Although investment advisors have been dealing with the shakeout of the economic recession for much of the past year, they appear to be riding out the storm just fine. The 674 advisors at 16 investment dealers surveyed for Investment Executive’s 2009 Brokerage Report Card say they are content, overall, with how their firms are performing during these difficult times.
“I’m proud of the fact that through this market meltdown, I can sit down in front of a client and say, ‘We don’t deal with subprime mortgages and the rest’,” says an advisor with Mississauga, Ont.-based Edward Jones in Ontario.
More proof that advisors are taking the downturn in stride is the fact that the categories that they consider to be of greatest importance have not changed: the freedom to make objective product choices, their firms’ ethics and their firms’ stability. Much like years past, these categories topped the importance ratings in 2009.
Toronto-based Richardson Partners Financial Ltd. scored well in all three of these categories, with its advisors praising the firm’s family values and independent model. And although the firm did see scores drop by more than half a point in six categories, they were all in categories that Richardson advi-sors rated low in importance.
“We don’t do a lot of consumer advertising, but we get exposure in a different way,” says a Richardson Partners advisor in Ontario, commenting on the firm’s consumer advertising. (The firm’s advisors gave a performance rating of 7.9 this year, vs 9.1 in 2008.) “Our focus is high net-worth clients and wealth management, and in that area we’re miles above the rest.”
“What we do is good,” adds a colleague in Manitoba. “In our business, marketing to a consumer is only one way of getting business. Our business is a contact sport. I could have my face on a bus; but I work for a family that is a Canadian institution — and that speaks for itself.”
When Richardson Partners was first launched in 2003, its goal was to establish a home for the top 10% of Canadian advisors. The firm continues to run on that philosophy. Richardson Partners caters to high net-worth clients and their needs, including estate planning; as a result, 95% of the firm’s advisors are licensed to sell insurance. (See story on page C8.) An ideal Richardson Partners advisor has a book of business of at least $100 million. And the firm is placing an increasing focus on discretionary portfolio management — an area that is new to this year’s survey.
This year, IE asked advisors whether they have a discretionary portfolio licence; as well, advisors were asked to rate both the performance and importance of their firm’s support in that area.
“Portfolio management is a growing trend among advisors,” says Sue Dabarno, president and CEO of Richardson Partners. “We have a portfolio-management group that does regular calls and shares ideas. We think portfolio management is pretty important — and that it is a strategy for the future.”
During January and February, IE researchers Matthew LaForge, Sarah Phillips and Ashley Spegel asked advisors to provide two scores: one rating their firms’ performance in a category and the other indicating the importance of that category to the advisor’s business. Advisors were asked to rate both 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 out for each of 31 categories, both firm-wide and Report Card-wide. The “IE rating” shows the average of all categories for each firm; in addition, the “overall rating by advisors” is how advisors rated their firms out of 10.
Much focus is placed on the ratings and how firms compare with one another. But the numbers serve a greater purpose: to provide insight into what is happening at a firm. For instance, despite tumultuous markets, advisors at Edward Jones rated the firm very much as they did last year; indeed, its advi-sors rated stability high, and many felt it has a lot to do with the firm’s continued growth and strong recruitment efforts.
“The firm is a century old and well established in Canada,” says an Edward Jones advisor in Ontario. “We have a very conservative business model that is built to last and built to stay.”
@page_break@Adds a colleague in the same province: “We are still hiring while a lot of other companies are laying off people.”
Gary Reamey, principal and head of Edward Jones’ Canadian division, has experienced a number of market down-turns in his 32 years in the business. As such, Reamey says, now is probably one of the best times to be in the investment industry.
“Clients are more likely to want a second opinion than they ever have been. So, we’re recommending our financial advisors go out and meet new people, and ask them for their business,” he says. “Clients need us more today than they’ve ever needed us — and there are fewer financial advisors in the country today than there were a year ago. Whether the markets are up or down, our clients’ lives go on. The role of our financial advisors today is more important than it’s ever been, and the future is looking very bright.”
Another national independent dealer, Toronto-based Raymond James Ltd. , is taking a similar approach to the current market — and the brokerage appears to be thriving. During the past 18 months, the firm has brought in 150 experienced advisors, expanding its sales force to 450 advisors.
“It’s really amazing to us that even in these markets — and how difficult it has been for advisors — that we have had such success in recruiting. I don’t know if other firms can claim that,” says Peter Kahnert, Raymond James’s senior vice president of corporate communications and marketing. “A lot of people are choosing to be part of the firm even during the toughest market they’ve had in their careers.”
The outlook is not as bright at Winnipeg-based boutique Wellington West Capital Inc. The firm is struggling to maintain the high ratings its advisors had handed out in previous years. The firm saw scores fall by more than half a point in 14 categories, with advisors complaining mostly about a perceived lack of strategic focus and public image.
“There have been a lot of changes and unanswered questions,” says a Wellington West advisor in Ontario. “People don’t quite know what’s happening.”
Late last year, Montreal-based National Bank of Canada announced it was acquiring a 12.5% stake in Wellington West for $35.8 million, an action which may contribute to advisors’ concerns. (See story on page 1.)
A bank-owned firm that saw some slips in its ratings is Toronto-based ScotiaMcLeod Inc. , with advisors complaining about poor marketing support, lack of research materials and, most frustrating, not much improvement in the firm’s technology tools.
“Technology aspects should have been fixed years ago,” says a ScotiaMcLeod advisor in Ontario. “It has been put off and shuffled around. This is because the firm has realized that there was money spent that shouldn’t have been. With proper consulting, management could have solved it.”
Dissatisfaction with technology is nothing new for the firm. Over the past few years, advisors have named technology as one of ScotiaMcLeod’s weakest points. And when asked what aspects the firm could improve, 63% of those surveyed say technology is the one thing that the firm needs to fix. At the same time, ScotiaMcLeod executives are quick to admit they are aware of the problem — and are trying to solve the situation once and for all. (See story on page C9.)
“We are still overinvesting in technology because we might have underinvested in previous years,” says Hamish Angus, head of ScotiaMcLeod. “So, we are spending even more in this environment.”
Technology ratings were also a problem for Montreal-based regional independent MacDougall MacDougall & MacTier Inc., with a quarter of advisors surveyed voicing concerns about the firm’s lack of client-contact tools and its poor technology platform.
“It’s behind the curve,” says a 3Macs advisor in Ontario. “We’re lacking in client relationship management software.”
Advisors rated the firm’s technology tools and advisor desktop an 8.6 in importance but only a 7.1 in performance, widening the gap between advisors’ expectations and the firm’s ability to deliver. Last year, the gap between the importance and performance ratings was 1.1 points.
But 3Macs president and CEO Tim Price says the firm is in the throes of implementing a new portfolio-management system that it hopes will be introduced in the fall.
“There will be more comprehensive features,” he says, “including reliability, ease of use and an evolved CRM system.”
That said, technology is just one area in which the firm could improve — it also saw its ratings drop significantly in a number of other categories, including delivery on promises and strategic focus.
“Management is not explaining the strategic focus very well; I don’t think it is put across properly,” says a 3Macs advisor in Quebec who rated the firm a lowly 4.0 in the category.
“I haven’t seen the plan because it’s only shared among the board of directors,” adds another advisor in Quebec.
On the flip side, Toronto-based CIBC Wood Gundy is seeing a turnaround from 2008. The firm saw significant increases in 22 categories, including the firm’s delivery on promises, stability and strategic focus. With advisors feeling that their work environment is finally stabilizing, the percentage of Wood Gundy advisors who would recommend their firm has jumped to 82% from 60% 12 months ago. IE