Rough economy fails to shake up advisors

“[The firm] is keeping calm and level-headed, and that is the most important thing at this time,” says an advisor in Saskatchewan with Regina-based Partners in Planning Financial Services Ltd.

An advisor in Ontario with Mississauga, Ont.-based PFSL Investments Canada Ltd. says the firm has been handling the economic crisis “unbelievably well,” with advisors not even feeling the effects of it. “Primerica has had no downturn,” he says. “We had a profit of about $500 million. I was there during the October crash of 1987. This is nothing new.”

Whether advisors have battled a recession before the current one or not, one thing remains clear: what they value most in their firms has remained the same. A firm’s ethics, its stability and the advisor’s freedom to make objective product choices top the charts in both importance and performance, meaning that firms are giving their advisors exactly what they need.

“Ethics is the most important aspect a firm should have,” says an advisor in Quebec with Montreal-based Peak Financial Group.

Adds an advisor in Ontario with Toronto-based Desjardins Financial Security Investment Inc.: “[Freedom] was critical, a key factor in my coming here.”

Over a recent six-week span, IE researchers Matthew LaForge, Sarah Phillips and Ashley Spegel asked 467 advisors at 13 dealer firms to provide scores in both importance and performance in 31 categories. Advisors were asked to rate both on a scale of zero to 10, with zero meaning “poor” or “unimportant” and 10 meaning “excellent” or “critically important.”

Individual ratings were then averaged out for each category, both firm-wide and Report Card-wide. The “IE rating” shows the average of all categories for each firm, excluding the “overall rating by advisors” — the rating that advisors gave their firms out of 10.

Overall average performance scores saw little change this year, with no major declines in the 31 categories. However, individual scores within some of the dealer firms are not up to par with advisors’ expectations.

Markham, Ont.-based Worldsource Financial Management Inc. struggled this year. In 10 Report Card categories, there were noticeable gaps between how advisors rated the importance of the category to their business and how they rated Worldsource’s performance in that category. The firm’s back office, marketing support for advisor’s practice, succession planning and firm’s delivery on promises all saw the biggest gaps, with performance scores a full point or more below advisors’ importance ratings.

“The back office is not where it’s supposed to be at,” says a Worldsource advisor in Ontario. “There’s high turnover and it’s not well equipped.”

Says a colleague in the same province: “There’s been some interaction [in terms of succession planning], but I don’t like what I’m hearing, I can do it better on my own.”

Toronto-based DundeeWealth Inc. saw gaps of a full point or more between performance and importance ratings in 18 categories, including firm’s stability and public image. Stability was rated 9.0 in importance, but only 8.0 in performance, while public image saw the same one-point gap, at 8.8 in importance and only 7.8 in performance.

Public image scores may be lagging due to a new branding initiative that seems to be getting out of the gate later than expected. Because of weak business conditions, the initiative stalled a number of times over the past year, says Gordon Martin, senior vice president of DundeeWealth’s retail division: “We’re just in the process now of really making sure that’s implemented across the country.”

On the flip side, Peak is closing some gaps between its importance and performance ratings — specifically, the firm’s stability. Last year, the gap between the two ratings was 0.6 of a point; this year, advisors rated the firm’s stability at 9.6 in importance and 9.4 in performance, a gap of only 0.2 of a point.

Advisors’ expectations vary throughout the industry, depending on their firm’s business model. In the dealer world, there is a smorgasbord of business models. Advisors search for a model that works well for them and their clients; and what works well for one advisor could be a nightmare for another.

“I am in the high net-worth private-client business,” says an advisor in Quebec with Toronto-based full-service dealer Assante Corp., “and [that] is the reason why I am with Assante.”

“The best thing about my firm is the freedom,” says an advisor in Alberta with Calgary-based independent dealer Portfolio Strategies Corp. “They leave us alone; we own our books and there’s a true entrepreneurial spirit.”

