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robo-advisor choose where a client fits, it
allows them to reduce overhead cost by
reducing commissioned staff who interface
with the clients."
In other words, it allows them to shift
wealth managers inside their organiza-
tion away from a commission base and
into a salaried position. "The fundamental
underlying key for the entire investment
industry in Canada and the US is the
'Know Your Client' rule – a regulatory
requirement," said Redcliffe. "And it's
good business sense. Every investment has
to be suitable for a particular client. They
take data at the front end of the relation-
ship and monitor it. When you open an
account at a brokerage, whether it's bank-
owned or independent, you have to fill in
your income, net worth and your invest-
ment objectives whether they're short,
medium or long-term as well as your risk
tolerances. You are almost self-policing
your investments. You do that in an inter-
view process with your advisor."
Redcliffe said that transactional brokers
tend to focus more on momentum invest-
ment and will typically take clients who
have 5% of their net worth to give and
invest. "I won't say it is play money but it
is money they don't mind taking a greater
risk with. That's why you're seeing more
transactional play out of the independents.
The banks tend to take the other 95% of
a client's assets and invest it for the longer
term – they are not as speculative. They're
risk averse in general which ultimately
trickles down to the products that are com-
ing through the house so a bank will not
allow clients to participate in highly spec-
ulative investments where there is a greater
liability created by the risk."
Redcliffe said that this has resulted in
less liquidity in the junior exploration
space with regards to share trading. "We
live in more of a nanny state where the
regulatory bodies' goal is to protect the
lowest common denominator in society.
So they create a bunch of rules which
are fairly strict and enforce them and the
banks don't want to upset the apple cart.
The independents want to bring forward
new opportunities but they have less client
INVESTMENT
