The results of this year’s brokerage Report Card reveal two divergent trends.
On one hand, they show that it has been a promising year for financial advisors, as their books of business and take-home pay were up almost to pre-recessionary levels. On the other hand, the improved state of advisors’ individual fortunes did not necessarily translate into greater satisfaction with their firms. In fact, the ratings in this year’s Report Card show various degrees of satisfaction, which indicates that firms still have some work to do.
As an advisor in Ontario with Mississauga, Ont.-based Edward Jones, puts it: “[It’s a] great firm to work for; it’s just that everyone has areas that need improvement.”
Those areas became evident once advisors were asked to rate their firms’ support services. This year, there were some significant drops in the ratings for categories such as “support for helping clients accumulate assets for retirement” and “support for helping clients plan for post-retirement income.” (See main table on page C4 and story on page C12.)
Furthermore, advisors who value having access to their firms’ technology while they’re away from the office also were concerned with the mobile offerings available, leading to several lower ratings in the “support for mobile technology and the mobile advisor” category. (See story on page C12.)
These results, among others, were obtained by Investment Executive researchers Brent Jolly, Shivan Micoo, Johnna Ruocco and Gian Verano, who spoke with 608 advisors at 13 firms for this year’s Report Card.
Advisors were asked to give two ratings for each Report Card category: one for their firm’s performance in the area; another to specify the importance of that category to their business. 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 of the 37 categories, for both each firm and for the entire Report Card. The “IE rating” indicates the average of all categories for each firm. An additional category, the “overall rating by advisors,” is how advisors rated their firms out of 10, on average.
However, the ratings tell only part of the story. Edward Jones, for example, saw its ratings drop in a number of areas. Yet, its advisors indicate they are still quite happy with their autonomy and the firm’s ethics, although there were still common themes in what the firm could improve upon.
Says an Edward Jones advisor in Alberta: “[They] need to improve the high net-worth services [and] address the product selection available. There are a limited number of [investment] funds we can use for clients.”
Toronto-based Macquarie Private Wealth Inc. saw its ratings drop by half a point or more in 12 categories. But the majority of Macquarie advisors were pleased with their firm. Ratings were still reasonably high, and advisors are enthused about pending improvements to the firm’s technology platform. “Even on promises that have not yet been delivered, the firm is working on them,” says a Macquarie advisor in Quebec. “It communicates constantly about its progress.”
And because many advisors value communication and transparency from their firms, two new questions to that effect were added to the Report Card this year. Advisors were asked to rate their “firm’s effectiveness in keeping advisors informed” and their “firm’s receptiveness to advisor feedback.”
Another change this year was a new emphasis on wealth-management support services. Categories related to this field were grouped together into one section on the survey, and two new questions were added: “support for developing an investment plan for clients” and “support for overall wealth-management process.”
In contrast, the number of questions relating to products was reduced this year.
Still another change involved the participating firms. The Report Card has borne witness to mergers and acquisitions over time, and this year is no different. Last year, Montreal-based National Bank Financial Ltd. purchased the balance of the shares in Wellington West Capital Inc. it did not already own; as a result, the former Wellington West advisors surveyed this year were asked to rate NBF. And to reflect the new mix of advisors at NBF, only 20% of respondents were former Wellington West advisors. As well, this year’s ratings for NBF are compared with a weighted average of the 2011 ratings for the two companies.
On the whole, former Wellington West advisors felt good about the acquisition: 70% of those surveyed say they felt “positive” about the move; the remaining 30% were “neutral.” In fact, many say NBF has several advantages to offer. “It’s a well-established brand,” says a former Wellington West advisor in Manitoba about NBF. “There’s recognition on a national scale, and the technology is more advanced than at other firms.”
And according to Martin Lavigne, president of NBF’s wealth-management division, that technology will evolve further as NBF’s and HSBC Securities (Canada) Inc.’s platforms are integrated. (NBF also acquired HSBC Securities last year, subsequent to the Wellington West purchase.)
“Both firms had some tools that were better than NBF’s, and vice versa,” Lavigne says. “We want to make sure we have the best of both worlds. By 2013, we’re looking to have a consolidated desktop for all advisors.”
With the former Wellington West advisors happy with the amalgamation, it’s no surprise NBF’s ratings have held steady in the “freedom to make objective productive choices,” “firm’s stability,” and “firm’s ethics” categories, which always rate high in importance with all advisors. NBF advisors of all stripes share the opinion that their firm is well established and has enough resources, financial backing and flexibility in product offerings to give them peace of mind.
As for advisors at the other firms, many thought that having no sales pressure regarding product choice was paramount. “It’s the No. 1 theme of the firm. There’s no tricky way to encourage advisors to sell their products,” says an advisor on the East Coast with Toronto-based Raymond James Ltd., which had a rating of 9.8 in this category
Toronto-based bank-owned RBC Dominion Securities Inc. and CIBC Wood Gundy both saw their ratings in this category fall by half a point or more – albeit from a high base in 2011. DS’s rating for product freedom fell to 9.1 from 9.6 and Wood Gundy’s dropped to 8.9 from 9.5.
Still, Monique Gravel, managing director and head of Wood Gundy, says the firm’s compensation structure does not favour in-house products: “We think that distorts the client’s decision process. I would be appalled if certain products pay the [advisor] more. All our products are offered because they meet client needs – not because they enhance our bottom line.”
Among the bank-owned firms, Toronto-based BMO Nesbitt Burns Inc. garnered the highest rating in this category, at 9.6. Furthermore, 94% of Nesbitt advisors surveyed say they would recommend their firm to another advisor – a significant improvement from 87.8% last year.
A Nesbitt advisor in Ontario says the company’s most positive aspect is: “The freedom to run your own business the way you want. And the firm’s reputation is really good.”
As a result, Nesbitt’s rating in the “firm’s stability” category improved to 9.3 from 8.7 in 2011. This doesn’t surprise Bill Brown, the firm’s national sales manager: “A firm that’s backed by a large Canadian bank [with] an excellent reputation is a significant advantage.”
The remaining firms all were on solid ground when it came to the stability rating. In fact, at 9.2, the overall average performance rating for this category remained the same as last year. It also is one of the highest overall ratings in the Report Card.
And while Wood Gundy, for its part, did not see the number of ratings improvements it had last year, its stability rating rose by more than half a point yet again, to 9.3 from 8.8.
There were no significant decreases in the “firm’s ethics” category, either. But advisors with Toronto-based ScotiaMcLeod Inc. gave their firm the lowest ethics rating in the survey, at 8.5 (tied with Vancouver-based Canaccord Wealth Management). The reason? Many ScotiaMcLeod advisors are livid that their firm’s technology is still very poor; despite pledges from management to fix it, nothing has been done. This situation was a reason behind many of the firm’s rating drops this year. In fact, the percentage of ScotiaMcLeod advisors who would recommend the firm to other advisors has dropped to 80% from 93.9%. (See story on page C8.)
The firm is making progress, however, says Hamish Angus, its managing director and head. For instance, an efficiency consultant has been brought on board to look at improving technology. The firm also is looking for ways to invite advisor feedback, says Angus: “These folks give us direction on what they’d like to see. Our culture of being comfortable listening to ideas from the field is key.”
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