Canaccord comes out on top

Although Vancouver-based Canaccord is certainly a deserving winner, it must be noted that its victory comes at the expense of two-time winner Edward Jones Canada. Although Edward Jones initially had higher average scores, a review of its card for biased ratings (please see story on next page) left Canaccord with the happiest crew around.

Every year in February and March, IE’s researchers hit the phones to talk to at least 40 brokers at each of the 10 big national investment dealers. Brokers are randomly selected from our mailing list and must have a minimum of one year’s experience. They are asked to rate their firms in 23 categories including front-office technology, account statements and the firm’s strategy. This year we added a few categories and dropped a couple, but the core of the survey remains the same. In each category, the brokers are asked to score their firms from one to 10, 10 being best. The scores from each broker in each category are averaged to give the firm its score. We calculate the IE Composite score as a weighted average of the firm’s average scores with points added in for the number of firsts in each category.

On that basis Canaccord rules the roost for the first time. The firm doesn’t dominate in a lot of areas but it does well across a large number of categories. It rates highest in freedom and near the top in payout, two qualities that brokers treasure and which are in short supply these days. One Toronto-based broker describes Canaccord as “unique.”

“Other firms’ management work for the company; this firm works for us and does everything to help us,” he says.

Despite the controversy this year, Mississauga, Ont.-based Edward Jones continues to garner standout reviews from its brokers, with leading scores in a range of categories including technology, marketing, training and research. In fact, Edward Jones ruled the roost in most of the major categories. It lags the national average only in payout, and its brokers’ only real complaint is that the firm needs to continue to grow to reach a critical mass and establish a more visible public image.

Canaccord and Edward Jones may be home to the happiest brokers, but overall scores were generally up across the industry. Most notably, the average scores for back-office systems and Canadian research were higher than last year. The contentment is likely due in part to the record performance of the Canadian equity market. Our research was completed before the massive tech sell-offs; we would not be surprised that, if we surveyed the brokers again in mid-April, the ratings may have slipped.

Improvements are most obvious at Canaccord, ScotiaMcLeod Inc., TD Evergreen Investment Services Inc. and Merrill Lynch Canada Inc.

TD Evergreen, a former winner, regained some lost ground this year. The firm enjoyed some notably higher scores in eight different categories and, as always, garnered its finest accolades for high payouts and lots of freedom.

Although some brokers complain that Toronto-Dominion Bank is closing its fist tighter around the brokerage’s throat, the highest payout in the business keeps them with the firm. But still others complain that TD’s industry-leading pay scheme hasn’t been the bargain that was touted by the firm’s management. When it comes to upgrading the firm’s systems, one broker urges the firm to “do it, don’t just shoot the shit.”

Two firms that have been doing it, say their brokers, are the newly renamed National Bank Financial Inc. and ScotiaMcLeod. National Bank Financial didn’t miss a beat, after merging Lévesque Beaubien Geoffrion Inc. with First Marathon Securities Ltd. last year. While past report cards have exposed mergers as a sure cause of unhappy brokers, the fact First Marathon didn’t bring a competing retail sales force likely kept the disruption to a minimum. Its scores went up markedly in corporate finance, an area that was bolstered by the merger. Its brokers also gave higher scores to the back-office systems, sales support and compliance.

There’s still some fuss over NBF’s name. When it was known as LBG, brokers outside Quebec complained about poor name recognition as Lévesque Securities. While some of them like their new identity, others say the word “bank” is too prominent and the firm still lacks a profile outside Quebec. The Quebec-based brokers, meanwhile, generally love being closely identified with that province’s biggest bank.

While NBF has been one of the better-rated bank-owned firms over the past couple of years, ScotiaMcLeod has been a perennial also-ran in our survey. This year finally brought some sign that management has been listening to years of criticism from its brokers. The firm rang up notable improvement in nine areas, led by technology, its fixed-income division and several other support categories.

Nevertheless, Scotia’s brokers remain convinced they are still playing catch-up with the big boys. “We’re last in line to do anything. For once, I would like to be front and centre and have the other brokerages chase us,” says a Scotia broker from the West. The feeling is shared by a Toronto-based broker. “We don’t do anything first. TD does it first, DS perfects it and we botch it up.”

Scotia’s brokers may not be completely enamoured with their firm, but they are outpacing their competition. Over at BMO Nesbitt Burns Inc., the new name hasn’t done much for the troops, nor has the firm’s tentative approach to introducing online trading. One confused Nesbitter from the East says the firm’s strategic focus needs help, noting, “They’re going through an identity crisis. I’m an IA, a stockbroker – I don’t want to be a financial planner.” But the sort of old-school stockbrokerage that is winning plaudits at Canaccord just won’t be tolerated at the bank-owned firms.

There’s much the same feeling at CIBC Wood Gundy, which trails Nesbitt slightly. Its scores for strategy, front-office software and overall satisfaction all slipped notably this year. The firm is also moving to more managed-money products, a change that has some brokers grousing. “Fee-based is just raping the clients,” says a Toronto-based Wood Gundy broker. Another says he still likes the firm despite going fee-based, because: “They’re letting us run our own books.”

But if there’s one brokerage for which the winds of change are blowing bitter it’s at RBC Dominion Securities Inc. Brokers rated it below average in most major categories and gave it the industry’s worst rating in the overall satisfaction category.

Jarring changes are unsettling the troops at DS, once the industry’s undisputed premier firm. Brokers moan loudest about being strong-armed into pushing proprietary products. But the firm’s scores have fallen across the board as DS brokers worry about just where the bank’s new wealth-management division will lead them.

“We’re going through a massive upheaval right now. We’re on our own as to where we’re going. There’s 1,500 brokers here and the bottom ones are the ones they want to get rid of,” says a DS broker from Toronto.

At the back of the pack is Merrill Lynch, whose brokers continue to hand out some of the lowest scores in the field. But things improved from last year. Although it is still a laggard, and slagged by many rival brokers, Merrill’s brokers report improved scores in 15 categories, albeit from low levels. Merrill’s purchase of Midland Walwyn Capital Inc. two years ago still seems to be biting at brokers, who claim that the firm is “Merrillizing” – a process that apparently involves more proprietary product and more pressure to stick to the firm’s recommended list.

Merrill has the distinction of being both the firm most hated – and most loved – by brokers at other firms. Brokers name Merrill more than any other as the firm they’d never work for. Yet it is also the firm named most often as the firm that brokers would choose to work for apart from their own.