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Ex-Richardson investment advisers sue wealth manager over share dispute – The Globe and Mail

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The Ontario Superior Court building is seen in Toronto on Jan. 29, 2020. Former Richardson Wealth investment advisers have filed several lawsuits against the wealth manager.Colin Perkel/The Canadian Press

A group of former Richardson Wealth investment advisers have filed several lawsuits against the wealth manager, claiming that 90 per cent of their shares in the company were “unfairly” withheld after they resigned during a corporate restructuring.

According to court documents filed in Ontario Superior Court, one group of eight investment advisers is alleging that the company breached its employee shareholder’s agreement and “acted in a manner that is oppressive” when it failed to transfer their shares in Richardson Wealth to them after they voluntarily resigned between June, 2020, and September, 2020.

Two other former investment advisers, Dean Bowe and Christopher Ballanger, filed separate cases with similar allegations, accusing Richardson Wealth of failing to pay out the full amount of their company shares when they departed in July, 2020.

A spokesperson for Richardson Wealth declined to comment as the “matter is before the courts.”

Richardson Wealth is one of Canada’s largest independent wealth managers, with about 160 investment advisers. But over the past three years, it has undergone a tumultuous restructuring that began when parent company GMP Capital – which was renamed RF Capital Group Inc. – sold off its capital markets division in 2019 to become solely a wealth management company.

To do so, RF Capital had to purchase the 67-per-cent stake of its own wealth management arm – Richardson GMP – that it did not already own, giving it full ownership of the operation. In October, 2020, a majority of Richardson GMP shareholders voted in favour of the acquisition.

The deal included a requirement that 90 per cent of the RF Capital shares held by employees be placed in escrow for the next three years to prevent a mass exodus of advisers – and the assets they managed – from occurring.

But a combined group of 10 advisers, who all left prior to the closing of the acquisition, are arguing they were not aware of the escrow clause in the share purchase agreement that had been amended in 2015.

According to court filings, the advisers said the changes to the share purchase agreement were made several years after they had joined the firm when many of them had set up employment contracts that specifically did not include any non-compete agreements or restrictions on their share purchase agreement.

The dispute stems from the company’s decision in 2015 to change its employee share purchase agreement when it became apparent that, without restrictions in place, no potential buyer would offer to purchase the company’s shares at a reasonable price if its key assets – its advisers and their clients – could easily walk out the door prior to a sale closing.

To make the firm more attractive to a future buyer, the share purchase agreement was changed to include non-competition and non-solicitation restrictions, as well as an agreement that shares could be held in escrow for up to three years after a sale or restructuring of the company.

According to court documents, the new agreement permitted RF Capital to claw back 90 per cent of shares issued to any employee who left the company during the three-year escrow period and continued to work in the field of wealth management.

Margaret Waddell, a partner with Waddell Phillips, said the 90-per-cent forfeiture clause the firm has implemented is “like nothing she has seen before” and “quite extreme” for the industry.

“They are trying to handcuff advisers to their business,” Ms. Waddell said in an interview. “Even if an adviser stays beyond the period when the purchase price can be adjusted, they will be required to pay back the full amount if they leave at any point within the three-year forfeiture term.”

Richardson has denied the claim, according to court documents, stating the advisers voluntarily resigned from Richardson GMP after the restructuring had been publicly announced by a press release in February, 2020, and that the advisers knew “full well that such a decision would result in their forfeiting 90 per cent of their shares in RF Capital.”

The firm also said in court records that in addition to the press release announcing the changes, the company – during an investor relations call in February, 2020 – referenced the fact that 90 per cent of shares would be forfeited “if during the escrow period, a RGMP shareholder were to leave to compete.”

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4 Common Investment Biases You Should Avoid – Forbes Advisor INDIA – Forbes

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As individuals, we all have certain biases and beliefs. They stem from different sources and profoundly impact how we think and go about things in our daily lives, including investments. While some notions, such as discipline and patience, help in the investing journey, certain biases can prove to be achilles’ heel for you. 

These biases not only hamper your investments but also prevent you from augmenting your riches. They act as a roadblock in attaining financial freedom and addressing life goals. Here are the four biases you should steer yourself away from.

1. Herd Mentality Bias

There must have been occasions when you have been tempted into investing in a financial instrument just because you have seen your peers and others doing it. It’s a fact that most of us end up chasing financial tools that others invest in, believing that such a move will help them build wealth and that they can not go wrong.

Do you remember the dotcom bubble? During that period, many people ended up investing in companies that didn’t possess robust corporate governance models and strong balance sheets. The results were disastrous.

In a nutshell, adopting this mentality can spell doom. You must make any investment understanding the product structure, the associated risks, and aligning them with your goals and risk appetite. Of late, many new fund offers (NFOs) have come to the fore promising attractive returns. Many investors have even invested in them.

However, before you invest in any such fund, make sure to understand the company’s fundamentals and analyse its long-term growth prospects. NFOs don’t have a track record, and investing in them just because others are doing can cause wealth loss. To simply put, don’t follow the herd but carve your own path.

2. Recency Bias

We are severely influenced by the recent happenings in our life. So much so that we quickly tend to forget the past. In this bias, we tend to give more importance to the recent happenings over historical ones. Multiple times investors have fallen for this bias, only to rule later.

