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Steven McMackon spent several years working for various securities brokerages as an investment advisor before he decided he was due for a change. Frustrated with spending much of his time chasing down clients to get their approval for every trade in their investment portfolios, McMackon was determined to spend more time helping clients build financial plans and managing their investments – and less time on logistical tasks.

That desire for change led McMackon to pursue registration as a portfolio manager – which requires one of two designations: the chartered financial analyst (CFA) or the chartered investment manager (CIM) – and eventually make the transition from the brokerage world to the “portfolio manager” registration category. Now, McMackon is a portfolio manager and financial advisor with Optimize Inc., a fully discretionary portfolio-management firm in Toronto.

“My decision to get my portfolio-management licence was spurred by the frustration of all of the work that goes into providing investment recommendations and waiting for clients to get back to me and provide their verbal approval. That’s an exhausting process,” McMackon says. “Now, in this role, I can focus more on financial planning, investment management and doing a lot more with my time than previously.”

McMackon is not alone. A growing number of advisors are earning their portfolio manager registration to manage clients’ investments on a discretionary basis. The proportion of client-facing advisors at full-service brokerage firms who are qualified as discretionary advisors jumped to 36% in early 2018 from 10% in 2008, according to Toronto-based Strategic Insight Inc.‘s Fee-based Report, Winter 2018. Some of these portfolio managers – like McMackon – eventually leave their brokerage and join an independent portfolio-management firm. Some of these advisors even launch a firm of their own.

“We are seeing more and more interest in the portfolio-manager registration category,” says Fernando Moleirinho, vice president of business development, institutional services, with Laurentian Bank Securities Inc. in Toronto, which provides custodial and brokerage services to independent portfolio managers.

However, becoming a portfolio manager is no simple task. Earning the necessary proficiency requirements can take years, and applicants are required to undergo a stringent registration process.

“It’s not easy,” says Moleirinho. “The credentials are high, and there’s a reason for that. As a portfolio manager, you are a fiduciary, and you are making investment decisions on behalf of your clients on a fully discretionary basis. Higher levels of accreditation and industry experience are required.”

Here are some factors to consider if you’re contemplating making the switch:

A growing trend

The popularity of the two portfolio manager designations has been growing for many years, according to Dan Richards, CEO of Clientinsights in Toronto: “This trend may have accelerated, but it’s not a new trend.”

Most advisors who consider becoming portfolio managers have been in the investment business for years, are focused on working with higher net-worth clients and have accumulated large books of business, Richards says.

For many advisors who make the transition, a key motivation is the prospect of moving away from the logistical challenges associated with getting clients’ approval for every trade.

“Trades could take weeks or even months if you can’t get a hold of your clients, or if you don’t have a big team to make all of those calls with you,” says Cody Novak, portfolio manager with Novak Private Wealth Counsel in Brantford, Ont., which operates under the banner of Toronto-based HollisWealth Inc. “As a portfolio manager, you have the discretionary authority to place trades on your clients’ behalf, so you can act in your clients’ best interest.”

Another factor contributing to the growing popularity of the designations is the prestige associated with earning a higher level of education and qualifications, which can be a notable advantage in the increasingly competitive advisory market.

“[A portfolio manager registration] sets us apart from other advisors in terms of education and expertise,” Novak says. “It’s great for our clients, it’s great for our support staff and it’s great for us as advisors, too.”


The registration process varies slightly, depending on whether you’re seeking to become a discretionary portfolio manager at a brokerage firm regulated by the Investment Industry Regulatory Organization of Canada (IIROC) or at a firm in the portfolio manager registration category, which is regulated by the Canadian Securities Administrators (CSA).

In both channels, there are two paths you can take to meet the educational requirements to become a portfolio manager: obtaining a CFA or a CIM.

Neither route is easy, according to Novak, who holds the CIM. “[Obtaining my CIM] was a lot of work,” he says. “It’s very, very challenging.”

In addition to the educational requirements, applicants must earn a certain amount of relevant investment-management experience within a specified time frame prior to applying for registration. The experience threshold varies, depending on the channel in which you’re applying and which designation you’ve earned.

Demonstrating the necessary experience can be a challenge, as regulators are highly specific about the experience that qualifies as relevant. Generally, regulators look for experience with securities research, portfolio analysis or securities selection in a portfolio context. In some cases, even candidates with a CFA and extensive investment industry experience are denied registration if they cannot demonstrate the specific experience regulators demand.

Once you’ve met the proficiency requirements, the relevant regulator will assess factors such as your knowledge of securities legislation, your character and integrity, and your personal solvency and financial situation before granting registration.

