Advisors feel the heat of uncertain times: Includes main chart

But other firms were not as lucky. ABCP problems and mounting losses at parent CIBC left advisors at Toronto-based CIBC Wood Gundy putting out fires, influencing how those advisors rated their firm. As a result, grades at the bank-owned investment dealer took a tumble.

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“It is an embarrassment to work at Wood Gundy,” says an advisor with the firm in British Columbia, “because of the stuff the firm gets into by association.”

Even in the face of uncertain times — or, maybe, because of it — advisors still gave priority to the three categories that have taken top ranking since IE began rating importance in 2005: freedom to make objective product choices, the firm’s ethics and the firm’s stability.

While the importance rankings were consistent with those from last year, the overall performance score for firms’ stability took a slight dip to 9.1 this year from 9.2 in 2007. But individual firms saw more dramatic movement: 10 saw scores that were lower than last year’s and four of those were significant drops. Wood Gundy took the biggest hit, with a 1.3-point drop in stability to 7.1 from 8.4 in 2007.

“The new bank CEO did a deplorable job with terrible leadership,” says a Wood Gundy advisor in Ontario. “It makes me question the stability. I am answering questions from my clients that I have never had to face before.”

“The current issues are not exactly what I would call ‘stable’,” says another Wood Gundy advisor in Ontario. “Constantly seeing our name in the press and being grouped in [with the bank] is completely out of our control at Wood Gundy.”

But Wood Gundy wasn’t alone in getting burned by the ABCP mess. Vancouver-based Canaccord Capital Inc. , which made headlines by selling ABCP to its retail clients, and Montreal-based National Bank Financial Ltd. also saw rating drops of 0.5 in the stability category.

DS, too, saw a drop to 9.2 in 2008 from 9.7 in 2007 — the only red mark in its ratings. (See page C4.) DS national director David Agnew speculates that the drop wasn’t directly tied to the ABCP crisis but was a direct result of market volatility. “When the industry encounters a situation such as the ABCP crisis, it can have a ripple effect,” he says. “These findings more likely reflect market volatility, which has made some clients nervous. As a result, advi-sors may be getting more calls and experiencing an increase in their workload.”

Agnew may well be right, but as a DS advisor from the Prairies points out, the whole industry has been affected by the ABCP crisis: “It has been tarnished by some of the bad apples in the business.”

Otherwise, DS was the top-rated bank-owned firm in IE‘s Report Card, seeing significant increases in 10 categories as well as a 0.4-point increase in its overall score.

But the sense of instability and unease is weighing on many firms. Winnipeg-based Wellington West Capital Inc. has acquired a $38-million line of credit from CIBC to ensure its acquisition power and, in turn, provide added stability for its advisors — just in case there is a prolonged economic downturn in the near future.

“We’ve always talked about having capital in case of market downturns,” says Charlie Spiring, CEO and chairman of Wellington West. “Very fortuitously this past year, Kish Kapoor, our president, arranged a standby line of capital with CIBC. So, we can weather any storm that occurs.”

Those high-end advisors who call the retail boutiques home seem immune from much of the fallout from the credit crisis. Advisors at Toronto-based Richardson Partners Financial Ltd. gave their firm — which celebrates its fifth birthday this year — top scores in 24 categories, more than any other firm surveyed. It finished with an IE rating of 9.4. And Toronto-based boutique GMP Private Client LP, a newcomer to the survey and a relative newcomer to the industry, proved it could play with the best of them as it garnered an IE rating of 9.3.

@page_break@Advisors at the boutiques are quick to say that independence and ownership are reasons why they flock to these firms.

“Being a partner makes a huge difference,” says a Richardson Partners advisor in Central Canada. “We all share ideas, issues are addressed almost immediately and the stumbling blocks are overcome faster than they would be at a larger firm.”

“The atmosphere of all being shareholders and being on the same wavelength with management is one of the best aspects of working at Richardson Partners,” adds a colleague. “It’s a good idea to build a business on that model.”

Wellington West, too, thrives as a result of its ownership model. Its advisors say the model makes for a perfect alignment of strategies, ideas and communication within the brokerage. And with 98% the firm being owned by its employees, Spiring says, Wellington West is the “poster child” when it comes to employees owning equity: “We have an owner-operator culture, and that is exactly what you get when you come here. We’re known to be extremely fair, and advi-sors get a voice in the firm and own and control their own books of business.”

Spiring says that while the 1990s were a period of aggregation and consolidation in the brokerage industry, led by the bank-owned firms, he believes the trend is moving back toward the boutique style of the old days.

“We’re going to be the dominant, independent, non-bank-owned boutique,” he says. “Advisors feel better about being an owner rather than being owned by someone else.”

And when it comes to ownership, another added bonus that firms can achieve is lowering risk.

“Because everyone’s a shareholder, it’s a self-policing group,” says Kapoor. “We spend very little time looking over brokers’ shoulders. Each of them watches over each other. No one wants a rogue in our shop.”

Wellington West even takes its corporate culture as far as the buildings it does business in, wanting to steer clear of the tall office buildings in which the larger firms are usually found. Kapoor says the firm wants to provide independent houses within heritage buildings that advisors can find in their own communities, going so far as renting and fixing them up for advisors: “We’ll build it like it’s your own personal home. All that is part of the culture that we are trying to promote.”

Having an ownership position carries weight at the national and regional dealers, as well. Of 130 advisors at Montreal-based MacDougall MacDougall & MacTier Inc. , 100 of them are shareholders. Through weekly meetings, president and CEO Tim Price stays aware of his advisors’ needs and concerns at all times.

“We are a very close-knit firm,” he says. “The fact that we are an employee-owned firm means advisors know they have the independence to function to the best interest of their client.”

At Edward Jones, based in Mississauga, Ont., one in three advisors has a limited partnership at the firm, which is a huge incentive for advisors when they are shopping for brokerages to join. Once an advisor has been with the firm for three years and has achieved certain performance and ethics standards, he or she becomes eligible to be offered a partnership. And although the firm was at the bottom of the barrel for freedom to make objective product choices (9.0, vs the category average of 9.6), it still placed fifth overall in the Report Card — and it tied for first place for stability and ranked second overall for ethics.

“There is a high level of participation by advisors in the key decisions that the firm makes,” says Gary Reamey, principal and head of Edward Jones’ Canadian division. “As a firm, we work at maintaining open communications with our advisors and we actively solicit their feedback. As owners, or future owners, our advisors feel responsible for all the things that happen at our firm.”

Blackmont may not be the front-runner in this year’s Report Card, but it definitely took the spotlight as one of this year’s success stories. (See page C14.) With significant increases in more than 20 categories, the firm saw a huge 1.9-point jump in its stability score, to 9.3 from 7.4, driving it out of the bottom spot in the category. Despite the industry’s shaky ground, Blackmont’s advisors feel their new leadership has turned them in the right direction and thus scored their firm accordingly.

Blackmont’s success reflects CI Financial Income Fund‘s acquisition of Rockwater Capital Corp., Blackmont’s former parent, about a year ago. Since the takeover, advi-sors are definitely voicing their approval.

“Being purchased by CI has enhanced our stability,” says a Blackmont advisor in British Columbia, “and has given us unparalleled footing among non-bank-owned firms.” IE