Paul Taylor, MBA, CFA
CFA Charterholder since: 1995
Early investment success: his high school team won Wilfred Laurier stock market competition for Ontario
Industry footprint: frequent commentator for Business News Network and CBC; regularly quoted in print media such as The Globe & Mail, Reuters and Canadian Press
Education: BA (Economics) University of Western Ontario, MBA Queen’s University

As the CIO at BMO Harris Private Banking, Paul Taylor leads the investment research and portfolio management team and heads the Investment Policy Committee. Here he speaks candidly on his career choices, some current industry issues and provides advice for young people just starting out.

What initially attracted you to a career in the investment industry?

Paul Taylor: My father worked in the investment industry for his whole career. He worked in investment banking and corporate finance roles at a number of investment dealer firms, so as a kid growing up I had a lot of exposure to the business – I also had an uncle who was a retail broker. In my early teens, I was following the stock market; I already knew how to distinguish a put from a call, for example. Then in Grade 10 or 11, my team from my school won the Wilfred Laurier stock market competition for Ontario, so that was fun. Even then, I knew commerce and finance was going to be the direction for me.

Can you share some of the highlights and accomplishments in your career that you are most proud of?

PT: Sure. The pivotal opportunity for me was in 1994 when I joined TAL Global Asset Management. CIBC had just bought a 55 percent stake in the firm and had transferred over the management of their mutual fund family – I was really responsible for the management of the CIBC mutual fund family. When I started there was a total of $5 billion in assets under management including the CIBC funds, the Talvest funds and two other CIBC programs. When I left TAL in 2002, that had grown to $30 billion. That was a tremendous opportunity for me to work with some very good people at CIBC, and to build a complex up from $5 billion to something many multiples larger.

Then again, when I joined BMO Harris in 2004, we had $5 billion in assets, and now we’ve grown to nearly $13 billion. It’s tremendously exciting to be responsible for a national platform at a major financial institution; to start at one level and see it many years later be many multiples larger than what you inherited. It’s tremendously rewarding and gratifying in many ways.

How do you see the wealth management industry evolving over the next few decades?

PT: The challenge for all of us as active managers is to demonstrate that we can add value – more and more there is a plethora of ETFs and other such passive products available. Meanwhile the average retail investor is getting much more sophisticated, and as a result, they’re truly holding money managers more accountable, insisting on them visibly demonstrating value add. Another trend that’s very clear is how quantitative the investment processes are becoming and I believe that will continue, and it will in fact accelerate.

I also expect there will be some blurring between traditional and non-traditional methods of managing money. We’ll see a much greater adoption of the non-traditional methods, with the average retail investor embracing hedge funds as we go forward. I truly do believe that it’s a model with merit, the notion of unfettered money management with less regulatory red tape, albeit with better disclosure . And as well, there’s the compensation – those will both drive that side of the business to flourish.

On the topic of regulatory red tape, does Canada need a single market regulator?

PT: My own view is – yes. It’s inefficient as a money manager to have to liaise with 13 different regulators. And even if it were insignificant in terms of cost savings, or time savings, it’s just the perception other geographies have of us in terms of our commitment to regulatory efficiencies – that by itself is worth the pain of moving to one single regulator here north of the border. It’s not an insignificant issue. We need to realize that it does look awfully odd that we don’t have a single regulator; it creates a perception that we don’t have our act together.

The past few years have been rocky for the industry. What do you think we learned out of the 2008 credit crisis and subsequent market meltdown?

PT: One is that we need to be clearer with our clients about is that in a systemic market meltdown, our ability to provide meaningful capital protection is limited. When the system comes unglued, as it did, it doesn’t matter how smart you were or how much foresight you had, the vast majority of clients experienced meaningful losses. For us as an organization and for the industry overall we need to be clearer with our clients and to say, that if we have another meltdown of that magnitude, the reality is that there likely won’t be the opportunity to protect fully from that fat tail event. That’s something we all need to get realistic about.

The second thing we have to realize is how damaging these events can be over the longer term to investor psychology. This could be the type of thing that can take a very long time to unwind. We’re all struggling across the industry to see any meaningful inflows into our complexes, but retail investors are not going to immediately allocate their assets back into equities given the dislocation that took place. We also need to point out to clients that our job as professional money managers is to act objectively throughout a fat tail event to reposition our portfolios coming out of the event for strong return potential. By removing emotion from the investment process we can capitalize on pricing anomalies that only materialize infrequently.

Would you recommend the industry to people just starting their careers?

PT: Yes, definitely. I’ve enjoyed having a career that’s always intellectually challenging and evolving. There’s no doubt that the investment processes and tools that we use in managing money today have advanced significantly from 10 or 20 years ago. The second thing I enjoy is coming into the office and not always knowing what exactly will happen. There are always things unfolding around the world, in both the capital markets and on the political stage, that will have an effect on our work; it’s the fact that we’re so connected into the world in which we live that makes it so interesting to me. I think for anyone who is an economic and political news junkie, this is a good career choice! At the same time, it’s rewarding to be in an industry where if you really truly do have unique, value adding ideas that there’s the ability to be well compensated. It’s that challenge of finding those ideas and identifying those opportunities to make a difference that is stimulating – the intellectual pursuit for me is very interesting.

Finally, what advice do you have for those who have recently received their charter and are embarking on a career in the investment industry?

PT: There are a few rules that I’ve always adhered to – one is strong moral and ethical behaviour – that is just table stakes. Your reputation is vitally important; the body of knowledge in the CFA program that covers ethical behaviour is critical, there’s just no room for even a single error.

Secondly, there were three things that I’ve always wanted to get right in my career. One, be in the right industry; two, be at the right firm, three, be in the right role. For me, being in the wealth industry has been key; it’s a growth industry because of demographics and all. Secondly, you want to be with a firm that is a leader in its category, one that’s professionally run, with a clear position in the marketplace – and hopefully with a sustainable competitive advantage. Thirdly, you want to be in a role where you can make a difference, because ultimately your compensation will be associated with that. So I think I’ve been fortunate. With TAL I was in right industry, great firm, great role. Here at BMO Harris, I’m still in the wealth industry, now working with high net worth, and as CIO it’s a great role. So for young people that’s what I would aim for over time.

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