In this year’s Report Card, dealer firms fell into three categories: full-service dealers, independent dealers and mutual fund dealers. The largest grouping within the Report Card consists of seven full-service dealers; their advisors praise these firms’ dedication to support services, advertising and marketing support.

“I would recommend this firm because of the services [it] provides to the advisor,” says an advisor in British Columbia with Mississauga, Ont.-based Investment Planning Counsel. “[It is] second to none on business processes and technology support.”

Assante is a full-service firm that has 370 advisors on its Investment Industry Regulatory Organization of Canada platform and 430 advisors on its Mutual Fund Dealers Association of Canada platform. As such, when it comes to the firm’s ideal advisor — and what his or her book of business should look like — it isn’t so black and white, says Joe Canavan, chairman and CEO.

“It really depends on the advisor,” he says. “We want all advisors to have a holistic approach to wealth management. You want to have a nice mix and embrace the client fully. Fifty years ago, people had different advisors for different things; today, all you need is one trusted respected advisor.”

The firm saw increases in its performance ratings of half a point or more in key support services such as wills and estate planning, tax planning and support for high net-worth clients.

“We have an excellent platform for high net-worth clients,” says an Assante advisor on the East Coast. “Assante has taken our private-client services and run with it.”

Burlington, Ont.-based Manulife Securities Inc. is still a newcomer to the full-service platform after it acquired Burlington, Ont.-based Berkshire-TWC Financial Group Inc. in August 2007.

Last year’s results came in the middle of a transition period in which advisors from the two firms were dealing with changes in technology, back office and branding. This year’s ratings reveal that all that hard work has paid off as advisors are starting to see results. The firm’s overall rating increased by 0.4 of a point, while ratings rose by at least half a point in 11 categories.

Although there are still some complaints about technology snags during the transition to Berkshire’s back-office platform, advisors are starting to see the firm’s public image and compliance department soar during a time it is most needed.

“[Manulife] is well known,” says an advi-sor on the East Coast, “and it is important in times like these to stand behind a powerful company.”

Although Manulife is no longer just a mutual fund dealer, many firms prefer to stay within those lines, with no interest in entering into the world of securities.

“Most of our clients are not looking for stocks,” says Jeff Dumanski, president and chief marketing officer for PFSL, “and if they are thinking about them, we don’t have the mechanism [for trading].”

With more than 9,600 advisors licensed to sell insurance — and 4,600 of them licensed to sell mutual funds — PFSL is a force in the dealer world. The firm licenses anywhere from 2,500 to 3,000 advisors a year. Unlike other firms, most of PFSL’s recruits come directly from its client base.

PFSL advisors are not given compensation for recruiting new advisors, but do receive an override for what the junior advisors below them have sold. The firm runs off a ladder system in which 667 regional vice presidents are required to run branch offices and manage the recruits below them. IE’s researchers spoke to advisors at all levels of the business, including rookies.

PFSL’s business model is a mix of traditional companies put into one. There is an agency side similar to the traditional managing general agency model and the hierarchy structure is similar to branch managers in the real estate industry, who receive overrides.

“It is the best of many models out there and fine-tuned over the past 30 years,” Dumanski adds. “It is a blend of a lot of successful components of existing businesses today.”

Meanwhile, Portfolio Strategies left behind the mutual fund-only platform and launched an IIROC platform in the past year. Known for its bare-bones model, it was one of the few firms that saw very little movement in its ratings this year. Advisors continue to praise the firm for its entrepreneurial abilities and higher than average compensation.

“I like the corporate structure and the way they let me run my own business,” says a Portfolio Strategies advisor in Alberta.

Adds a colleague in the same province: “They leave me to build my business in the best interests of the client; I’m free to do what I want, and they pay me fairly.”

Portfolio Strategies doesn’t offer support services, advertising, succession planning or marketing support to advisors in order to sustain a higher payout.

“We support a strong branch network in which our advisors report to a branch manager and not to head office,” says Mark Kent, president of Portfolio Strategies. “We have the independent, entrepreneurial advisor who wants to build his or her practice, and they thrive in our model.”

IE