Brokers tend to rate their firms low on the ease with which they can move elsewhere. This should not come as a surprise because companies generally want to prevent their reps from moving their books of business from the firm.
Year after year, when brokers are asked how easy they think it would be to move their book of business from their firms, their response is among the lowest scores on the Brokerage Report Card. This year was no different, with an average score of 6.1. That’s up from last year’s 5.2, but it’s still among the lowest grades on the card.
This year, in order to bring to light the reasons why they might want to change companies, brokers were asked to check one of six possibilities: compensation, corporate direction, management, product/services, entrepreneurial opportunity or other.
Compensation was the most common reason. “Someone would have to cut me a stupidly large cheque,” an RBC Investments broker in Alberta says when asked what it would take to get him to move. “It’s just not worth it.”
That was a common sentiment. “$125,000 or more would do it,” says one Edward Jones broker.
After compensation, entrepreneurial opportunity and management were most commonly cited as reasons why advisors would consider moving. “I haven’t moved for 20 years and I’ve been offered some monster cheques. I would move if I lost my independence and couldn’t deal with clients the way I want to,” says another RBC Investments broker in Ottawa. “There’s only one reason I would move — if my clients were denied products. Period,” said another.
The “other” category provided a number of reasons, ranging through client management, personal relationships, integrity of the firm, ethical scandals in upper management, reputation of the firm and unfulfilled expectations.
The firm’s integrity was the reason cited most often in the “other” category. “I’d say really bad ethics. If my clients complained about the ethics, I’d look into leaving. It would be painful in the extreme, but you have to stand up for your beliefs,” said an RBC broker in southeastern Ontario.
A popular reason for not moving was a commitment to clients. “I wouldn’t move,” said a TD Evergreen Investment Services Inc. broker in Calgary. “My clients don’t need the grief. I think clients suffer in these moves.”
But there’s an angle to this story that was conspicuously absent from the response sheets. Not many brokers want to move because of current market conditions. Considering the state of the markets and their client portfolios, few brokers want to ask their clients to move with them. Clients, presumably, are not overjoyed with the recent performance of their portfolios. And, although that may not be their brokers’ fault, they may be more tempted to jump ship now than they’ve ever been.
Forget moving now
“We’ve seen a significant reduction in people moving from firm to firm,” says Dan Richards of Strategic Imperatives in Toronto. “In the current market environment, advisors don’t want to ask their clients to decide whether to stay or go. As long as you stay where you are, you have inertia working in your favour. But as soon as you force the client to make the decision, all of a sudden inertia is working against you.”
Brokers today are tied more tightly to their firms than ever. One of the reasons, says Richards, is that there are fewer firms to move to. With CIBC’s recent purchase of Merrill Lynch Canada Inc., there is one less major player in the market, limiting the choices for advisors who want to move.
New product developments, such as wrap accounts, have also had a dampening effect on movement. “Many advisors have been using in-house wrap account products, and that’s another hurdle,” says Richards. “If you have a significant amount of your book in an in-house product, moving is all that more difficult.”
Several brokers, evidently recognizing that, expressed dissatisfaction with the new product lines. “I shy away from proprietary products. Why should I tie my clients to the firm?” says one ScotiaMcLeod Inc. broker.
Management has also become more aggressive in going after the clients of advisors who may move. They contact clients and ask them to give the firm an option to provide a second alternative or require brokers to sign non-compete clauses. “It’s something that has made many think twice about making the jump,” says Richards.
“I think there’s moss growing on my shoes. It’s not easy to move,” said an Edward Jones broker. “There’s a contract to sign saying you won’t contact any of your clients for six months. As well, if you’ve been with the firm for less than two years, you have to pay it back for all your training.”
It’s no wonder advisors are staying put. “It’s one of the terrible things about this business,” said one broker. “You have to sneak out in the middle of the night.” IE