Working in the Best Interests of All Clients

Mackie Research Capital Corporation
Written by Robert Hoshowsky

Mackie Research Capital is committed to providing clients with knowledgeable, personalized portfolio management and investment services, a role it has proudly held for many decades.
The company – headquartered in the heart of Toronto’s financial district on Bay Street – also has locations in Calgary, Montréal, Regina, Vancouver and St. Albert. It also has independent wealth management locations in Campbell River, British Columbia and North York, Ontario.

Mackie Research Capital Corporation is one of Canada’s largest independent full-service investment firms with over three hundred dedicated employees. Mackie Research Capital employs what are commonly known as retail representatives or investment advisors, including portfolio managers, and advises clients on their investments and, in some cases, manages accounts on behalf of their private clients.

The company also conducts capital markets activities, provides institutions with trading and advisory services and raises money for issuers through investment banking. Mackie performs independent research on companies, publishes its work and makes recommendations on the pros or cons of specific companies to its clients.

For the company’s many clients, Mackie Research Capital provides well-researched, tailored investment solutions and superior financial services based on its many years of first-hand investment management experience.

It started as Mara McCarthy Stock & Bond Brokers in 1921 and has seen several mergers and name changes over the decades that have benefited both the company and clients. In 1962, the company was known as Andras, Hatch & Hetherington; this was followed by several other changes before the business acquired its current name in 2009. Several descendants of Andras and Hetherington are still with the company today.

The company is in the business of building relationships that last. Some of Mackie’s relationships with its clients go back to the 1930s and encompass both private and institutional investors.

“The bond between a client and advisor is often the most important element in a client’s relationship with the firm; so it is crucial to be able to retain advisors,” says Whitlam, who has been the company’s president for the past thirteen years. “We’ve had a long history of our advisors staying with our firm.”

Geoff Whitlam’s background is ideally suited for his role as president of Mackie Research Capital Corporation. He spent many years as a Partner in charge of the Investment Industry practice of KPMG before joining the industry in 1996 as Chief Operating Officer of Yorkton Securities. Subsequently he became President of Research Capital Corporation (now Mackie Research Capital) in 2004.

Mackie’s investment advisors and portfolio managers are flexible, personable and have up-to-date knowledge of a wide array of financial products available making them able to offer many full-service account options. Being privately owned by its dedicated employees gives the firm some unique advantages, particularly in its ability to provide advice free from bias.

“Independence allows our experienced and knowledgeable team of investment advisors, investment bankers, dedicated institutional salespeople and top-rated research analysts to do what they do best – provide objective, unbiased advice that is tailored to our clients’ needs,” states the company.

In recent years, many of us have heard about “commoditization” in the investment industry. Commoditization is when products or services become broadly obtainable and so similar to those provided by other companies that they become virtually interchangeable. In Canada, the Big Six Banks – the National Bank of Canada, TD Canada Trust, The Bank of Montreal, Royal Bank, The Bank of Nova Scotia and the Canadian Imperial Bank of Commerce – have devoted considerable resources to commoditization of financial products. While this is not entirely a bad thing, it has resulted in a large proportion of investment advisors being pressured to sell bank products, reducing choices for the consumer.

At present, the investment dealer arms of the Canadian banks hold approximately ninety-three percent of all the investment assets held in investment accounts in Canada. Most of this ninety-three percent of assets are invested in large cap companies or in investment-grade bonds, often through structured products or bank sponsored mutual funds. Most of the clients with similar investment objectives get the same portfolio, leading Whitlam to make the analogy of a ‘Happy Meal,’ the financial equivalent of packaged fast-food.

“You don’t go to McDonald’s and ask if they would prepare a deli sausage sandwich for you,” comments Whitlam. “You’ve got to select from the menu, and that’s what you get. That’s what’s happening in the investment industry to a large degree now in Canada.”

The commoditization of the investment industry is also manifested in the tremendous growth of Exchange Traded Funds (ETFs). An ETF is a marketable security which tracks a number of assets, such as a market index, bonds or commodities. Like common stocks, ETFs see prices fluctuations during the day.

