squeezed out of the curriculum by budget reallocations intended to make room for yet more instruction in remedial skills. The intention has been to equip students with abilities that can make them "employable."

September 14, 2011

The Need For Stable Financial Partners

Businesses beneath the $100M revenue mark and who have narrow EBITDAs, below $5M, will be struggling to find banks willing to lend to them over the next year.
After all, if you had one million dollars and you could lend it out, but at such a low rate of return, would you? That is the question banks are asking themselves. Why would they lend to SMEs who do not have the fat in their systems to take more bumps from Europe and American business news? That risk is just not worth the razor thin profits to made from SMEs below $100M.
Yet, unwittingly, banks are allowing direct competitors to flourish in this Scrooge environment because into this risk category steps Private Equity.
Banks are leaving an enormous gap for those who can take the higher risk and who will be more expensive money if the business owner just looks at the interest rate. The Private Equity firms still alive are tough and are flourishing in this hard economy because they are stepping up to invest in business owners and their companies, even if there is risk. They also get in and help grow the EBITDA.
Private equity partners will be there for business owners who realize that they can grow more with more capital and with smart partners at the Board room table. Here is a WSJ story on Private Equity taking over the bank's usual territory - small business. We will be seeing much more of this.
Private equity-backed bank holding company SKBHC Holdings continues to take advantage of the shaky environment for small community banks, picking up Seattle’s Viking Bank. Viking had assets of roughly $400 million and assets of $379 million as of June 30. read more.

September 12, 2011

Women Want Leadership Courses

Women in business seem to be finally dropping their requirement for women based courses at the MBA level of business education. Over the past two decades, there has been a rush of women clubs, women networking groups and even made for women university courses. Here is an intersting article on the European MBA school IMD leading the way by changing their course titles, dropping the gender differential. Who asked for the change in title - the women on the MBA courses who have already jumped the required hurdles to get to the top. They have achieved it on their own and know it is a tough world where men and women need to compete aggressively. IMD changed the name of its course to Strategies for Leadership from Strategic Leadership for Women. Participants did not like the [original] name of the program, says Prof Toegel.

Read the full article here http://www.ft.com/cms/s/2/e2ba5f0a-d947-11e0-884e-00144feabdc0.html#ixzz1XkIzJnwC

September 5, 2011

I am not against all business, just big business

An anti-business, anti-capitalism, view is popular with the young people today, despite their good fortune to be born into such a wealthy society. It seems to be forgotten how our wealth developed by individuals with a dream. The business owners take out mortgages and risk everything, including their marraiges, to create something of value. They pay the salaries and taxes that then pay government officials and for government programs. This rise of Western capitalism, even embraced by China and India, has uplifted the living standards of so many yet the current US government labels all business owners as one category of business leadership. 
I agree that there are flaws that this recession has laid bare, but I disagree vehemently that business owners of private companies can be compared with public companies.
The media, school teachers, university professors, political experts and those denouncing business would gain credibility if they distinguished between corporations, which may be public and have professionally paid CEOs, and owner operated corporations, which are run by the original founder or family.  
My uncle was one of the leaders of The Royal Bank of Scotland back in the 90's, just as bankers stopped being bankers and became corporate finance experts, and he talks about one of his top issues with this distinction between big and middle business. 
The salaries and benefits of Directors in public companies are disgusting. This needs to be said a hundred times.
These corporate CEOs, paid to lead, do not take the same risk as owner operated business because they get obscene salaries and benefits even if (and when) they fail. Mid sized business owners often lose everything, their house, their wife. 
Here is my dear uncle:
I am not against all business, per se, but only big business. I noticed today in an article in the Independent that the average Pension Pot for FTSE 100 Directors had risen in less than a decade to £84 million, nearly 600 times the average retirement fund for five ordinary workers! These are the same people who have been closing down Final Salary Related Pension Schemes for their staff on the grounds that they are simply unaffordable! Small businesses, on the other hand, are finding it difficult to obtain necessary support from the Banks, who are amongst the worst culprits in the Obscene Rewards League.
What Big Government Does Not Reveal
The expansion of government is easy for politicians and means announcements of programs can be made to the media, like mother bird dropping bits of regurgitated worms into the mouths of eager baby birds. 
Another issue my uncle speaks about is the image of Scotland as a Quebec of Canada, keen for a dying culture while taking in more from London government than paying out in tax revenues. When there was North Sea oil, the revenues were taken to London and not saved for future generations in the form of a sovereign fund similar to Finland. 
Here is my uncle again:
As I said earlier, there is a great deal of comment in the press about the pros and cons of Scottish independence, with varying statistics being thrown around to "prove" opinions. Statistics can be invoked to prove almost anything, but one quoted last week was that, despite all the areas where Scotland seems to do better than England, Northern Ireland looks better off and Wales only slightly less well treated. Guess who gets most support from central government - the City of London!!! Furthermore, the Exchequer receives more in taxes from Scotland than it pays out under the Barnett Formula.

September 2, 2011

Should employers be forced to publish everyone’s pay?

