Innovation of Education & Training in the Exempt Market | Raintree University as a Case Example
By: Cora Pettipas
To keep up with our current pace and growth, the exempt market has to be committed to education and professional development, especially for our Dealing Representatives (DRs), as they advise investors directly. Raintree Financial Solutions is one of Canada’s largest exempt market dealerships (EMDs) and is one of the leaders in advisor training in the exempt market. They have an ongoing corporate training initiative that is much needed in the Financial Services industry. I recently attended their Dealing Representative training program in Edmonton Alberta, called Raintree University. Their philosophy is that to have an educated and engaged investor, you need an educated and engaged advisor. The training was three days in Edmonton, where their head office is located. I participated for the three full days like any other trainee going through their program, and received a wealth of information about the industry, their product shelf and their processes. I was graciously welcomed into their program, and got to see their internal process firsthand.
When invited to join this training session, I did not know what to expect. I have been in financial services for ten years, and have been through, and facilitated, my fair share of training. I was pleasantly surprised, and have a new appreciation for the efforts that an EMD goes through to prepare an advisor to be compliant and truly good at their role as a DR and advisor in the exempt market. As an exempt market EMD, Raintree offers their DRs: marketing support, compliance support, product selection and product education. During my time in this training, all the owners participated, and there was an opportunity to meet all of their staff. The company culture is very open, unpretentious, and friendly. It was clear throughout the whole training that the EMD staff had a deep understanding of the products on their shelf, and had very close business relationships with the issuers. DRs were encouraged to contact the portfolio managers and principles directly if they had a question about the offering, or needed support for their clients.
The training itself was three intensive days of compliance, operations, product knowledge and advisory training. The training revolved around several integral themes. The first was called alignment, an adaptation of the MBA concept of triple win, where business decisions are based on client, employee and corporate success. Raintree’s core business value is reaching alignment. Alignment is a driving force in their EMD and was the main theme throughout the training. They see their business operations as a three legged stool, comprised of DRs, the EMD, and the issuers. Each leg is vital to the support of the stool. The client (investor) sits on the stool, so each independent business unit supports the activities and prosperity of the client. The three pillars work together; it is a partnership where the activities of all three parties are given equal importance. “The Dealing Representative’s role is to work with their clients to solve certain needs of the portfolio, as we are not product promoters, we are suitability advisors,” stated Adam Derges, one of the founders of Raintree.
A second major theme of the training was know your product. There was intensive product training, as this EMD currently offers seventeen investments on their shelf. Since inception, they have looked at approximately 250 potential products, and have 2-3 new offers to examine weekly from issuers. The product selection was detailed at the training. Out of all the business cases presented to Raintree, management stated that about 85% of the offerings are based on sound business ideas. With the majority having great business ideas, the determining factors to in product selection for this EMD’s Management is the investment structures and whether or not the clauses in the OM align with investor interests. “We have seen a lot of investments where the investors are hurt first and rewarded last; we want to flip that so that investors are rewarded first and hurt last,” explained Adam Derges. Issuers working with this EMD need to prove investor alignment (in structure and compensation) as well as minimal conflict of interest.
The product training focused on investor alignment and how to communicate the vast details of the products in a digestible way for clients. Prism, Walton, Centurion, Westpoint, Crossroads DMD, Jaymor, Pavilion Solar Income Fund, Pennant, and Newport all presented at this training. This gave the trainee a good breath of their product offering, as these presentations represented almost half of their product shelf. The presenters were all key persons in their representative companies, and all gave the impression of an open door policy to the advisors. Another emphasis was that an advisor is expected to constantly upgrade product knowledge, and constantly be engaged in product education support. This is done through three key education pieces at Raintree: the Call in to Kyle with Kyle Jacober weekly, as well as Nick’s Notes by Nick Fournier and the Brodeur’s Bulletin developed by Dan Brodeur. Since there are approximately 100 advisors are spread out nationally in five provinces, these initiatives are a key focus by management to keep advisors engaged and a part of the company’s culture and community.
The last major theme through the training was know your client. It was emphasized through the compliance, process, and investor pieces that one needs to know their client well and their motivations and background. Raintree encourages their advisors to be educators on the product, and experts on the client. It was stressed repeatedly that not every investment is good for every client. When making product and portfolio recommendations to the client, it was emphasized to: keep it simple, to make sure the client has all the relevant product knowledge and knows about the OM clauses, and to make sure it is suitable for that client, and to ensure diversification of products/strategies and sectors. In terms of the third point, suitability, the training focused on four key areas: client objectives, risk tolerance, personal experience, and tax consequences. “Clients need to have a firm grasp of risk and it needs to be captured on the KYC,” stated Kyle Jacober, another founder of Raintree in his presentation, “clients need to understand their investments, and where they can potentially go wrong.”
The Raintree University exemplifies what are best practices in the exempt market for training and commitment to professional development. It provided a very enriching experience from the knowledge acquired and the discussions with DRs, issuers, and the EMD. It is heartening to see this leadership initiative for a culture of transparency and client engagement. Through EMDs and their advisors, clients are encouraged to be active participants in their investments and wealth accumulation, as opposed to being encouraged to passively invest in products they do not understand, as often happens in the public markets. Canadian investors have been taught to behave with complacency, and to expect mediocrity, with their investment returns. Our industry can counter this status quo. The investments in the exempt market need a more engaged investor, and more sophisticated and skilled advisor, fortunately investors now have this resource.