To say banking products aren’t popular with advisors would be an understatement. And although firms that scored highly in this category are in the minority, they not only shed some light as to why they did but also offer a useful blueprint for others to follow.

Gary Reamey, principal and head of Edward Jones‘ Mississauga, Ont.-based Canadian division, which scored 8.5 and came in second only to Toronto-based CIBC Wood Gundy in the category, says advi-sors recognize that banking products bring an extra touch that lead to closer relationships with clients.

“What we have found, through our client surveys, is that there is a tighter relationship with our clients when they have banking services with us, such as credit cards and home loans,” he says. “The more they own with us, the tighter that relationship is. We recommend to our advisors that they offer the banking services to their clients to enhance the relationship.”

If a client has three or more investment or banking products with Edward Jones, then there is a greater chance that the firm is going to be that client’s primary financial institution, Reamey adds: “If I am a client and I have a retirement account with my Edward Jones advi-sor, and I have my insurance-related needs taken care by my Edward Jones advisor, and I have some of my banking services handled by my Edward Jones advisor, maybe I don’t want to use anyone else.”

Toronto-based Richard-son Partners Financial Ltd. also performed well in the banking products category with a score of 7.5. President and CEO Sue Dabarno says Richardson Partners’ new fixed-income team, which débuted this past summer, is probably the reason advisors rated the firm highly in this category.

“We introduced a new fixed-income specialist desk of three people that, between them, have 70 years of experience in the fixed-income sector,” she says. “They provide access to a wide range of products and can leverage institutional pricing and provide professional recommendations to advisors.

“Many clients are looking for products that generate income,” Dabarno adds. “In order for us to get better yield and high-quality instruments, we need seasoned professionals searching the marketplace.”

As for the firms that didn’t score highly in this category, one theme keeps coming up: principal-protected notes.

When it came to grading banking products — which include PPNs, guaranteed investment certificates, term deposits and high-interest deposits — an overwhelming number of advisors singled out PPNs as the absolute worst of the bunch, despite the principal guarantee. Although the other products fared well overall, it was the PPNs that dragged the overall average in the category down to 6.2.

So, what seems to be the problem with PPNs? Advisors’ No. 1 complaint was that these products don’t make money for their clients. And the reason behind PPNs’ low rates of return appears to be a combination of the high built-in fees and their lack of liquidity.

PPNs, many advisors say, are there to make money for the issuer and the advisor — not the client. And as clients are locked in for a seven-year period, advisors fear that if the market underperforms, the PPNs won’t increase enough to compensate for inflation.

“In a declining market, they have difficulty adjusting,” says a BMO Nesbitt Burns Inc. advisor in British Columbia. “PPNs can seldom adjust quickly enough to mitigate the damage.”

Nesbitt advisors rated their firm a lowly 3.9 in banking products.

Debra Hewson, president and CEO of Vancouver-based Odlum Brown Ltd. , which scored a 3.0 in the category, says that poor market conditions over the past eight months prompted advisors to prefer products for their clients that are more liquid and more transparent.

“A typical GIC product, for example, is not that liquid,” she says. “Looking at transparency of asset-backed commercial paper, advisors are taking a step backward, looking at their clients’ accounts and saying that, in times of volatility and times of uncertainty, there’s always a flight to quality.”

Although PPNs are considered banking products, many advisors say they act more like securities. And while PPNs are generally issued by banks, their return is linked to an underlying asset, which may include anything from a simple index to an incomprehensibly complex vehicle such as a fund of hedge funds.

This is why advisors also complain that PPNs are confusing — not only to clients, but to advisors themselves — and that their lack of transparency makes them difficult for brokers to sell.

@page_break@”What I don’t understand fully, I don’t feel comfortable investing in,” says a TD Waterhouse Private Investment Adviceadvisor in Ontario. The Toronto-based dealer scored 5.5 in banking products.

Toronto-based GMP Private Client LP received a rating of 5.9 in the category. A GMP advisor in the West says it takes him more than 10 minutes to explain to clients why PPNs are the wrong product for them.

And an Odlum Brown advisor in B.C. says PPNs “tend to be very, very complicated, not only for clients but for me to explain in a way for clients to want them. I have trouble selling them.” IE