That The Economist, the pillar of Capitalism (or it used to be) even posts such a question is alarming. Even more sickening is that half the readers who took the poll thought this was a jolly good idea. It reveals a appalling lack of understanding about how markets are structured. I found it even more surprising that from the comments, it seemed that the young generation liked the idea of revealing who is better and getting the rewards for their hard work.
Weren’t they the generation where marks in schools were hidden, where no one came first, everyone's a winner and gets a trophy and everyone’s artwork was put on the wall? I guess these young people do not understand how things work in the real world where if the art work is not that great, the customer will not select it:
No customer, no revenue, no business to pay salaries. 
 There may be an argument for requiring company owners to publish a list of who is paid what, so that if anyone is being discriminated against for any reason—not just sexism but other generic reasons such as race or religion, or maybe because of some individual vendetta—he or she can seek redress, or at least demand proper explanations as to why others are receiving more. Imposing such a rule on workplaces where pay varies widely is bound to cause ructions. It might cause more trouble than it is worth. Or maybe those ructions are necessary, to force those employers to be more rational in how they reward effort and talent.
Colin O’Neill from the heart of Socialist Capital of BC Canada writes:
The secrecy seems to be a form of short-term, rent-seeking behaviour; an inefficient game, where the employer incentives during wage negotiations is to exploit the asymmetrical information at the greater expense to the economy. A person's wage should reflect their productivity (their contribution; their value etc.): without transparency, the marginal cost of the worker won't equal the marginal benefit. Some workers are paid too much, some too little. A worker won't know where they are most productive (where an employer is willing to pay them more); therefore, factors of production (people) in the economy are not being used efficiently. 
Thank you, Trevor P. Harvey, who is older and wiser than Colin and probably remembers life before Socialism, and replied:
But Colin, what does this mean? "A person's wage should reflect their productivity (their contribution; their value etc.)" Who is to decide such relative values? Imagine comparison of Mozart, Pele, Shakespeare, Isaac Newton and Marie Curie. All had either employers or patrons. All were productive, but not one directly compares to another. Surely the only real arbiter of what value the world puts on us is the market. As R. L. Stevenson so rightly remarked, "Every man lives by selling something." Or at least, they did before the welfare state made fecund idleness a good little earner.
My favourite comment was from Japan, by Shintaro Tominaga
Socialists are all over the world.
But here is the real secret that young Colin does not get: employees in privately owned companies do not reveal their true salary to their co-workers, nor to peers working at a competitive business, not even at an industry cocktail party to strangers. 
Why not?
Privately owned business is very different from Public employees who get their salaries paid for by tax revenues. Salary scales are not simple and Government regulations mess up the free market and suck up time that should be spent on keeping a business strong. 
In Private Equity, I am observing how Canadian business owners are finding out it is not so hard to do business in other countries with more attractive environments for business owners.
 So, what do you think? Ought employers to be made to reveal everyone’s pay? 

September 1, 2011

How Business is under attack by Government

Have you a local bakery which puts out samples, enticing you to actually try Rosemary Olive Flatbread or that strangely coloured spinach pasta? Do you see the same, cheerful staff ringing up your purchases over the years? Can you stroll around, discovering new food while picking up your usual frozen shepherd’s pie and French bread? Is your experience one of welcome and comfort, so different from the larger supermarkets? What is the value of small store, neighbourly stores that offer a taste of Paris style shopping?
I have spent money for over a decade at this pleasant collection of cramped stores, voting with my money that they deserve their spot on Yonge Street I am sure that Longos and Lablaws (both family owned big stores) must covet.
It made it particularly distressing to see the plump, dimpled bakery lady’s face crumple as she told me about the bakery’s plastic bag debacle. 
Turns out the Toronto’s mayor, Rob Ford, wants the plastic bag 25c charge to discontinue, and this was reported in the media. The result is confusion as many shoppers and store owners believe that it has been dropped, but turns out that laws quickly put in place are not so easily repealed. This bakery does not have a compliance officer or lawyer on staff; checking out legislation is expensive. How many loaves of bread does a  bakery need to sell to ask a lawyer 's counsel on whether they must continue to charge 25c, particularly when the media reports the mayor saying no more charges?
This is where the true horror story begins – a customer of the bakery snitched on them to City Hall for not charging 25c. 
Worse than Agent Smith, a government bureaucrat posed as a customer in order to entrap this store. Then a fine was charged, a significant amount of money compared to the bakery's profits.
Is this Russia where neighbours snitched on each other? 
Is this Zimbabwe where the government imposed bread prices and government thugs terrorized store owners?
No. This is Toronto the Bland, Toronto the Good.
Was this snitching and government interference over 25c bags a matter of concern for a global warming, Al Gore lover wanting store owners to snap into line over being green? Was it the City of Toronto Rob Ford haters just in for a dig to make him look bad? Or is it just a do-gooder making sure everyone follows the rules?
Whatever the reason, this snitching is terrible. Our our risk taking, hard working merchants do not need to be frightened. 
This bakery lady was more upset that a customer had snitched. Imagine the feeling of knowing a customer has snitched on your business, that government bureaucrats pretended to be a customer in order to levy a fine, that not charging 25c cost you thousands of dollars. 
When you have a bad business day, will you be able to carry on in business, or will you be just that bit more to close down? Snitching casts a terrible pall over a store and reduces the "animal spirits" required to run a business - that optimism. 
Finally, will the bakery owner continue to be generous to the customers and put out a new cheese for them to sample – meh - not this week.
And there goes the neighbourhood.