Experience, knowledge are keys to success: Includes chart

It is no secret that many mutual fund dealers have moved steadily toward a full-service business model, bringing investment dealers, managing general agents and banking products under their umbrella. The most recent example is Waterloo, Ont.-based Manulife Securities International Ltd. With its acquisition of Burlington, Ont.-based Berkshire-TWC Financial Group Inc. this past summer, it acquires Berkshire Securities Inc., an Investment Dealers Association of Canadamember firm. Berkshire Securities will be renamed Manulife Securities Inc. next month.

Advisors at the dealers in the survey are following that trend by becoming securities-licensed; 19% of advisors surveyed this year are securities-licensed, compared with 15% in 2004.

“This is being driven by advisors,” says Dan Richards, president of Toronto-based Strategic Imperatives Ltd. “As they tackle the top end of the market and compete against full-service brokers more and more, they’re feeling the need, from a credibility perspective, to be able to say, ‘Look, I can do anything that anyone else can do, but the reason I’m recommending funds is because this is what makes sense for the moment’.”

Advisors who previously sold only mutual funds report that their businesses have improved as a result of getting their securities licences. When they are better able to take care of all of their clients’ financial needs, says Richards, it changes the dynamics of the client/advisor relationship for the better — and advisors feel more confident about approaching tax or insurance planning specialists for support.

Beyond allowing advisors to grow their businesses and serve their clients better, the increased number of advisors with securities licences is also due to higher fees levied by the Mutual Fund Dealers Association of Canada. The cost of belonging to an MFDA member firm is a lot closer to the cost of belonging an IDA member firm now than it used to be; the monetary disincentive for joining the IDA platform is shrinking.

GREATER ACCESS TO FUNDS

The word is spreading, says Richards, and it’s leading to more advisors obtaining their securities licence. “Anecdotally, advi-sors are hearing from their IDA-licensed colleagues about all of the client funds to which they now have access that weren’t available previously,” he says. “Or, perhaps, they got referrals that they felt they wouldn’t have gotten previously, and that has accelerated the momentum.”

In lockstep with the increasing number of advisors with securities licences is the declining percentage of advisors with mutual fund licences. Ninety per cent of advisors at the dealers surveyed this year have a mutual fund licence. This is a steep decline from 2004, when 97% of advisors possessed a mutual fund licence.

On the designation front, financial planning designations are also following this pattern. (The first time advisors were asked which designations they held was in 2004.) Not even the certified financial planner designation has been spared. The percentage of advi-sors holding a CFP has dropped to 44% in the 2008 Report Card, from 54% in 2004. The percentage of those holding the registered financial planner designation fell to 4% this year from 7% in 2004, and the percentage of those who have completed the professional financial planner course has plummeted to 1% from 10% four years ago. IE didn’t ask advisors in 2004 whether they completed the personal financial planner program, but only 2% of advisors surveyed this year have. (Combined, the total percentage of advisors holding either related designation totals 3%, which is still a steep decline from 2004.)

Richards finds the drop in designations held surprising. “I would have thought that with the move toward full service,” he says, “the financial planning designations would’ve gone up.”

@page_break@And, given that many executives are touting their companies’ comprehensive wealth-management strategies and financial planning approach, Richards would be justified in thinking that.

As Rick Annaert, president and CEO of Manulife, says: “First and foremost, our ideal advisor is someone who takes a planning approach to meeting his or her client’s needs — someone who is not transactional.”

However, firms such as Manulife are also emphasizing independence and giving their advisors the ability to assess how best to meet their clients’ needs. So, even though obtaining financial planning designations is strongly encouraged, firms are not forcing certification on anyone.

If anything, the decline in financial planning designations can be tied to the increasing number of advisors who are shifting to the IDA platform as their dealers adopt a full-service approach.

Hand in hand with firms recognizing the need to offer a greater suite of products and services to meet clients’ increasingly complex needs comes the realization that only experienced advisors will be able to judge what’s best for their clients. Thus, many of the mutual fund and full-service dealers are wooing experienced advisors only.

“Typically, we look for experienced advisors,” says Annaert, “with the ideal book between $25 million and $40 million. We don’t hire new grads from university.”

Likewise, Chris Reynolds, president of Mississauga, Ont.-based Investment Planning Counsel, says only top producers are welcome at IPC. “We don’t hire rookies because we don’t have the infrastructure to train them,” he says. “Our entire infrastructure is to help experienced advisors build their businesses. Generally, we hire those aged between 35 and 50; we like to get at least 10 years out of them.”

EXPERIENCED REPS ONLY

This demand for more experienced advisors with bigger books of businesses is reflected in this year’s Report Card. For instance, the average book of business has $23.7 million in assets under management vs $18.3 million in AUM in 2004. The larger book value correlates with advisors’ years in the industry, which increased by an average of five years from 2004.

For IPC, more and more of its experienced, top-producing advi-sors are women. Even though the number of women surveyed in the mutual fund/full-service dealer world has gone up by just 2% in the past four years, to 17% from 15% , IPC was one of three firms — along with Montreal-based Peak Financial Group and Mississauga-based PFSL Investments Canada Ltd. — that saw significant gains in the percentage of women advisors on staff during this four-year period.

PFSL’s percentage of women surveyed rose to 28% this year from 21% in 2004; Peak’s percentage increased to 19% from 14%; and IPC’s advisor roster now consists of 5% women — a stark difference from 2004, when none were surveyed.

“The number of female advisors has gone up,” Reynolds says. “But not through any real program or target on our part. We only recruit veteran advisors — and more and more of them are female.”

Reynolds also praises the particular talents of women advisors: “We find that female advisors are excellent with clients. They tend to be more empathetic to client needs and really take time to listen to their goals and objectives.” IE