It appears that the possible extinction of the financial advisor has been greatly exaggerated considering the results of the 2015 World Wealth Report, which Capgemini Financial Services and Toronto-based Royal Bank of Canada’s (RBC) wealth-management division released on Wednesday.
The research found a rise in the percentage of Canadian high net-worth (HNW) investors who are seeking professional advice, with 57.1% doing so in the first quarter of 2015 compared with 48.4% in that same period in 2014. Furthermore, Canadians are less likely than their global counterparts to use automated advisory services, with 31.3% saying they would move to this type of service compared with 48.6% globally.
Canada’s strong banking system is likely a factor in fewer investors making the shift to automated investment services, such as robo-advisors, says Tony Maiorino, vice president and head, RBC Wealth Management Services, as even residents in small Canadian cities with populations in the tens of thousands have access to bank branches.
“If you were to look at other centres that don’t have a similar banking system, [a small town] might not have any banks in it,” he adds. “The need for an online portal is a little more elevated in those areas.”
As a result, the proliferation of robo-advisory services is not as heavy in Canada as in other regions, such as the U.S., Maiorino notes.
Nevertheless, Canada’s advisors and wealth-management industry should take stock of areas in which they can improve. This is especially the case when you consider the beliefs that HNW investors under the age of 45 hold.
On a global basis, 76% of wealth managers say they understand the needs of those younger HNW clients, but only 61% of the younger HNW investors surveyed agree with that statement. In fact, more than half, 54%, say they’re looking for more support and professional advice from their advisors compared with 49% of older investors.
Finding a compromise between greater use of technology and more personalized services can make the difference for those younger investors, Maiorino says.
“We need to have better technology to allow our clients faster access to our guidance,” Maiorino notes while referring to tools that can help investors learn more about minimizing their tax liabilities and intergenerational wealth transfer. “That’s the ‘robo’ part, but that has to be melded with the advisors, which is the individual providing the advice around the more complex topics such as trusts, philanthropy and foundation work.”
Providing advice to HNW clients on the topic of philanthropic giving is a way advisors can continue to distinguish themselves as it is an area of great importance to this group. In the 2014 World Wealth Report 88.1% of Canadian HNW investors thought it was important to give their time, money or expertise to generate a positive social impact. The results of this year’s report reveal that 33.6% of investors would like to receive more advice in this area.
Thus, this represents an opportunity for advisors to discuss some key areas with their clients, such as their intent in philanthropic giving and providing advice on where the funds for these donations can be accessed and the best ways to structure the philanthropic initiative, Maiorino says.