This bias came to the fore in March 2020 when equity markets nosedived hit by uncertainties amid the coronavirus pandemic. Investors’ wealth made over time eroded in no time. However, this was not the first time that Indian equity markets had crashed. It happened during the 2008 financial crisis and 1992 stock market scam, only to bounce back stronger.

However, investors gave so much importance to the happening that most pulled out and exited markets fearing further loss. In the process, they converted notional losses into actual ones. Markets scaled new highs and rewarded those who remained committed to their investments.

Those who had remained invested during that challenging phase are now sitting on meaty gains. Hence, it’s advisable to look at the big picture and not bank on short-term trends. Irrespective of whether you are investing in a stock or mutual fund, evaluating how long you must stay invested without giving into short-term trends is important.

3. Confirmation Bias

Renowned Swiss author and entrepreneur Robert Dobelli in his bestselling ‘The Art of Thinking Clearly’ has called it the mother of all biases and rightly so. It refers to the human tendency to interpret things to confirm existing beliefs, and any notion that contradicts it is weeded out without a second thought. Those with this bias don’t want to take the stress that accompanies conflicting views.

Confirmation bias not only robs you of your ability to think logically but also gives you a false sense of overconfidence. With this bias at the back of your mind, you will always feel that you are in command of your financial decisions and can never go wrong. However, it’s not so. This bias – more often than not – gives you a false sense of hope, and you may end up investing in an instrument with poor attributes.

That’s not all. You may end up sticking to a loss-making investment with the hope that things will eventually turn. However, by the time you realise your mistake, the damage is already done. So, it’s prudent to face facts and mould your thought process accordingly. When it comes to investments, it’s vital to keep an open mind and go ahead accordingly.

4. Loss Aversion Bias

We all hate to lose, isn’t it? When it comes to investments, the focus radically shifts towards avoiding losses more than making gains. In the process, they lose out on chances that can augment their gains. In the long run, this can prove to be detrimental to wealth creation. While it’s prudent to adopt risk-mitigating strategies, it’s equally essential to look for opportunities to bolster gains.

Also, due to this bias, investors continue with loss-making investments because they want to avoid the pain of making a loss. However, it drags overall returns and proves to be a roadblock in achieving financial freedom.

How To Overcome Investment Biases?

By now, you must have realised that these biases pull you back and prevent you from leveraging your investments’ potential to the maximum. So, how do you overcome them? Let’s find out.

Be Logical and Analytical in Your Thinking

You can mitigate and overcome a lot of these biases by being logical and analytical in your thinking. An analytical approach will help you go deep and understand the nitty-gritty crucial for getting your investments right. Do your research and make sure to make investments in line with your goals and risk tolerance.

Understand Your Financial Position

Just as we differ as individuals, so do our financial positions. Note that investments don’t follow a one-size-fits-all approach. So, it’s advisable not to base your decisions based on other’s financial position. Have a holistic view of your positioning and adopt a strategy accordingly.

Manage Emotions

Investing emotionally can lead to flawed investment decisions and fall for any of the biases mentioned above. Hence, you must have a check on your emotions and adopt a rational approach. Weeding out emotions from investments can help you make decisions that can enhance your riches by a significant margin.

Take Help from a Financial Advisor

Professional help is always beneficial in every sphere of life, and investment is no different. If you are finding it difficult to overcome the biases yourself, seek help from a financial advisor. Financial advisors are qualified professionals who help you sort money matters and overcome preconceived notions and beliefs, and they aid you in thinking logically. 

Bottom Line

Biases stem from various sources, including the environment where we grow up and how we see people around us going about their investments. However, it’s essential to understand that wrong beliefs and notions can significantly hurt your finances and deprive you of wealth creation opportunities.

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More Climate Technology Investment Is Needed to Get the World to Net Zero – Bloomberg

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Vast sums are now pointed in the direction of reaching net-zero emissions by 2050. That’s good news: We require somewhere between $100 to $150 trillion in climate investment over the next three decades, and ignoring global warming would prove a costly and potentially irreversible cataclysm. In fact, the crucial coming years need to see sums going into the energy system to more than double from the current $1.7 trillion a year. But does the promised cash add up to what the planet needs? Not quite.

There’s the inconvenient fact that the cash isn’t reaching every corner of the globe in sufficient quantities. Too much stays in the developed world: That’s a problem, given developing economies will account for nearly 70% of global power demand by 2050. In 2020, 90% of energy transition funding went to high- and upper-middle income economies, according to BloombergNEF.

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Investment Funds Are Pushing EU Carbon Price Higher – BNN

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(BloombergNEF) — Investment funds are piling into the European carbon market for the year-end squeeze. This has contributed to European emissions allowances (EUAs) breaking the psychological price threshold of 70 euros per metric ton ($79/ton) and reaching 75 euros/ton on Nov. 25, 2021.

Speculators can increase volatility and create price spikes if they trade opportunistically. They can also bring stability if they have a longer investment horizon (beyond one year) and invest from a fundamentals perspective.

See the full research report here

©2021 Bloomberg L.P.

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