The last 18 months feels as though time is speeding along, and the last quarter isn’t any different. In Canada, most children are back at school and the ‘hybrid’ working model looks like it could be here to stay. We continue to be encouraged by the progression of human ingenuity, which will help us all get back to our normal lives. Canada recently had a federal election and as projected, another Liberal minority was reached.

We have seen a small pull back in markets over the last couple of weeks, which is normal and happens at least once a year. We are monitoring this situation closely and are confident that the economy is still strong.

Our newsletter will focus on the following topics:

Market News – Evergrande
Client Focused Reforms (CFR)
Updates with the Client Portal
Healthcare, Reducing our Carbon Footprint, and Semiconductor Advancements

Market News - Evergrande

Evergrande is a Chinese property developer which is also the world’s most indebted company, owing about $300bn USD, most of which was issued in China and denominated in Yuan (the Chinese currency)

Over the last number of weeks, there has been concerns about its ability to make payments on its debts. At this point it appears that the debt problem will remain localized within China as most of the debt is internal to that country and not spread globally as the mortgage crisis of 2008 was.

Over the last number of years, the Chinese government has been working to move its model of economic growth from creating more infrastructure to increasing the size of the service economy. Evergrande’s business model was to take down payments from individuals on a new project, borrow and then much later finally sell the property to those who made the down payment. This model was always tricky, but China’s previously very high economic growth allowed it to work.

With growth rates now at a lower level, the Chinese government is very concerned about the gap between the very wealthy and the large number of people just getting by. The expectation is that they do not want to anger people by allowing an uncontrolled collapse of Evergrande and taking away those home down payments. We are watching these events and the effects on developed markets. Over the last month or so, markets have been neutral (pausing previous growth but not moving down) with a modest increase in day-to-day volatility. As stated above, we expect that this will remain constrained with in China and that the government will manage the process very carefully.

Client Focused Reforms (CFR)

Over the last number of years, new regulations for the investment industry have been put in place to codify that clients are properly served and the advice they receive is suitable and appropriate to their circumstances.

The latest steps in this process come into effect at the end of this year. One part of these reforms is known as Know Your Product or KYP. In the investment industry “Product” refers to mutual and exchange traded funds, not individual securities. Advisors must be able to demonstrate to regulators that they understand how these investments are run, how they are expected to behave, and that they have considered alternatives.

Over the last few weeks, several of the Canadian banks have announced that they will limit their in-branch advisors to only offering bank proprietary mutual funds. They are doing this to make it simpler for their staff and eliminate the need to compare between options from other firms.

At Beacon Wealth Partners, we have processes in place that allow us to sort investments and choose between them. Our firm doesn’t put any limitations or incentives in place, but provides us with a platform that allows us to scan the entire investment universe. We monitor our holdings closely and make changes when necessary.

Another part of the CFR deals with upgrades to the Know Your Client (KYC) rule. We now have a more comprehensive process with a regulated timeline to ensure we as advisors, keep ourselves up to date with any changes to our client’s financial circumstances. That process now includes reporting that we have had a meaningful discussion with clients and that there are or are not material changes.

Our clients will not notice any difference in our conversations as we already are up to speed with these new regulatory changes.

We recognize that trust is the most important aspect of our relationship with clients. We have always placed the interests of our clients at the heart of the investment and financial planning advice provided to them.

Updates with the Client Portal

Last newsletter we outlined some changes with the client portal that allowed a secure way to transfer documents between you as clients and us as advisors.

We are excited to announce two upcoming changes:

Clients that own ETFs and stocks will now be able to see prices will be updated periodically throughout the day on their investments
In Q1 2022, we will be coming out with a secure mobile app to allow clients to see their investment accounts on their smartphone

Healthcare, Reducing our Carbon Footprint, and Semiconductor Advancements

Continuing from our theme in past newsletters, technology has come out with some incredible advancements that will help improve our lives. We wanted to share some of the more interesting articles and pieces of news we read over the last quarter that caught our eye:

Flexible Semiconductor Microprocessors: In the past we have discussed how innovations in semiconductor technology has vastly improved processing power. For those new to the technology, microprocessors are at the centre of all electronic devices such as smart phones, tablets, laptops, routers, and cars to name a few. They are made on silicon chips with machines that have the precision to within 2 nanometers (there are a billion nanometers in a meter). Nature recently published an article about Arm, a semiconductor company, that has created a type of microprocessor that can be fabricated on paper, plastic, or metal foil. Its applications could be extensive, including the potential to wear ‘smart’ clothing that could measure heart rhythms, breathing rates, and alert individuals of medical problems. More on this article can be found at: www.nature.com/articles/s41586-021-03625-w

