Rolling stones may gather headaches

Next thing he knows, the chain’s head office decides he should take an office a number of blocks further away from downtown, where the overhead will be less and he will be able to generate a profit faster. The broker does as told, but while the rent is cheaper in his new area, he has also lost all his marketing momentum in the downtown part of the city, and must start his business from scratch.

Chances are that given the massive upheavals in the brokerage industry in recent years, you’ve either moved firms yourself or have heard stories of what moving can entail. Still, you can’t shake the excitement of new opportunities. Investment Executive decided to ask brokers what they thought about movement within the industry. Some of the answers were surprising.

Some brokers at the 10 national investment dealers polled said that moving was not an issue. “If you build your business right, you have control of your book, which makes moving possible,” says an RBC Dominion Securities Inc. broker in Timmins, Ont. “My clients deal with me first, then the firm.”

A National Bank Financial Inc. broker in Montreal describes moving as “a piece of cake. I have built all my relationships with clients up from Day 1. If I moved, 95% of my book would move with me.”

Why, then, are the vast majority of the comments so negative, and the grades for moving so low? On a scale of one to 10, with 10 meaning a lot of freedom to move, the average score was 5.9. This was significantly lower than scores in most other categories.

“Moving’s a nightmare,” reports one National Bank Financial broker in Edmonton. “When you move, you lose 30% of your clients,” says a BMO Nesbitt Burns Inc. broker in Halifax. Another Nesbitt Burns broker in Ottawa adds, “Takes three years to get your book back together and there’s not much difference between the firms. It’s not worth it.”

Not only do brokers report a reluctance to move, but there’s a sense that moving is becoming more difficult logistically. “I’ve done it once before, and I’d say it is getting harder every year,” says a Merrill Lynch Canada Inc. broker in northern Ontario. “It puts you back two years on average.”

“Moving is very difficult. I went through it once, going from Midland to Evergreen, and I reckon it is even harder now,” says a TD Evergreen Investment Services Inc. broker in southern Ontario.

Many brokers attributed the difficulties of moving to being at a bank-owned firm, or having to cope with a “bank-owned mentality” in the industry. “A lot of the clients I have now are tied to the bank,” says the TD broker.

It is not only bank-owned brokers who are experiencing tied-down clients. One Goepel McDermid Inc. broker in Alberta described moving as: “Easy for me; tough for my clients – so tough for me.”

How did the industry go from a situation in which brokers could move freely, confident their clients are their own, to one in which brokers, along with their clients, are tied to the mother firm?

The answer may be that with the shift to fee-based or managed-money products rather than stocks or bonds, many brokers believe their clients have more invested in the firm than in their relationship with an individual broker.

A Goepel broker in eastern Ontario spells out the problem succinctly. “I moved from Merrill and it was a lot of work,” she says. “Every single mutual fund position had to be moved over manually. It was a nightmare.”

Moreover, many brokers at bank-owned firms are coming to rely more on the bank referral system to find clients. Asked to evaluate the support he gets from the firm to do his own marketing, a TD broker from Toronto says he never uses it and doesn’t count on it.

“I think the bank advertises well, though,” he continues. “Great organization, and the referrals come from the bank.”

Relying on the referral system ties investment representatives ever more closely to the firm’s bank owners. That, in turn, makes it even harder for brokers to get up and leave.

Despite the hurdles – your firm-referred clients are investing in the firm’s products, you’ve been dealing with firm-friendly fund companies for as long as you’ve been in business, and there is no end in sight to the paperwork if you choose to go – you still believe broker paradise lies somewhere over the horizon.

Don’t despair. According to a TD Evergreen broker in Toronto, with resolution and planning anything may be possible.

“If you plan the move [well] in advance, it is OK,” he says. “The impact on your business is huge. The first four months are concentrating on bringing your book over, and the first year is written off. But I figure it was worth it. I’m seeing the payoff now. And I love the 70/30 payout!”

A Goepel McDermid broker from Alberta shares the sentiment that being where you want to be is what counts.

“I’m a gorilla. I can sit anywhere I like, and I choose to sit here,” he says.