Back-office performance isn’t usually a deal-breaker for most advisors contemplating a change of scenery. However, considering its importance to the way advi-sors conduct their daily business, maybe it should be.
In the more than 635 interviews conducted for this year’s Brokerage Report Card, a couple of dozen advisors remarked that back-office performance was possibly the worst thing about their firm — once again showing that if a firm is not getting the basics right, advisors will punish it. On the other hand, just once did an advisor name back-office service as the best thing about the firm.
It’s also worth noting that even though back office traditionally fell within the “technology” category in previous Report Cards, this year advisors were asked to score their employers on their back office after considering a broader set of criteria, including: dividend distributions, interest posting, trade reconciliation, payroll, benefits and the whole gamut of support advisors receive behind the scenes.
Many advisors acknowledge that when administrative tasks such as these are botched, they don’t deal with them directly. Instead the work falls into the laps of their assistants. “There is difficulty with administration all the time. And it’s not really me who has to handle it, but my assistant,” says one RBC Dominion Securities Inc. advisor who speaks for many in the survey. “I can imagine how frustrating that must be.”
In any case, with the opportunity to judge so many systems, the scores were bound to suffer. The question struck a nerve, and the overall performance average for this category dropped by 0.8 — the biggest drop of any category in the survey.
As one might guess, the trouble lurks mostly within the bureaucracy at the bank-owned firms, for which, on average, scores dropped by 1.4. In contrast, the score dropped by an average of less than 0.3 among the national independent brokerages, the regional firms and the boutiques combined.
Advisors at BMO Nesbitt Burns Inc. led the verbal attack on their back office. “It’s our Achilles heel,” says one advisor in Toronto, who gave the firm a score of 3.0 out of 10. “It’s all about that Dilbert-style buck passing. If I knew who was in charge over there, I would send them an e-mail; but no one is accountable.”
Adds a colleague in Ottawa: “It’s inefficient. They lose documents. It’s frustrating.”
At the largest brokerage, by advisor count, DS — for which the score slipped by 0.9, to 7.6 from 8.5 — advisors echoed that theme. For instance, a DS advisor in southern Ontario says the firm’s back office works with peculiar and “inadequate” methods, while another yearns for the day when paperwork and administration is all au-to-mated: “Technology will help with this, so only time can make it disappear.”
At National Bank Financial Ltd. — for which the score dropped by 1.4 to 7.3 from 8.7 — one advisor in Montreal tried to describe how back-office administration affects his business: “They take the clients for granted. I don’t know if it’s upper management or just our back office.”
Although advisors complain about back-office support, they are sensitive to the potential cause of the problems. Advisors say that it’s not the employees that are the cause; it’s upper management, which refuses to pay for talent.
Advisors often acknowledge that their back-office staff may work hard, but, ultimately, they’re not paid well enough to produce — or even to stick around the job long enough to develop an expertise in the area. In Calgary, for example, where wages at even the local Tim Hortons franchises are the highest in the country, second-rate wages at the brokerages are not providing enough of an incentive, says one advisor: “More support staff are needed, and they need a higher level of pay because the turnover is so high. We lost a lot of support because they can find another job for $10,000 to $15,000 more per year.”
Dozens of advisors at many of the bank-owned brokerages also suggest that their firms invest more in back-office personnel. “There is an extremely high turnover rate because they do not pay these employees enough,” says a DS advisor in Ontario.
Recent cuts to the administrative arm at Nesbitt were also a sore spot for advisors. “We’re always cutting costs here, squeezing costs there,” says a Nesbitt advisor in Alberta. “It’s typical bank behaviour.”
@page_break@The same sentiment is found at TD Waterhouse Private Investment Advice — at which advisors complain about playing second or third fiddle to the parent’s retail branch network and the discount brokerage in many categories. “Our back office has been underinvested, and we’ve had to piggyback off the TD discount brokerage,” says one advisor in Nova Scotia.
Although executives at Nesbitt and CIBC Wood Gundy declined to be interviewed for this year’s Brokerage Report Card, Mike Reilly, president and national sales manager at TD Waterhouse, addressed the reasons for his firm’s lower score.
Reilly admits that the brokerage is probably short-staffed, and he points to the firm’s rapid growth as the reason for this. Since 2004, the firm’s registered advisor count, including assistants, has grown to 625 from 400, while assets under administration have just about doubled to $50 billion.
“There are going to be growing pains associated with that,” Reilly says. “The fact is we are putting more resources into the back office, we are putting more technology in the back office, we are looking at upgrading what we have. But we are dealing with a massive growth spurt while we’re doing that.”
At independent firm Canaccord Capital Inc. , new hires are required to train for some time in the back office so that they appreciate the importance of the role. One advisor in a Calgary office remarked that underpaid and overworked administrative staff was probably “an industry-wide problem. We need highly trained people here.”
In addition, some advisors also pointed to language difficulties. Many advisors across the bank-owned brokerages complained of poor English language skills in general among administrative support staff. Anybody who has ever tried to learn technical and business diction in a new language should understand their plight. The business world in general and the investment world in particular are jammed full of jargon.
The same problem now applies to the independents as well. At Raymond James Ltd. — which had a solid score of 8.2 even after a drop of 0.7 from 2006 — one advisor remarked that back-office help had not grown commensurately with the firm.
At ScotiaMcLeod Inc. — the perennial loser in this category — the low back-office score of 6.6 was undoubtedly dragged down along with technology tools, which scored a lowly 5.4.
Hamish Angus, head of Scotia-McLeod, admits each year that the firm’s systems are poor — then strikes a tone of optimism about spending and improvements for the year ahead. This year was no different: Angus says the firm has spent $30 million over the past three years and is now in the final phase of developing a system that will soon be implemented.
“We started from a total improvement in the pipeline, and the advisor platform hits in May, June and July,” says Angus from the firm’s head office in Toronto. “The key to making sure we have high scores next year is ensuring the training is appropriate; and we have a variety of initiatives that will make that happen.” IE