When something is bigger, the usual assumption is that it’s better. But according to this year’s Brokerage Report Card, bigger doesn’t mean better. That’s especially true at the bank-owned firms. In fact, as the banks start to mould, influence and create uniformity among brokers, the old collegial style of brokerages is fast disappearing.
Many of the brokers who took part in our survey didn’t hesitate to tell us that the bank’s influence, apart from the stability it provides, is often hurting client relationships and morale.
Many brokers at bank-owned brokerages say the work atmosphere has been damaged because of “bureaucracy” and “inflexibility.” According to a broker at ScotiaMcLeod Inc. in the Prairies, the brokers are not given top priority. “The bank excludes the ScotiaMcLeod guys. For example, the most recent ad for RRSPs in the newspapers talks about Scotiabank but never the brokers.”
Brokers at other companies echoed the sentiment. “CIBC’s priority is not CIBC Wood Gundy,” says a Toronto broker. “Its priority is building the bank.”
The biggest morale concern seems to be the inability to connect with upper management, a problem some independent firms seem to have succeeded in avoiding. Brokers at independently owned Canaccord Capital Corp., rated No. 1 in last year’s Report Card and No. 3 this year, say that one of the company’s best attributes is that it maintains an open-door policy to management.
“We, as management, truly believe we work for the brokers; they don’t work for us,” says Bob LaRose, Canaccord’s national sales manager in Vancouver. “Our chairman’s office is always open. If someone has a problem they can go in at any time and we listen to what they have to say. If it’s feasible, we’ll take care of the complaint.”
Canaccord brokers seem to agree. According to a Vancouver advisor, the firm has a nimble, small shop, with an easy-access management style. “And we’re stealing a lot of brokers from bank-owned firms, too. I can still knock on [CEO] Peter Brown’s door any time and he’ll listen to what I have to say, and get something done if necessary. You could never get that done in a large, bank-owned firm — too much bureaucracy,” he says.
Another independent, Edward Jones, which ranked No. 1 this year, also prides itself on being broker-friendly.
“I used to work at a bank and they would focus on the 2% or 3% of things I did wrong,” says Bruce Paziuk, an Edward Jones investment representative in Kamloops, B.C. “Edward Jones concentrates on what you do right, it uses a lot of positive reinforcement.”
He adds that, unlike the banks, at which accessing management is only possible after exhausting numerous channels, he can phone any of the managers at Edward Jones.
“The support is tremendous,” agrees another Jones advisor in Coquitlam, B.C.
Some brokers at Merrill Lynch Canada Inc. also told IE that an unfortunate thing about getting bigger is losing the personal touch and not knowing the person who is sitting beside you. That may be the reason many believe client relationships are suffering as firms get bigger.
“However, the big firms do a lot of things right. [Merrill], for example, wants a certain type of broker, and because it’s so big, if a broker doesn’t like it and leaves, it’s all right with [Merrill Lynch],” says LaRose.
The bank-owned brokerages’ main problem, says one broker at RBC Dominion Securities Inc. in Nova Scotia, is that they are too cost-conscious, always looking for ways of reducing expenses rather than expanding revenue. “They are short-sighted and spend very little on establishing long-term relationships, which I think is silly.”
Being client-focused is definitely a buzzword in today’s investment industry, but are the banks listening? They don’t seem to be, according to many brokers. One DS broker in Toronto says the banks leave clients feeling stonewalled.
“They just changed the commission schedule. There’s been an increase in commission for clients doing larger orders.
“I change the schedules myself, take a hit and tell clients nothing. It seems such a short-term, knee-jerk kind of approach,” he says, adding that because the bank has continually lowered the rates it pays for cash in accounts, it forces clients not to leave money with the brokers.
“They used to pay good rates and clients felt happy leaving their money in cash accounts. Now I spend half my life rolling over T-bills.”
Whether at independent or bank-owned brokerage houses, brokers seem to agree that banks need to improve lines of communication between management, broker and client.
“I would like the banks to be more client-focused and to involve us more in decisions,” one Toronto-area DS broker says. “If we’re going to survive, we have to protect the relationships we already have.”