Lyndsie Barrie had a steady salary at a large company called IIROC, but gave it up to set up her own shop as a tax-exempt sales representative.
A native of Dawson Creek, British Columbia, who enjoys rugby, skeet shooting and moose hunting, he works in Cochrane, Alta. Her first insights into investing came when she was a 21-year-old hairstylist. “One day I was cutting the hair of a business owner. He asked me if I wanted to run a salon in the future. I said I didn’t think so because I didn’t want to manage a bunch of crazy hairdressers. He said that if I didn’t plan to become a business owner myself, I would have to invest in other people’s businesses to make money.
“I had no idea what he was talking about. He suggested that I read the book Smart Couples End Up Rich and my passion for investing started after reading that book.”
Why did I get it
Barrie started working for an insurance company, selling life insurance and segregated funds. “It wasn’t for me. I wanted my income to reflect only the work I did, not what subordinates did. And I didn’t want to manage a group of part-time financial advisors any more than I wanted to manage hairdressers.
Counselor
Lyndsie BarrieBarrie Financial Consulting
City: Cochrane, Alta.
Years in the industry: 4
Customers: About 30
AUM: Less than $10 million
Minimum: Thread
Compensation Style: Order
So she took a job at a large company called IIROC. They gave her a salary in the hope that she would pass the CSC exam. “I was basically getting paid to run CSC online from home,” notes Barrie. When she wasn’t studying, she spent all day at work searching.
After obtaining his license, Barrie spent two years with the same company. She says the wealth management training she received there was great, but she really wanted to be her own boss.
Before starting her own firm, Barrie had the opportunity to be an associate under advisors who managed approximately $100 million.
“They needed someone to take care of the lower parts of their books. But I kept comparing it to being self-employed, and that’s what really drew me to the exempt market.”
Therefore, at the beginning of 2014, she opened her own store. A friend in the wealth management industry advised her to avoid naming her company by any generic name and instead choose the more personal name Lyndsie Barrie Financial. Having completed all the formalities, she started searching.
How I did it
Leaving IIROC to become an EMD meant Barrie could no longer advise existing clients on stocks and bonds – the largest part of their portfolio. To retain these customers and be seen as a one-stop shop for potential customers, it developed a business model based on three partnerships.
Private
For private investing, Barrie has joined Alberta-based Pinnacle Wealth Brokers, an EMD firm operating in eight provinces (see “Employment on the market released“). Some of her new clients just want a private piece. “They come to me and say, ‘I want an incredible return on this portion of my money.’ Show me something cool that I can’t reach (my proxy). That’s all we do and we don’t talk about anything else.”
Barrie says it won’t allocate more than 20% of its portfolio to private investments. When customers have all their money with them, it is easy to monitor it directly. The situation is different in the case of customers who come to it only to take advantage of exempt market games. In such cases, it uses the KYC method – the client must disclose the total amount of investable assets by initialing the dollar amount and sign the form. “If he’s not lying, you can take it.”
The customers she has retained since IIROC are well-received by her new offering. “About 90% invested 10 to 20% of their assets in private investments.” The salary is more attractive in the private space, adds Barrie. When she was an IIROC representative, she received 40% commission – the remaining 60% went to the dealer. “At Pinnacle I get 75%, which is a huge pay increase.”
A typical private contract includes an upfront commission of 4% to 10%. Also at the lower end of this range is the teaser 1%, which appears after about a year. Barrie notes that the investing company pays her both fees. So, when a client invests $200,000 in a private transaction, everything will start working from day one (see “Choosing private games“).
Public
For public investments, Barrie uses Toronto-based Lonsdale Wealth Partners, a division of Newport Private Wealth. “Lonsdale takes people worth $100,000 to $1 million. If a customer has a million dollars, they get placed on the Newport discretionary platform.”
Employment on the market released
What does it take to get hired as a tax-exempt sales representative? Darvin Zurfluh, CEO of Pinnacle Wealth Brokers in Calgary, explains what he looks for.
