Angry advisors change CI’s mind

By Steven Lamb | February 13, 2008 | Last updated on February 13, 2008
4 min read

Outrage in the advisor community has forced one of the country’s largest investment firms to backtrack on a move to transfer assets from one money manager to another.

CI Investments and Sun Life Financial have scrapped a plan that would have shifted about $400 million in SunWise and SunWise Elite segregated funds from Fidelity Investments to CI’s newly launched subsidiary, Cambridge Funds.

In a letter dated February 1, CI and Sun Life pointed out that the investment mandates for each of the Cambridge funds was “substantially similar to the Fidelity fund it is replacing” and reminded advisors that Cambridge was the new home of Alan Radlo, the popular fund manager who left Fidelity in early 2007.

Essentially, investors would have been kicked out of Fidelity’s NorthStar, True North and Canadian Asset Allocation funds without consultation.

Sources have told that CI announced in a conference call Tuesday night that it would no longer pursue the plan. CI and Sun Life issued a letter today to advisors explaining the decision.

“Over the past week, we discussed this change with advisors, and many told us that they wanted a choice of both Cambridge and Fidelity funds in the SunWise lineups,” the letter reads. “We have listened and, after careful consideration, have chosen a solution that provides you and your clients with a broader choice of options. We have decided to keep the Fidelity funds within the SunWise and SunWise Elite policies, while launching new SunWise Elite segregated funds that will invest in the underlying Cambridge mutual funds.

“The changes that had been scheduled to take effect on February 28, 2008 will not take place. Fidelity True North Fund, Fidelity Canadian Asset Allocation Fund and Fidelity NorthStar Fund will remain part of the SunWise and SunWise Elite platforms, and will continue to be available for sale to new clients in SunWise Elite.”

Offering Cambridge Funds alongside Fidelity is what some commentators say the firm should have done in the first place.

“It’s all about our clients, and it was wrong. It was absolutely wrong,” says Alan Filer, a CFP at Lifetime Financial Planning Group in Niagara Falls, Ontario.

Aside from being taken out of the investment decision process, Filer was incensed by an ominous warning at the end of the letter to advisors: “Please be aware if there are any realized capital gains or losses to the segregated funds, these may be allocated (distributed) to clients at the end of the 2008 tax year.”

“CI is within their legal right according to their prospectus to change their money managers, but there’s a moral, ethical issue here,” Filer says. “I fired the wholesaler. He’s a really nice guy, but the bottom line is that he’s banned from our office.”

Since the reversal of the decision, Filer says he has made amends with his wholesaler, who called him Tuesday night to give him the news.

“I told him he’s allowed to come back in,” Filer laughs. “The problem is, right now I believe that SunWise is the best product in Canada for our clients. The proof is that we’ve done $40 million in business in four years.”

“I’ve never had my clients happier than they are now,” he says.

The initial reaction to the planned asset shift was not much better within CI’s own corporate family. Heather Ferber, CFP and branch manager of Assante Capital Management Ltd. in Cambridge, Ontario, says she also had “a rather heated discussion” with her CI representative.

“We were not really happy about it. I have talked to a couple of clients about it, and they are not very happy either,” says Ferber. “One of the reasons I went with Fidelity was that it gave us some variety.”

The ability to offer third-party funds was likely a welcome option for Assante advisors since the firm is owned by CI. If the SunWise line offered exposure to CI-managed funds alone, clients may have perceived the products as proprietary and questioned the advisor’s motives.

“Sometimes you have to go to bat for what you believe in. If you fight against something you believe to be wrong, you can correct it. I think they’ve listened,” says Ferber. “I’m really happy for my clients, now that there aren’t going to be any capital gains issues.”

The proposal had come as a surprise to industry watchers and advisors alike.

“I don’t blame advisors for being angry, because it’s not like a wrap where discretion is delegated to an oversight committee,” says Dan Hallett, president of Dan Hallett & Associates Inc. “It just seemed like a blatant attempt to move assets in-house. [To have done so] regardless of tax consequences to clients, is a complete conflict of interest.”

Hallett says he is still a “big fan” of Radlo, even having gone so far as to recommend investors follow him to Cambridge in the first place, but says CI’s shift of assets would have been “unfair.”

“Everybody’s reason for buying a particular fund are different. For some people, Radlo wasn’t the reason to buy those funds. In fact, for True North, for about six years he hasn’t been running it anyway, so that one doesn’t really make sense in terms of following the manager.”

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Steven Lamb