Firms given a wake-up call

“A lot of our systems are outdated. We have a history of developing our own software in-house and making it a complete disaster,” says an advisor on the Prairies with Toronto-based CIBC Wood Gundy. “A horrific amount of money has been spent on systems that don’t work.”

On the plus side, the average book of business is now up to a new Report Card high of $113.7 million vs the previous record of $101.8 million in 2014.

Not surprising, these bigger books have translated into bigger paycheques, with 26.2% of advisors reporting annual compensation of $500,000-$1 million vs 18.7% a year earlier. Similarly, 19.2% of advisors said they earned more than $1 million this past year vs 10% of advisors in last year’s survey.

However, in a clear sign that advisors feel work remains to be done, they offered many complaints about their firms’ compensation structures. “We always want more,” says an advisor on the Prairies with Toronto-based Richardson GMP Ltd. “[Compensation could be] less complicated, a little more straightforward.” (See story on page C10.)

As well, the sources of AUM and pay are changing, with 61.2% of advisors reporting an increase in their fee-based business vs 57.8% in 2014. Furthermore, in advisors’ product distribution, equities and bond holdings rose, as did exchange-traded funds; mutual funds were flat and managed products were down notably. (See page C6.)

Although advisors feel more comfortable with the nature of their individual businesses, firms shouldn’t rest on their laurels. Instead, significant satisfaction gaps – which occur when the overall average importance rating is much higher than the overall average performance rating, in the “delivery on promises,” “firm’s image with the public” and “technology tools and advisor desktop” categories – reveal that brokerages still have much work to do to satisfy their advisors.

Richardson GMP, for example, saw its public image rating drop to 7.6 from 9.3 last year. Many of the firm’s advisors expressed frustration that the firm’s brand is not recognized by prospective clients.

“[The public doesn’t] know who we are,” says a Richardson GMP advisor in Ontario, “If I tell someone I don’t know very well that I work at Richardson GMP, they’re usually too polite to say, ‘What’s that?’; but I know that’s what they’re thinking.” (See page C12.)

“Firm’s total compensation” and public image are two of the seven categories in which Richardson GMP saw its ratings drop by half a point or more. (This is in addition to the firm’s “overall rating by advisors,” which dropped to 9.1 from 9.6 year-over-year.) One issue that came up consistently for this firm was the growing pains associated with the acquisition of Macquarie Private Wealth Inc. in 2013; this is the first time IE surveyed advisors who made the transition to Richardson GMP as part of that deal.

Advisors with Mississauga, Ont.-based Edward Jones similarly were dissatisfied with their firm. The independent brokerage saw its ratings drop by half a point or more in 12 categories – the most among any firm in the Report Card – including total compensation, “firm’s receptiveness to advisor feedback” and delivery on promises. (The firm’s overall rating also dropped by more than half a point.)

However, Edward Jones was not the only firm with which advisors expressed dissatisfaction regarding delivery on promises. And, for many of these firms, this dissatisfaction often was tied to perceived issues with management. More specifically, advisors said their firms can’t deliver on their promises when there’s lots of turnover among upper management. (See page C12.)

One firm that has seen such turnover lately is Toronto-based BMO Nesbitt Burns Inc. In November, Charyl Galpin become sole head of the firm, which has seen other changes in senior leadership over the past two years. In 2013, senior management was pared down to four regions from 12 divisions and, more recently, the firm formalized its assistant branch manager role across Canada.

“Some of our leadership had been in place for quite some time and were looking to step down out of their roles and just become investment advisors,” Galpin says. “So, it created an opportunity for us to refresh our leadership team.”

As a result of these changes, Nesbitt advisors rated their “firm’s stability” at 8.4, down from 9.1 a year ago. “There have been a lot of changes in management since I’ve joined,” says a Nesbitt advisor in Ontario. “It’s a bit much to keep up with.”

As in past years, firm’s stability, along with “freedom to make objective product choices” and “firm’s ethics,” are the categories that are most important to advisors. Vancouver-based Odlum Brown Ltd.‘s advisors, for example, appreciate their firm’s history in the community and rate the firm’s stability at an almost perfect 9.9.

“Odlum Brown has been around for 90 years, and it has not gone astray on its core values,” says an Odlum Brown advisor in British Columbia.

Meanwhile, having the freedom to choose any product for clients keeps advisors happy and contributes to their overall opinion of their firms’ corporate culture.

“We have complete freedom, and there’s an excellent culture at both the branch and firm level,” says an advisor in Ontario with Toronto-based Raymond James Ltd. “It’s a warmer, fuzzier feeling here than at bank-owned firms.”

That sentiment was clear in Raymond James’ ratings this year, which rose by half a point in 11 categories – the most among any firm in the Report Card.

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