Candidates must have at least several years of experience in the financial industry, preferably as a representative of IIROC or MFDA. In this way, they “continue to comply with the same rules under the Securities Act; (except EMD), contact the Securities and Exchange Commission directly.
Some new representatives have over 20 years of experience in the industry. In all cases, Zurfluh ensures that there are no serious violations recorded with IIROC, MFDA or provincial commissions.
Another key characteristic: a willingness to spend more time learning about new products than is typical with mutual funds and other public investments. “When you sell based on a prospectus, it is obvious that the information is complete. When you sell based on an offering memorandum, there is slightly less disclosure and it is not reviewed by the Securities Exchange Commission.
“(The representative) has a greater responsibility to verify the information and promises contained in marketing materials. Therefore, in private space you need to read much more and exercise due diligence.”
Zurfluh notes that the dealer deals with the deepest layers of analysis. The CFA, MBA and CPA team reviews approximately 20 investments on Pinnacle’s shelf. Sales reps then select five or six as their top pitches to customers. Which ones they choose depends on their own investment philosophy and the type of clients they have.
“Some people won’t choose anything that isn’t asset-backed. Some have a client base focused on income-generating investments: for example, if they are dealing with seniors or people who want cash flow. Others have clients who are looking for something more tax-advantaged. This is one of the advantages of private space; many (investments) are structured to provide more tax-efficient returns.”
Clients pay approximately 2% management fees. This gives Barrie a teaser speed of 80 points per second; 10bp goes to Pinnacle. And if he ever decides to leave the private side of his business, he will still receive 80 basis points, with an additional 10 basis points remaining in Lonsdale.
Insurance
When Barrie obtained her IIROC license, she didn’t completely abandon insurance. It began working with PPI Solutions, a Calgary-based MGA, as a liaison to the major manufacturers it works with. “I don’t do a lot of insurance, but it’s definitely a part of my business that I will continue to do forever because it’s part of being a holistic financial advisor.”
Barrie adds that he knows how difficult life can be for newly minted advisors in large companies. “They have a commission gun to their heads. It’s really difficult.” Her advice: “Hang in there, work hard and do what’s best for your clients.” He says that within a few years you will see how enjoyable and rewarding career counseling can be.
Choosing private games
Lyndsie Barrie, a financial advisor at Barrie Financial Consulting, has rigorous standards for private investing that she recommends to clients.
Her process begins with background research on issuers. Although her company’s due diligence team has already checked out the product shelf, Barrie vets the investment herself. He starts with a simple Google search for the name, then reviews government filings for fines or other penalties.
Even a minor violation that others might reasonably assume could be a deal breaker for Barrie. “I just won’t do anything that’s associated with a name that’s been the subject of any problems with the Securities Commission.” He adds that there are plenty of great investments without all this baggage.
Another unknown is the unclear concept of investment. Barrie gives an example of the possibilities of solar panel technology. “There were a lot of political aspects to it and too many ifs and maybes.” “
A strong management team with experience in the area in which the investment is being made is an absolute necessity. “I want to see that they know how to do it and that they have been successful before.” Among them, Enercapita stands out, which focuses on oil and gas assets. It is led by the CFO of Crescent Point Energy, a public company widely viewed as a solid holding for energy investors. “He won’t screw it up,” says Barrie.
Barrie avoids single-project investments. “I prefer a fund-style approach. More diversification means less risk.” One of her favorite plays for income-seeking clients is Invico Capital Corporation’s privately negotiated debt fund.
It is diversified across multiple unrelated strategies, RRSP and TFSA eligible, and the management team is strong, he says.
Managers must have a significant amount of their own (or their family’s) money to invest, so Barrie insists on meeting them face-to-face to see how they deal with her pointed questions and objections.
Dean DiSpalatro is a financial writer based in Toronto.
