Raintree Financial Solutions
Raintree Financial Solutions presents Canadians with an alternative to the main street, bank-owned investment options. The core value – operating as an independent investment firm, effectively turns Raintree into an investor’s best friend, as the firm provides the investor not with ‘their’ investment solution, but the ‘best’ investment solution that fits the client’s needs.
Founded in 2010, Raintree Financial Solutions has grown to become a top Private Capital Market Dealer in Canada, and to-date has placed over $500 million into alternative investments, and has referred over $300 million in investments to portfolio managers within the firm’s extensive network of Private Wealth Advisors across Canada.
Raintree was founded quite organically – by realizing the professional experience and views of the three founding partners. With diverse professional experiences, they shared common values in providing clients with more than just a traditional investment service, and they built a private capital dealer that operates differently from the traditional financial service providers available in the Canadian market today.
The Canadian Business Journal spoke with Nick Fournier, President and CEO, and Peter Kinkaide, Managing Director of Corporate Finance, about the core concepts behind the firm and the Raintree upside for the Canadian investor.
As to the initial ideals and philosophy behind Raintree, Fournier reminisced. “The idea to launch Raintree goes back to 2009 when the investment regulations and compliance requirements changed. The impetus for Raintree was a gap and an opportunity in the marketplace – I’m talking about the fact that many dealers in the private market were simply selling their own investment products. So the first core concept and value for the Raintree business was to ‘operate as an independent dealer of financial products.’”
“Another founding value were our views of finding investments,” adds Kinkaide. “We seek investments where our clients’ capital would be protected, respected, and where the investment management team’s motivation would align with our investors. So we chose a very specific view of how we select investments and how we structure investments to meet the alignment objectives.”
Both, Kinkaide and Fournier, emphatically stress the importance of the next value as the core of any successful financial service. That value is integrity. “All the investment decisions we make, we make them with a high level of integrity,” says Kinkaide, “and this integrity also translates into all Raintree business activities. Our core intent is to build win-win relationships with our clients, advisors, product suppliers, and other business contacts. I believe this attitude has allowed us to get through the startup period, and turn it into the business that we are today.”
The Business Strategy
As the Raintree business matured, the firm focused on a more holistic approach toward its clientele, and the business strategy focused on attracting financial advisors by offering unique products and services. In this aspect, Raintree developed its own industry-leading proprietary software for its back office; delivering outstanding administrative and compliance systems. Raintree also intends to continue building up the service offering with the portfolio managers, provide high quality portfolio management services to investors, and continuously grow the investment banking and corporate finance platforms.
In order to continue its staggering growth as a financial industry powerhouse, the Raintree leadership team is recruiting additional financial advisors. To attract them, the firm shows them that they can provide holistic solutions to clients, and at the same time gain operational efficiency, provide clients with world-class alternative investments, and take advantage of Raintree’s transparency over fee disclosure, and have all this available while operating as independent advisors.
Raintree also prides itself on having a deep investment banking team, that specializes in underwriting, structuring and bringing to market private and alternative investments. “As we continue to grow, we are finding that we are taking the market leadership perspective within key areas of our business, and more and more we are awarded lead dealer status with our issuers, not only to gain distribution through our firm, but also through other exempt dealers, and even IIROC or MFDA dealers,” says Kinkaide.
Handpicked Alternative Investments
Alternative investments have moved from the periphery of the investment world, and into the mainstream, because these investments help achieve portfolio diversification and can react differently to macroeconomic market activities, and in combination with mainstream investments balance overall portfolio returns. The firm’s partners have witnessed this shift first hand over the past 25 years, as they helped the institutional as well as the high-net-worth individuals find suitable investments and allocate their portfolio into alternative investments such as real estate, private equity, venture capital, hedge funds, and real assets.
Raintree has grown into an expert in the Canadian capital markets because they source what they believe are the best investment solutions for investors. Each Raintree retail investment offered is a third party offering, and Raintree analysts execute an extensive due diligence process before making any investments available to clients.
“We have a comprehensive internal risk assessment process in place to help protect investor capital,” says Kinkaide. “Our role is to sit down with management teams, understand their business model, understand what they are trying to raise capital for, understanding the economics of that business, and work with them to structure an investment offering that we think will provide our investors with a good opportunity to generate fair, risk-adjusted returns. Only after exhaustive scrutiny that focuses on investor alignment do we decide whether to offer the investment to our clients.”
Raintree’s alternative investment strategy is industry-agnostic, meaning that it will consider investing in any industry, as long as the company provides a solid business track record, asset backing for the investment, whether it be commodities, real estate, land, etc.
Core + Explore Investment Strategy
In general terms, Raintree subscribes to the modern portfolio theory: creating “efficient portfolios” through diversification and allocation, in order to effectively respond and withstand volatility and risk over long periods of time, while also achieving higher returns for each increment of risk taken.
While the theory rings true, investors have increasingly allocated a growing proportion of their portfolios to investments outside traditional securities, and Raintree is at the leading edge of this trend. “We have recently redefined our investment strategy to deliver more diversified offerings to our clients,” says Kinkaide. “The old 60/40 portfolio balance has proven itself ineffective in some of the volatile markets, and it is really an investment strategy dinosaur. Additionally, in the current economic environment with record low interest rates, clients are looking for new ways to enhance their portfolio yields. That’s why we have developed our Core+Explore investment strategy.”
And the Core+Explore investment strategy truly is the bread-and-butter of Raintree. While “Core” presents clients with traditional investments placed with portfolio managers who invest in traditional forms of securities, Raintree supplements the Explore side of the portfolio with private investments.
Of course, every client’s investment strategy is different, and Raintree still believes the majority of a portfolio should be in the Core, but the Core+Explore strategy provides clients with the opportunity to choose the level of risk within both Core and Explore segments, and create additional depth to their portfolio diversification.
The Ideal Client
According to Kinkaide, there are three main pools of money in Canada: the retail investor, institutional investor, and high-net-worth/family office clients, and Raintree services all three groups. Raintree makes available a myriad of alternative and private investments in a wide range of industries and asset classes. The firm’s philosophy is that these investments are not for everyone, but they do compliment almost all portfolios in someway.
The firm also has portfolio managers who focus on helping the retail investors, and portfolio managers who focus on the institutional investors. The firm also struck a partnership with Wealthsimple, Canada’s largest robo-advisor, and launched Wealthsimple for Advisors, a platform where advisors can help clients access portfolio managed ETFs at a very low cost. On the other side of the spectrum, Raintree promotes large active independent portfolio managers such as Newport Wealth, BCV Asset Management and CC&L Financial Group, who provide financial advice and services to more affluent clients.
“Our ideal client is someone who wants to take more control and an active role in their own financial future,” says Kinkaide. “I don’t think Canadians are asking enough questions about the investments that they are making and holding. We attract clients who want to influence their own investment decisions. We want our investors to be educated, informed, and make empowered decisions about their financial future. Part of that is also educating our financial advisors and, by extension, educating our clients. This is a very important facet of the financial advisory business – financial professionals need to be advisors to their clients, not just sales people.”
“We are really excited about where our firm is heading,” says Fournier. “With the past six years under our belt, seeing and understanding the marketplace, understanding what clients are looking for, understanding how difficult it is today for small and medium size companies and funds to access the capital markets, puts us in a unique place to continue to grow and develop our business, and service the marketplace in a way that really helps the capital markets function very compliantly but also in a way that connects great ideas and great managers with capital. We created a platform that’s ready for continuous expansion,” concludes Fournier.