Sometimes numbers don’t tell the whole story. Take the back-office technology scores in Investment Executive‘s 2004 Brokerage Report Card. The average mark remains relatively steady — dropping just a tenth of a point to 6.9 from 7.0 — but the consistency of that mark masks a growing chasm between the technological “haves” and “have nots” in the Canadian brokerage industry.

Despite the overall score, individual marks for some brokerages — ScotiaMcLeod Inc., CIBC Wood Gundy, TD Waterhouse Investment Advice and First Associates Investments Inc. — clustered between 5.2 and 6.2, several notches down the scale from the six industry leaders, which range from 6.8 to 8.5.

The scores on front-office technology reveal a similar split. Although the industry average increased to 7.4 in 2004 from 7.3 in 2003, the four “have not” brokerages scored consistently lower than the six industry leaders.

That gap is further defined by comments from brokers, the most negative of which disproportionately came from the brokers working for the four laggards.

“It’s junk” is the blunt assessment of one
First Associates broker when asked about his firm’s technology.

A ScotiaMcLeod broker in British Columbia seems to be thinking along the same lines. “They know it’s bad. Some of the technology is ridiculous. It’s 10-year-old hardware. My kid has a better computer,” he says.

That several brokerages need to update technology is a point senior execs concede, although in a roundabout way. “I think our technology is currently representative of the industry and competitive, but does not represent where we would like to take our organization on a going-forward basis,” says Bill Hatanaka, executive vice president of Toronto-based TD Wealth Management.

Still others blame the low marks on the fact that technology is so quickly superceded by new developments. “Technology is one of those areas in the industry that — depending on where you are in your stage of investment — you could be out in front or lagging behind a bit,” says Stuart Raftus, president and COO of Toronto-based First Associates.

This may be true. But the gap between these two groups has an historical element, with many in the “have not” group lagging the “haves” for the past couple of years.

More than that, the “cyclicality” argument breaks down when you consider industry leader Canaccord Capital Corp., which makes a point of constantly upgrading its technology.

Canaccord has a retail advisory committee of 13 IAs from across the country that provides feedback on technology issues. “If something is missing, they usually tell me and we put it in place as fast as possible,” says Bob Larose, Vancouver-based Canaccord’s executive vice president and national sales manager, about his company’s technology strategy.

“Technology is one of most important tools for IAs, so we try to be proactive in giving them these tools and being ahead of the curve in meeting their needs. We ask brokers what they think they’ll need and, if it’s very important, we will carry it out at almost any cost,” he says, suggesting that steady technological improvement is indeed possible.

That attitude has translated into good marks for Canaccord, which attracted more than its fair share of positive comments from brokers and racked up the highest scores on technology, with an 8.8 for front office and an 8.5 for back.

In defence of the laggards, however, it must be noted there are good reasons technology spending has lagged. The recent downturn in the industry saw many firms slip into survival mode, which pushed large
technology projects onto the back burner.

And that makes sense; there’s no point bringing in company-wide technology until senior management knows what the post-bubble Canadian brokerage industry is going to look like.

But with the recent rebound in business, we might expect some improvements — and some members of senior management have promised as much. Hatanaka, for one, indicates his company will be beginning upgrades soon: “We’ve put together all the project priority lists and we’re executing them as one organization, moving forward on myriad technological enhancements. It may make for boring press but we’re [engaging in] a 36-month process to create a strong technological backbone that will support the investment advice business.”

Actually, it doesn’t make for boring press. Brokers rely on technology to perform their jobs, and many point out how difficult their work becomes when they have to deal with old technology. “Archaic systems make it difficult to get the job done efficiently,” says a CIBC Wood Gundy broker in Ontario.