Local Scientific Breakthrough: AbCellera is an antibody testing laboratory that was founded at the University of British Columbia. Antibodies are proteins made by our immune system that help fight infection and disease. Our body has over a billion different types antibodies. AbCellera searches, decodes, and analyzes our natural immune system to find antibodies that can help fight viruses. Traditionally these tests were done one at a time, where each sample of a virus would be tested against a single antibody to determine its effectiveness. However, as AbCellera puts it, this process is like trying to identify a droplet of orange juice in a swimming pool. They created a testing environment that can divide single samples into 100,000 – 300,000 different testing tubes (which fits on an area the size of a credit card). This has allowed for two things
- 1: the ability to use one viral sample to test thousands of different antibody treatments
- 2: speed up the time for treatment discovery from a decade to a few months.

In the early days of the COVID pandemic, AbCellera used it’s testing machinery to find 24 potential antibody treatments within 23 days. They sent these results to Eli Lilly (one of the largest pharmaceutical companies in the US), who then began the process of building treatments. To learn more about his company click here: www.abcellera.com

Carbon-Removal Manufacturing Facilities: In Iceland the first ever commercial carbon capture facility just started operations at the beginning of September. Its purpose is to remove CO2 from the atmosphere to help reduce the effects of global warming. Traditionally, the main way this process was tackled was to plant trees. However, this does have its drawbacks as trees can burn in wildfires and can be cut down. When this occurs, most of the carbon trees stored, is reintroduced to the environment.
Climeworks has created a CO2 capturing facility which they call Orca. Their process extracts CO2 from the air and mixes it with water. This solution is then pumped into volcanic bedrock which contain minerals that chemically react with the CO2 to form calcium carbonate – a white crystal found in limestone.

Therefore, Orca converts CO2 from the air to rock.

The CO2 capture process is currently very expensive, but the company thinks that with increased scale from a growing number of clients and interest from around the world, they will be able to reduce the cost almost 10-fold. Companies such as Microsoft and The Economist have already signed up to offset part of their emissions.

More on this story can be found here: www.climeworks.com/orca

A slightly different approach is being developed by Carbon Engineering (a Canadian Company), but the end goal is the same; to remove CO2 from the air and lock it away to first slow and then hopefully reverse global warming.

In Conclusion

From the discovery of fire and the invention of the wheel, through to wearable computers and bio-technology that significantly decreases the time to find answers, we continue to be optimistic about mankind’s ability to find solutions. We are also encouraged by trends that show we, as individuals, become more aware and accepting of different viewpoints and cultures.

Thanks again to everyone who has introduced us to new potential clients, we really appreciate all the trust you have put in us.

We wish you a happy thanksgiving and as always, we are available to answer questions or concerns you may have.

Jack Fournier B.Sc, FMA, CIM®
Portfolio Manager | iA Private Wealth
Insurance Advisor | iA Private Wealth Insurance Agency
700-609 Granville St. Vancouver, BC
p: 604 895 3348
jack@beaconwealthpartners.ca

Travis Kidson, B.Sc, CFP®, CIM®
Portfolio Manager | iA Private Wealth
Insurance Advisor | iA Private Wealth Insurance Agency
700-609 Granville St. Vancouver, BC
p: 604 895 3486
travis@beaconwealthpartners.ca

This information has been prepared by Travis Kidson and Jack Fournier who are Portfolio Managers for iA Private Wealth Inc. and does not necessarily reflect the opinion of iA Private Wealth. The information contained in this newsletter comes from sources we believe reliable, but we cannot guarantee its accuracy or reliability. The opinions expressed are based on an analysis and interpretation dating from the date of publication and are subject to change without notice. Furthermore, they do not constitute an offer or solicitation to buy or sell any of the securities mentioned. The information contained herein may not apply to all types of investors. The Portfolio Managers can open accounts only in the provinces in which they are registered.

iA Private Wealth Inc. is a member of the Canadian Investor Protection Fund and the Investment Industry Regulatory Organization of Canada. iA Private Wealth is a trademark and business name under which iA Private Wealth Inc. operates.

Insurance products are provided through iA Private Wealth Insurance Agency which is a trade name of PPI Management Inc. Only products and services offered through iA Private Wealth Inc. are covered by the Canadian Investors Protection Fund.

Beacon Wealth Partners is a personal trade name of Jack Fournier and Travis Kidson.