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photo: Joanes

Online advisor’s biggest concerns? Plunging oil, loonie

Neville Joanes, portfolio manager with newly launched WealthBar Financial, is not rushing to make changes, instead taking a mid- to long-term view


Date: February 27, 2015

Neville Joanes used the money from his first job to buy a motorcycle at age 16. As an investment advisor, he’s more concerned now than he was back then about the price of gas.

“Our biggest concerns now are the effects of the price of oil and growth in the economy,” says Mr. Joanes, 37, portfolio manager and chief commercial officer at Vancouver-based WealthBar Financial Services Inc.

“The price of oil remains quite volatile due to weakening global demand, a surge in U.S. oil production, a surprisingly resilient supply from the Middle East and a stronger U.S. dollar.”

WealthBar is a robo-advisor, a relatively new category of firms that offer low-cost, managed investment portfolios based on exchange-traded funds. Founded by husband-and-wife team Chris and Tea Nicola, it was launched last November. Like other robo-advisors, it allows prospective clients to go online to set up an account, purchase an ETF or ask for advice.

“WealthBar came about through Tea and Chris, his relationship with his father and his father’s business,” Mr. Joanes explains. Chris Nicola is a Web developer, Tea is a financial planner and his father John is a financial advisor who runs Nicola Wealth Management, with more than $3-billion in assets under management.

WealthBar’s assets under management are still a fraction of this (they decline to release this figure) but the founders believe they fill an important niche. Their 30-something friends were seeking access to the kind of hands-on wealth management that Chris’s father provides, but which they can’t necessarily afford, Mr. Joanes says. “Chris and Tea saw there was an opportunity to provide wealth management that was engaging, yet at a lower cost [by working primarily online].”

WealthBar’s investment philosophy is mid- to long-term, Mr. Joanes says: “We practise strategic asset allocation. We’re not trying to beat the market; we want to represent asset classes in the market that are suitable for our clients.”

Mr. Joanes and the Nicolas say the firm is more than robotic, because they also provide direct service, in which clients can talk to an advisor. Services include hands-on financial advice, tax planning and insurance.

Mr. Joanes, from Britain, started out as an engineer, “until I realized I wasn’t cut out for engineering. I went back to school and did finance and investment,” he says. He worked for a U.K. pension company until he moved to Canada in 2005, working here in financial analysis and management before joining WealthBar.

Right now oil and the plunging Canadian dollar are the big issues for portfolio managers to navigate, Mr. Joanes says. He is not rushing to make any drastic adjustments, though.

“We’re not changing our strategic asset allocation; we’re monitoring the economy,” he says. “Our investing philosophy focuses on strategic asset allocation. Clients’ portfolios are structured with a mid- to long-term view.”

Still, Mr. Joanes doesn’t rule out a few short-term moves to cope with shifting interest rates. The Bank of Canada surprised many experts in January when it cut its key lending rate from 1 per cent, where it had rested since 2010, to 0.75 per cent.

Bank of Canada governor Stephen Poloz said in February that the rate cut was designed to buy time to cope with the effects of low oil prices on the Canadian economy, both good and bad. The bank has not lowered rates again yet, but many analysts don’t rule out future cuts, with an eventual rise that could come later in the year if the global economy picks up.

The low price of oil and uncertainty over the direction of interest rates can be vexing for portfolio managers, Mr. Joanes admits: “We’ve been investing in shorter-duration investments so that if interest rates do start to move the impact of that move will be reduced.”

At the same time, he wants to avoid getting into a guessing game.

“Based on all the data I’ve seen I expect the U.S. to increase its overnight rate at some point this year, but it may not be until the end of the year because they keep putting it off. They may drop the rates again in the meantime,” he says.

The uncertainty over interest rates is not likely to last, Mr. Joanes contends. “I think it’s temporary and it may be due to the price of oil. Our interest rate is still higher than the U.S. and I think we’re going to play catch-up.”

Central banks cut rates to stimulate the economy, making it easier for companies and individuals to borrow. They raise them when they become concerned about high debt levels and inflation. The current downward pressure will likely continue “until either the price of oil rebounds or there’s an uptick in the economy,” Mr. Joanes says.

Oil rebounded slightly in February to trade (generally) in the range of $50 to $60 (U.S.) a barrel, a rise that has occurred despite record stockpiles in the United States. Mr. Joanes expects the price won’t change drastically, though he is prepared with contingency plans if it does.

“Going forward, we’re remaining vigilant … but I want to wait to see what Canada does and the U.S. does,” he says.

“If oil goes down to $40 we may put in some increased exposure [in our portfolios] to the U.S. I don’t think it’s very likely, but commodity markets aren’t the most rational markets,” he says.

The drop in the Canadian dollar (it trades at around 80 cents (U.S.) compared with parity or more earlier in this decade) has actually benefitted some of the holdings in WealthBar’s portfolio, because it’s based partly on geography, Mr. Joanes says. “Our U.S. dollar holdings actually increased [in value] as the dollar fell, so the drop in the Canadian dollar actually worked in our favour.”

The mid- to long-term approach suits WealthBar’s clients best, Mr. Joanes says. Some are accumulating wealth to prepare for retirement; others are retired and relying on their holdings for income.

“We’re constructing portfolios that will provide a constant level of income in the long term,” he says.

“I’d say we’ve got two groups of clients. The first are millennials who are tech-savvy. They’re in the accumulation stage and they’re saving for the future,” he adds.

“The other group are the pre-retirees, baby boomers. They have some exposure to traditional wealth management and come to us for a lower-cost, more engaging solution where they don’t feel like they’re being bounced around.”

WealthBar is registered in every province (though not the three territories yet). Mr. Joanes says he believes they already have clients in each province.

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