On the surface, the financial advisors surveyed for Investment Executive‘s (IE‘s) 2012 Report Card series seem to be faring well in today’s post-financial crisis environment, reporting growing books of business and heftier pocketbooks. That said, these same advisors are growing disillusioned with their firms; they are starting to place higher importance on certain key areas, but remain disappointed by the performance of their firms in these categories.
This is evident in the gap between the “overall importance rating” that advisors gave each category and the performance rating they bestowed upon their firm. When the importance and overall performance scores from all Report Cards were averaged, “technology tools and advisor desktop,” “firm’s total compensation packages and “firm’s marketing support for advisor’s practice” had the most notable satisfaction gaps.
In particular, compensation remains a touchy subject, with many advisors taking major hits over the past few years. (See story on page C8.) Says an advisor in Ontario with Toronto-based Assante Wealth Management (Canada) Ltd.: “They reduced our commission grid during the recession, and they haven’t made any effort to return it to where it once was.”
Adds an advisor in Quebec with Vancouver-based Canaccord Wealth Management: “The compensation system has changed from being a gridless one to one in which we’re now on a grid. And this, in effect, has lowered our payouts. They don’t factor in that we’ve had to discount fees for clients in order to maintain strong relationships.”
Concern with outdated software
Advisors also are quick to point out the numerous glitches they encounter when it comes to technology. Outdated software and slow internal systems repeatedly are brought up by advisors as issues that not only affect how they run their businesses but also how they communicate with their clients. Says an advisor in British Columbia with Toronto-based Macquarie Private Wealth Inc.: “Our remote access is lacking, and not all of our systems are up to date.”
With firms still struggling to keep their technology up to date, advisors may be in for a bumpy ride in the next few years. Although there have been many changes over the past several years, few have evolved at such a fast pace as the new world of mobile devices and social media.
The introduction of mobile technology has created the launch of the mobile advisor, with handheld digital devices becoming the new equivalent of the briefcase. In fact, BlackBerry and iPhone smartphones have become essential for many advisors, while tablets such as iPads not only are being gobbled up by advisors but by clients as well. “Thanks to the firm’s offering and support of mobile technology,” says an advisor in Alberta with Montreal-based National Bank Financial Ltd., “advisors are given more freedom in how they operate their businesses. We have such great remote access that we are able to work right from home.”
The new online interaction that social media allows also has enhanced the strategic opportunities for advisors in marketing and prospecting for clients. Says an advisor in Alberta with Canaccord: “My marketing department has given me great support in helping me create my own blog, as well as allowing us to use LinkedIn for prospecting.”
In order to reflect the trends in the financial services industry better, IE has added two new questions to the Report Card questionnaire that address these changes directly. Last year, advisors were asked to rate their firm’s “support for mobile technology and the mobile advisor” as well as their “firm’s focus on social media” for the first time. However, because of low responses in the social media category in 2011, those ratings were not published.
That changed this year, as there was a noticeable increase in responses; it’s evident that advisors and their firms are starting to realize that the nature of communication – especially with clients and potential clients – is shifting rapidly.
‘We think technology plays a huge part in the business,” says Earl Evans, CEO and head of Macquarie. “The No. 1 thing in our industry that can be a firm’s biggest strength or weakness is communication. The baby-boomer market is very savvy, in terms of the technology side of things. So, we embraced it very quickly.”
Although some advisors are elated at the idea of being connected to their colleagues and clients with a tap on a handheld device, many advisors still are not convinced that these devices or tools can add any real value to their business. In fact, most firms also are slow on the uptake, with only a handful stepping up as industry leaders and staying ahead of the curve in this matter.
Toronto-based DundeeWealth Inc. stood out in this year’s Dealers’ Report Card in the mobile technology category. The firm saw a major increase in its performance rating, rising to 8.4 from 7.6 last year. Currently, the firm has more than 700 advisors actively using iPads to interact with their clients. (This includes conducting transactions through a Dataphile-based application.)
“We made this decision a couple of years ago, and there’s a lot of reasons why we believe [the iPad] is a good way to go,” says Richard McIntyre, executive vice president and head of retail at DundeeWealth. “Advisors find the usability of the iPad just incredible. And, given that Canada is such a massive country and we have snowbirds [as clients], advisors now can keep in contact with clients on a much more frequent basis. It’s a very secure way to do business from anywhere you want to be.”
Other additions to this year’s Report Card surveys were two new questions that look at a firm’s communication with its advisors, an area of concern that advisors surveyed in years past had brought up continuously with researchers. So, this year, advisors were asked to rate their “firm’s effectiveness in keeping advisors informed” and their “firm’s receptiveness to advisor feedback.”
Within the support services section, new emphasis was placed on wealth-management support services, so two new questions were added: “support for developing an investment plan for clients” and “support for overall wealth-management process.”
The 2012 Report Card surveys were conducted over a six-month period beginning in early January. This year, IE researchers Brent Jolly, Shivan Micoo, Johnna Ruocco and Gian Verano spoke with 1,745 advisors at 42 firms. Advisors were asked to give two ratings for each Report Card category: one for their firm’s performance in the area and another to quantify the importance of that category to their businesses. Ratings were based 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 for each category, for both each firm and for the entire Report Card. A firm’s “IE rating” indicates the average of all categories for which the firm was rated; the “overall rating by advisors” is the rating out of 10 that advisors gave their firm as a whole, on average.
Greater importance on key areas
The results are published in a four-part series: the Brokerage Report Card, the Dealers’ Report Card, the Report on Banks and Credit Unions, and the Insurance Advisors’ Report Card. Across all four channels of the financial services industry, there are many similarities in what advisors value most. “Firm’s stability,” “firm’s ethics,” “freedom to make objective product choices” and “firm’s delivery on promises” are always among the top-rated categories in both performance and importance – and advisors are placing greater importance on these areas now more than ever.
It’s in these key areas that the top-rated firms excel, and their advisors praise these firms for providing security during these shaky times. Mississauga, Ont.-based PFSL Investments Canada Ltd., Toronto-based Richardson GMP Ltd., and Calgary-based PPI Solutions Inc. once again stand out among the firms surveyed, with top ratings in their respective Report Cards in the “firm’s strategic focus,” compensation and technology tools categories. Not only are these firms listening to their advisors’ needs, they also are following through on what they say they are going to do.
Almost three years after the merger of Richardson Partners Financial Ltd. and GMP Private Client LP, Richardson GMP advisors are more than happy with the result. Says a Richardson GMP advisor in Alberta: “They’ve done a good job integrating the offices and bringing together the two cultures.”
Advisors with PPI Solutions also are seeing positive results after their former firm, Financial Management Group of Cos. Inc., entered into a partnership with PPI Financial Group Inc., now PPI Advisory. (See story on page C6.) “Jim Virtue has a very good handle on the [managing general agency (MGA)] business,” says a PPI Solutions advisor in B.C. “And he is doing what he is doing to position PPI Solutions as the key MGA in Canada.”
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