“The registration process is not easy,” says Katie Walmsley, president of the Portfolio Management Association of Canada. “You’re managing people’s life savings. You want the bar set high. It’s a tough job and a very important one, so the regulators have to make sure that these [candidates for registration] are qualified and have the right experience.”


Portfolio managers generally receive fee-based compensation, calculated based on a percentage of the assets they manage. So, if you’re considering making the transition to become a portfolio manager, you should think about how that model would affect your overall compensation and your clients.

“You would have to figure out whether that change in pricing would be good for your clients or bad for your clients,” Moleirinho says.

The fee-based model appeals to many investment professionals, Walmsley says: “It eliminates most of the conflicts of interest and aligns the interests of the portfolio manager with the client.”

McMackon says his decision to join an independent portfolio-management firm was motivated partly by the compensation structure – particularly given the growing regulatory focus on embedded commissions.

“I wanted to position myself [to head in the same direction] that the industry was heading,” he says, “and move to a firm that has entirely independent advice, has a fee-based structure, is fully transparent and doesn’t have fees embedded in the products that we sell.”


The regulatory requirements portfolio managers face are similar to those for advisors, except that portfolio managers generally are required to undertake a higher degree of due diligence when opening an account and getting to know a client.

For example, in addition to completing a “know your client” form, portfolio managers are required to have clients sign additional, in-depth documents outlining the client’s investment objectives, risk tolerance and the investment guidelines according to which the portfolio will be managed.

Portfolio managers face a similar set of compliance responsibilities whether they’re operating in the IIROC or the CSA channel. However, IIROC tends to take a more prescriptive, rules-based approach. Advisors who are switching from an IIROC-licensed dealer to a firm regulated directly by the CSA are likely to notice a considerable difference, says Richard Roskies, legal counsel with Toronto-based AUM Law Professional Corp.

“You’re changing worlds, to some extent,” Roskies says. “The IIROC world, from a compliance standpoint, is fairly prescriptive. In the CSA portfolio manager world, the rules are mostly principles-based.”

The CSA also conducts fewer audits compared with IIROC, according to Vipool Desai, president of Toronto-based ARA Compliance Support: “You get a much more pleasant experience when you’re at the [CSA] level.”

Legal considerations

If you’re thinking about leaving your brokerage firm to join an independent portfolio-management firm, you’ll need to consider whether you will be able to bring your clients with you.

Depending on the agreement you signed when you joined your brokerage firm, you may be subject to non-compete and non- solicitation clauses, which could prohibit you from bringing your clients to your new firm.

“Some advisors contractually own their book of business, which means they can pursue an independent path and take those clients with them,” Moleirinho says. “Other advisors don’t have that in their employment clauses.”

The agreements dealers make with their advisors vary among firms, and language used in those agreements can be difficult to decipher.

So, Roskies recommends having a lawyer review your agreement you have with your brokerage firm before deciding how to proceed.


For entrepreneurial-minded investment advisors or portfolio managers with a yearning to branch out and launch their own firm, the portfolio manager registration category can be an attractive route to pursue.

If you have accumulated a substantial book of business, you could find that establishing your own shop rather than paying your firm a portion of every dollar of the revenue you earn makes financial sense, says Vipool Desai, president of Toronto-based ARA Compliance Support.

“[Advisors] who have [assets under management of] $150 million-plus don’t have a ‘book’,” Desai says. “They have a ‘mini-business.’ And if they have the right skills and support, they really should consider having their own firm.”

Although a dealer firm provides important functions, such as compliance support and back-office technology, advisors can outsource those services to third-party providers for less than they’re paying their firm, Desai says.

“You can decide what products you want to bring into your firm and you can build your own brand,” he says. “You basically are running your own ship. There’s real value in that.”

To set up a firm, you would need to apply to register your firm with the Canadian Securities Administrators – in addition to registering yourself as an individual advising representative (or hiring or partnering with someone who is registered).

Although the registration process is rigorous, it’s slightly easier than launching an investment dealer regulated by the Investment Industry Regulatory Organization of Canada (IIROC), according to Fernando Moleirinho, vice president of business development, institutional services, with Laurentian Bank Securities Inc. in Toronto. He notes that in the portfolio-management channel, the capital requirements are lower and the compliance responsibilities are more manageable compared with the IIROC channel.

The key is securing a strong support network, Moleirinho says: “You definitely need good partners. Having the right network of resources – legal, compliance, information technology – is critical to getting a firm established and up and running.”