ETFs are set up to map some index or industry portfolio with a certain percentage in each of a number of securities. And as the prices of each of those securities change, the ETF is rebalanced to maintain the right percentage for each security.

Whitlam calls EFTs “price takers”, not “price makers. Exchange-traded funds don’t make investment decisions; they just rebalance to track the index. So, the more that investment capital flows into ETFs, the less there are real people in the market – buyers and sellers – who are making conscious investment decisions that will actually determine the price of stocks.”

Another impact of commoditization is that as more and more capital is devoted to large-cap stocks, there is less investment capital available for smaller companies to develop and grow. Seeing the impact of these changes in the marketplace actually presents greater opportunities for Mackie Research Capital, as banks are increasingly moving towards commoditization and away from individual investment selection. No longer wishing to be served a fast food meal, many clients come to Mackie for highly-informed advice about individual companies, to discuss their specific investments and to create individually-tailored portfolios to meet their financial goals.

“In many cases, clients are seeking to create wealth, not just manage wealth,” says Whitlam. “There are a lot of people in this country who have made a lot of money out of being early-stage investors in companies which have succeeded and grown dramatically in value.”

One example, he says, is technology juggernaut Apple. Early-stage investors who put their money into the then-fledgling company soon after it was formed forty years ago would today have a portfolio worth millions of dollars. While there is greater risk from investing in early-stage companies, those clients do not have the same opportunities to create dramatic growth in the value of their holdings investing in ETFs as they do with individual, early stage companies.

“Mackie Research Capital is certainly active in that space. We see those opportunities frequently, and we advise those clients who are seeking high-risk, high reward investments in those early-stage growth stocks,” comments Whitlam.

Mackie Research has the advantage of not being too large to have flexibility. Following the Global Financial Crisis of 2008, many more industry regulations were imposed. While banks have the resources to handle this, the increase in structure to comply with regulations has curtailed the ability of bank staffers to modify specific investment portfolios and advice to the very particular individual needs of clients.

Instead of risking their reputations with lawsuits, bad activities or complaints regarding the suitability of investment advice from an individual broker, banks come up with investment ‘products.’ As a result, clients are encouraged to invest in the bank’s own mutual fund products or ETFs, which mostly have little or no exposure to small and medium-cap investments.

Bank investment portfolios are mainly invested in larger blue chip companies of Canada and the United States. Clients are charged fees from the banks to manage these investments, but the “Happy Meals” may not be right for all clients.

Through commoditization and the growth of ownership of the banks in the investment industry, the bank-owned investment dealers generally have been moving toward improving their profit margins by doing several things, including not taking on client accounts with less than $250,000 in assets. This is not the case at Mackie Research Capital, which does not limit clients to those with a certain value in assets.

“What the banks are saying is, ‘If you don’t have $250,000, we want your account to be handled by an employee of the bank, not an investment advisor in our investment dealer subsidiary,’” says Whitlam. “This means that smaller amounts will be sent off to a bank employee who is only qualified to sell funds, not stocks and bonds.” As a result of these limits and fears of complaints, banks are denying opportunities to investors who have less than a quarter of a million dollars and those who want something other than a standard package of funds or GICs.

Since the Big Six Banks have control of the majority of the market, payouts to their brokers –who are generally expected to produce at least $500,000 a year in commission revenue – are being reduced. This is resulting in a backlash, with brokers looking for new homes. Since Mackie Research does not impose those types of limits and has a generous compensation grid for advisors, the company is experiencing an influx of experienced brokers seeking a measure of independence in who they can accept as clients and better payouts. This benefits clients, the brokers and Mackie Research, which enjoys significant employee retention.

Mackie Research Capital Corporation has been growing largely through acquisition and continues to hire veteran brokers, who already have an existing book of clients and appreciate working with an employee-owned, full-service independent investment firm which has the experience and diversity to help them meet their clients’ goals and needs.



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