Advisors look to the future

“[We have] all-around good access to really good support – technology, everything; the whole nine yards – that can help you build a really good business,” says an advisor on the Prairies with Toronto-based RBC Dominion Securities Inc.

Although there’s always room for improvement, most advisors surveyed for this year’s Report Card series believe their firms deliver in the categories that matter most to them. Cases in point: the “firm’s ethics,” “freedom to make objective product choices” and “firm’s stability” categories received the highest overall average importance and performance ratings yet again.

In regard to the freedom to sell certain products, advisors believe they can pull any desired item from their firm’s product shelf. Furthermore, advisors also gave high praise to firms that constantly restock their shelves with products that can meet clients’ changing needs.

“[My firm] is always searching for new offerings for us to help serve our clients better,” says an advisor in Alberta with Calgary-based Portfolio Strategies Corp.

Even as companies revamp their products, regulators are considering several major reforms that could have a big impact on advisors’ businesses. To that end, the surveys for this year’s Report Card series included a supplementary question asking advisors if they were in favour of the Canadian Securities Administrators’ proposal to introduce a “best interest” standard to the rules governing the client/registrant relationship.

In response, 74.1% of advisors surveyed across all four of the distribution channels included in the Report Card – brokerages, mutual fund and full-service dealers, banks and insurance agencies – said that they do agree with the implementation of such a standard. Some advisors said they agreed with the proposal because they believe it’s time to create a more professional investment industry. Other survey participants said they already act in the best interests of their clients and would like to see an even playing field.

“[Adhering to such a standard] is how we operate today, so I think everyone should be operating that way anyway,” says an advisor in Alberta with Toronto-based Richardson GMP Ltd.

Should a best interest standard be adopted, or any other regulatory reforms for that matter, advisors are confident their firms will help them prepare for the changes. Advisors gave their firms an overall average performance rating of 8.6 in the “support for dealing with changes in the regulatory environment” category, signalling that most advisors are happy with their firms’ support in this category. By and large, advisors praised firms that proactively provide relevant communication and training in new regulations.

“[Hub Financial Inc.] holds seminars and bring [experts] in for them,” says an advisor in Ontario with the Woodbridge, Ont.-based managing general agency (MGA). “The firm has always been devoted to ongoing education.”

As a result of the major regulatory reforms that have been and others still likely to be introduced, the cost of doing business has increased substantially. In turn, several firms included in the Report Card series are shifting their focus increasingly toward more profitable client relationships.

This year, survey participants were asked in another supplementary question if their firms encourage advisors to drop the smallest clients from their books of business. Advisors with brokerage firms were the only ones who overwhelmingly answered in the affirmative, citing regulatory changes and the rising costs of doing business. For the time being, advisors with mutual fund and full-service dealers, banks or insurance agencies are happy to take on those smaller clients – although some of these advisors worry they may have to follow suit.

“If [regulators] get rid of trailer fees, [the business] may go that way,” says an advisor in Ontario with Markham, Ont.-based Worldsource Wealth Management Inc. “It’ll probably be another year or two before that actually happens.”

Regardless of the client account sizes advisors serve, access to productivity-enhancing technology is key. Unfortunately, getting technology tools right is no small feat for most of the firms included in the Report Card series. In fact, the 1.5-point difference in the overall average performance rating (7.5) and the overall average importance rating (9.0) in the “technology tools and advisor desktop” category represents the second-largest “satisfaction gap” in the Report Card series.”

Yet, some advisors acknowledged the investments their firms have made in technology and gave their company credit for it. Case in point: advisors with Mississauga, Ont.-based Edward Jones gave their firm the highest rating overall (9.3) in the technology category and had many positive things to say about how their firm helps them serve their clients.

“The technology is excellent, [as is] the desktop. We have all these systems that we can [use to] check if we’re in line with [clients’] goals,” says an Edward Jones advisor in Ontario.

Advisors appreciate firms that make such necessary investments in the business, and just as crucial is knowing what’s going on at both the firm and the broader industry. Firms with strong ratings in communication-focused categories, such as “firm’s effectiveness in keeping advisors informed” and “firm’s receptiveness to advisor feedback,” tended to have higher IE ratings and overall ratings by advisors.

(The overall rating in each Report Card is a score that advisors’ give their firm, as a whole, on a scale of zero to 10. The IE rating is the average of all the ratings advisors gave their firm in the categories included, excluding the overall rating.)

“Every Tuesday, I get an update on what’s going on in the industry and [the MGA],” says an advisor in Ontario with Mississauga, Ont.-based IDC Worldsource Insurance Network Inc., which received high performance ratings in the communications categories and overall. “I like that.”

HOW WE DID IT

Investment executive’s (ie) annual Advisors’ Report Card provides an opportunity to take a step back, look at the big picture in the financial services sector, and explore the issues affecting financial advisors across the sector’s key distribution channels.

Specifically, this Report Card aims to make sense of the major themes and trends affecting the 1,753 advisors at 38 firms surveyed for the Brokerage Report Card, the Dealers’ Report Card, the Report Card on Banks and the Insurance Advisors’ Report Card combined.

To get a better sense of how these advisors feel about their firms’ efforts in a variety of important categories, IE research journalists Latifa Abdin, Sophie Allen-Barron, Charles Bossy and Jennifer Cheng asked each survey participant to give two ratings in each category: one for their firm’s performance and the other for the category’s importance to that advisor’s business.

Advisors provided ratings based on a scale of zero to 10, with zero meaning “poor” or “unimportant” and 10 meaning “excellent” or “critically important.” To provide context to these ratings, advisors were also asked to explain the reasons for providing those ratings.

In addition to gauging how advisors feel about their firm’s efforts, IE also asked advisors to provide their thoughts on two major trends affecting the financial services sector in two supplementary questions added to this year’s Report Cards.

One question asked advisors if they favour the Canadian Securities Administrators’ proposal to introduce a “best interest” standard to the rules governing the client/registrant relationship.

The second question asked survey participants if their firms encourage advisors to drop their smallest clients from their books of business; if so, advisors then were asked what the cut-off threshold applied to the minimum client account size that advisors could take on.

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