Don’t get no respect

Today, in the age of bank-owned brokerages and increasing emphasis on institutional business and corporate finance, retail advisors may not be getting the respect or the perks — assistants, computer programs, coverage of sundry expenses — they deserve.

Investment Executive’s 1999 Brokerage Report Card asked investment advisors from 10 national firms to rank various characteristics of their firms’ sales culture: sales support, marketing support, the firm’s image with the public and its treatment of retail brokers. While most advisors believe their firms value the retail side of their business and are satisfied with their companies’ sales culture, others were harshly critical. With only one exception, no firm appeared to receive a unanimous thumbs up or thumbs down; firms that had the most vocal critics also had enthusiastic supporters.

The exception was Edward Jones, where everyone, it seems, is having a wonderful time. One explanation for its top-ranking 9.6 rating: the firm has no institutional or corporate finance department to compete with retail for resources or attention from management. As well, the firm has a policy of recruiting and training advisors from outside the financial industry, so there are no seasoned, jaded brokers at Edward Jones.

One Edward Jones advisor puts it this way: “They are very much involved in making sure we are happy and well served.”

If there is a complaint, it is that Edward Jones advisors would like the firm to have a higher profile. “Nobody knows us” is a familiar refrain from the firm’s advisors across the country.

At the bottom of the rankings are ScotiaMcLeod Inc. and Merrill Lynch Canada Inc. with a still respectable 7.1.

ScotiaMcLeod received some praise from brokers pleased with the firm’s image with the public; others say the company’s sales culture is improving. Yet many ScotiaMcLeod advisors are critical. One eight-year veteran of the firm says management is not concerned with the retail side of the business, and it neglects brokers’ requests for sales support and improved technology. For example, advisors have been asking for computer software that helps them serve their clients. The firm provided a program that only improves client retention, he says.

“You’re supposed to be able to manage your client better, but the only thing you’re really doing is tying your client to the firm.”

The advisor cited a recent change in management as the cause of the shift away from a retail culture. “We have a new group of managers and I think they’re very bank oriented,” he says. “[Former ScotiaMcLeod chief executive] Gordon Cheesbrough was from the old school, where a brokerage house did brokerage business. We’re turning into asset-gathering machines.”

Another ScotiaMcLeod advisor puts it this way: “The new management put the knife to a bunch of people in a really callous way. We’re still dealing with the fallout.”

A number of ScotiaMcLeod advisors complain about the lack of sales support. The firm has reduced the number of support staff in some cases “by 50% in four years,” says one advisor. Advisors are expected to pay for heat and light consumed by their assistants. In at least one case, four advisors share one sales assistant.

But not all ScotiaMcLeod advisors are discontented. One advisor, who previously worked at the former Midland Walwyn Capital Inc., says ScotiaMcLeod is “a quantum leap better.”

You don’t have to be bank-owned to be disgruntled. Over at Merrill, there is a wide range of opinion. One broker’s description of the firm’s treatment of retail —”so far so good, but it’s only been a couple of months” — sums up the cautious optimism shared by many in the firm.

Others are less positive. One Merrill Lynch advisor, who previously worked under the Midland banner, says there is now pressure to sell only stocks on which the firm does research. “We might as well have the Bank of Merrill Lynch above us,” she says. “There’s too much pushed down our throats. Too much ‘rah-rah-rah Merrill Lynch!'”

A 15-year veteran of Toronto-based CIBC Wood Gundy Securities Inc., who gave his firm a 10 on treatment of retail, says some brokerage houses apply pressure to sell certain stocks. “There are people like Merrill Lynch here in Canada who will actually put on your desk every morning what you are selling and what to say.”

A Merrill Lynch advisor suggests many Merrill brokers in Western Canada will soon be making the move to Goepel McDermid Securities Ltd., which is perceived to be more independent. Goepel scores above average in the treatment-of-retail category.

But even independent, entrepreneurial Canaccord Capital Inc. scored relatively low — 7.6 — in the treatment-of-retail column. One advisor’s complaint sounded like the lament of a broker from a big bank-owned firm: “They don’t understand who brings in the money, but we are the most important people in the organization. It’s very bureaucratic now, whereas it used to be very entrepreneurial.”

But many Canaccord advisors are optimistic about the firm’s new strategy. Where Canaccord is known as a Vancouver-based firm that specializes in speculative stocks, management wants it to be seen as a national firm that markets high-quality issues with a niche in the mid-cap market.

The firm is making some strategic moves. It recently hired a new director of research, James Muir, as well as a number of new analysts and traders.

Canaccord’s culture seems to be retail-friendly partly because top management, including chairman and chief executive Peter Brown, rose from the retail ranks. Even one Canaccord advisor who graded the firm low in retail treatment admits it is improving.

RBC Dominion Securities Inc. is cited by its own and advisors from other firms as having the most effective marketing program. “Royal Bank is promoting all the different parts of the group under one umbrella, and doing a great job of communicating through TV ads,” says a TD Evergreen Investment Services Inc. advisor.

Yet opinion at DS is mixed. The firm scores only a middling 7.8 in the marketing support category. One advisor complains of having to pay for the printed materials, and others criticized the “ideas.”

The sales culture is changing in the brokerage industry, and many retail advisors feel neglected. Money is important, but payout is not always directly related to a firm’s rating in treatment of retail. Top-ranking Edward Jones has the lowest payout.

“Management never talks to us” is one of the most common complaints among brokers dissatisfied with their firms’ retail culture. It is also the most inexpensive problem to correct.