Firms rebound in a big way

“I like that the bank matches a nice percentage on the retirement side,” says an advisor in Alberta with Toronto-based TD Canada Trust.

Adds an advisor in the same province with Montreal-based National Bank of Canada: “Most people don’t even have pension plans these days, so we’re very lucky in that regard.”

Even though the average book of business has shrunk and compensation levels have remained stagnant from last year, advisors in this channel are reporting an increase in the number of client households they serve. As well, despite 34% of those advisors’ books still sitting in cash, advisors are seeing increased movement of client assets to mutual fund products. (See story on page 1.)

What also stands out in this year’s Report Card results is that every firm received a rating of 8.0 or higher in both the “IE rating,” which is the average of all the ratings advisors gave their firms, and the “overall rating” that advisors gave their firms.

There are several reasons for this, but the stability that these firms provide to their advisors is key. In fact, “firm’s stability” received the second-highest overall average performance rating in the survey, at 9.4, and remains among the top three in importance for advisors. Advisors at both the banks and the CUs praise their firms as being stable places to work with strong brand names behind them. Royal Bank of Canada (RBC), TD and Bank of Nova Scotia, all based in Toronto, continue to receive top ratings in both stability and “firm’s strategic focus.”

“I appreciate the stability, quality colleagues and a brand that is recognized and respected by Canadians,” says an RBC advisor in Ontario.

“Stability allows an advisor to focus on their clients’ needs,” says Paul Orlander, president of TD Mutual Funds. “Working in a stable environment removes any distraction or anxiety that a client might feel. It is a portion of the conversation that an advisor simply doesn’t need to have because there is an added level of confidence and trust that clients walk in with.”

And with the number of firms licensed by the Mutual Fund Dealers Association of Canada declining year after year, consolidation in that industry isn’t just affecting advisors; in fact, it also can leave clients feeling uncertain, says Michael Walker, vice president and head of branch investments with RBC.

“From both a client’s and an advisor’s perspective,” says Walker, “you want to ensure that if you’re entrusting your future and wealth to an advisor and to a firm, you want to make sure there’s security and stability in that firm and it’s going to be there for the long run. You want to make sure that it’s going to be making the investments, both to me as a client and to me as an advisor.”

That feeling of stability is a big reason why advisors with Toronto-based Canadian Imperial Bank of Commerce (CIBC) rated their firm higher this year by half a point or more in 26 of the 34 categories (including the “overall rating by advisors”) for which it received a rating in both 2014 and 2013, including stability, which rose by a full point to 9.4 from 8.4 in 2013.

“The stability of the bank itself goes a long way,” says a CIBC advisor in British Columbia. “We’re not a small player in the financial world, and the bank stands behind us in earning the client’s trust.”

Over the years, the concept of “stability” has grown in its definition and now often is switched interchangeably with “reliability,” says Annamaria Testani, National Bank’s vice president, national sales, intermediary business solutions.

“When you’re dealing with an institution that you consider safe,” says Testani, “it’s not just ‘Is my money safe and can I have access to it?’ but ‘Is it reliable in providing me a level of service that I expect? Are they diverse? Are they spending or investing in the right resources to provide me that level of service that I need?’ If you’re dealing with a firm that’s safe, you want everything.”

Although both CUs included in the Report Card have less financial heft and different corporate cultures than the banks, these CUs also saw their ratings improve dramatically over the past year. St. Catharines, Ont.-based Meridian Credit Union saw improvements in 31 categories, with 20 of those being half a point or higher. Edmonton-based Servus Credit Union Ltd. saw improvements in 22 categories, with 12 of those being half a point or higher.

“I need to have achievement and fulfilment every day in my job,” says a Meridian advisor in Ontario. “This is a culture of ownership, and it allows me to do what I do best without the pressure of selling proprietary products.”

Adds a Servus advisor in Alberta: “The most positive aspect of working here is the support you receive. You’re not doing this alone. The support and training you need is right here and there is always someone to help you.”

Without proprietary products, many advisors at the CUs praise their firm’s “freedom to make objective product choices” and the ability to recommend what’s in the best interest of their clients without the added pressure to sell specific mutual funds.

“Compared with the Big Five,” says a Meridian advisor in Ontario, “it’s great to not have to sell proprietary products and [still] have access to the top funds in Canada.”

Bill Whyte, senior vice president, chief of member services with Meridian in Toronto, is looking to expand that product offering. A recent pilot project will provide Meridian advisors access to products on the Investment Industry Regulatory Organization of Canada‘s platform.

“We did this because we are limited in certain things,” says Whyte, “such as the trading of equities, bonds and exchange-traded funds. I don’t see us moving everybody to the IIROC [platform]; but at the same time, we probably need the ability for members to have those needs met and to be able to provide somebody that can fulfil those [client] needs.”

How we did it

The financial advisors surveyed for this year’s Report Card on Banks and Credit Unions hold many different titles at the various deposit-taking institutions at which they ply their trade. They’re commonly known among clients as account managers, financial planners, customer service representatives, investment specialists – and on and on.

But while the various titles can get confusing, the common denominator among these advisors is quite simple: these advisors all possess a mutual fund licence and sell mutual funds to their clients at the branch level. As well, these advisors work within a compensation structure that relies upon a base salary plus bonuses. And although some of these advisors do receive commissions, they constitute only a small percentage of these advisors’ payouts.

These advisors thrive on working in a secure and stable environment that provides the necessary training tools and support services advisors need to serve their clientele successfully.

To get a sense of how these advisors feel about their firms, Investment Executive research journalists Scott Barber, Jacob Boon, Geoff Davies and Leah Golob spoke with 308 advisors at six banks and two credit unions. These advisors were asked to provide ratings for their firm’s performance in 36 categories, as well as rating the importance of each category to their business.

The 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 then were averaged for each category for the firms individually, as well as for the Report Card overall.

The “IE rating” is the average of all category ratings for each firm, excluding the “overall rating by advisors,” which is how advisors rated their firms overall out of 10.

© 2014 Investment Executive. All rights reserved.