Middle-aged guys the industry average

To be fair, we didn’t ask respondents to this year’s Brokerage Report Card if they are white or what they wear to work but we did ask age, number of years with the firm, number of clients and assets under management. If you take the average of the 392 brokers at Canada’s national investment dealers who were randomly selected to respond to the survey, that advisor is indeed male, middle-aged and from Toronto.

This year, male brokers outnumber female brokers by a margin of seven to one. Only about 13% of the brokers we spoke to this year are women. The average broker is 44.5 years old. He has about seven and a half years with his current firm, and 10 years as a producing broker. During that time, he has built a book of about 348 clients, with $49.3 million in assets under management.

That book is concentrated in clients who have between $50,000 and $500,000 invested. About 53% of clients fall into this broad range, with 17.4% in the $250,000-$499,999 range, 20% of them at $100,000-$249,999 and 15.6% at $50,000-$99,999.

The average broker’s book also bears the marks of the industry’s evolution over the past few years. For example, brokers estimate about 34.7% of their books are in managed products of some sort, such as mutual funds and wrap accounts. That is slightly more than straight equities, at 32.7%, and more than fixed-income products, which account for slightly less than 23% of the average book.

The influence of fee-based accounts is also growing. The average broker is earning almost 18.5% of his compensation from fees, and that is expected to rise to 25.9% in the next two years, according to the survey. At the same time, he sees his transaction-based compensation slipping from about 63% to a little more than 50%. That said, at this point in time, the average broker only has 2.4% of his book in fee-based accounts.

As for educational achievements, about 48.7% say they either already have or are working on a CFP designation; 57.6% are pursuing or have already obtained a PFPC designation; and a 42.5% are working on or have a FSCI designation.

Looking at the breakdown between men and women, there’s very little difference in most areas (see also page C13). The average female broker is slightly younger than her male counterpart: 43 years vs 44.8 years. Women also have a shorter tenure: 6.3 years at their current firm and 8.1 years in the industry overall, compared with 7.8 and 10.3, respectively, for men.

This disparity in service time may also account for many other notable differences between male and female brokers. Men report having slightly more clients and notably more assets under management than the average female broker: $50.4 million under management with 350 clients for men, compared with $43 million under management and 341 clients for women.

Women also report a slightly higher proportion of managed products in their books — 38.2% vs 34.1% for men — and that the distribution of their clients’ accounts is skewed modestly lower than male brokers on average. There is no difference on the fixed-income side, but men report having 33% of their books in straight equities vs 31.5% for women.

Women brokers also have more small clients and fewer big fish. Women say they have considerably more than half of their books in accounts worth less than $250,000, whereas men have less than 50% of their books in these smaller accounts and a higher proportion in high net-worth accounts.

The more conspicuous use of managed products, and the difference in account distributions are both consistent with the fact that women brokers haven’t been in the business as long as men on average. They have built their books more recently than the men, at a time when managed products have become more widely used. Also, women report having more than 3% of their books in fee-based accounts, vs 2.3% for men.

Marginally higher

When it comes to rating their firms, however, there’s no notable difference between the scores from male and female brokers, although women appear to give marginally higher scores on average in almost every category.

The same sorts of trends that distinguish women from men are also evident when looking at the brokers’ demographic data purely in terms of experience. For example, brokers with between one and three years’ service report having an average of 231 clients and $25.6 million in assets under management. This rises to an average of 422 clients and $56.8 million in assets for brokers with between six and 10 years in the business. Those who have more than 20 years’ experience claim books of 537 clients, with $88.6 million under management on average.

Managed products

Similarly, rookie brokers report putting almost 42% of their books in managed products, compared with 31% in straight equities and 20% in fixed-income. Those with 20 years’ or more experience say they only have 22.4% of their books in managed products, 39.4% in equities and 26.4% in fixed-income. The veterans also only have 1.4% of their books in fee-based accounts vs 3.75% for those with three to five years’ service.

As might be expected, brokers with less time in the business also generally tend to have smaller accounts. The rookie brokers say 36% of their books are composed of accounts with less than than $100,000. Veteran brokers have only 16% of their books in these smaller accounts.

At the same time, veterans report having more than 16% of their books in accounts of at least $1 million, most of it in the $1 million-$3 million range. Such large accounts are relatively few and far between for younger brokers — not surprising, because not only have they had less time to find those plum accounts but they’ll also naturally have fewer clients who have grown under their management.

The same sort of tenure factors also influence regional differences in the brokers surveyed. Brokers in Ontario report the shortest tenure at their current firms, at seven years, and slightly more than nine years in the business. The numbers are similar in Western Canada; brokers average about 12 years of experience in Quebec and Atlantic Canada.

Brokers in Ontario have an average of 346 clients and $48.3 million in assets under management, vs Quebec-based brokers who have 521 clients and $66.25 million in assets. The numbers for the West are similar to those in Ontario, while the Atlantic provinces are just trailing Quebec.

However, the numbers do not follow the script when it comes to looking at product mix. As expected, Quebec’s experienced brokers have been slow to adopt managed products, with just 19% of their books in these products, and 37% in each of equities and fixed-income.

The surprise is in the Atlantic provinces, where despite having loads of experience and fairly large books, brokers report having more than 41% of their books in managed products and just 25.9% in straight equities.

The product mix favoured by brokers in Ontario and the West comes pretty close to the national average. Dividing Ontario’s results according to brokers in the Toronto area and those in the rest of the province shows some sharp differences, however. The non-Toronto crowd reports almost 41% in managed products, with 29% in equities. Toronto-based brokers more or less report the inverse: slightly more than 28% in managed products and 39.7% in equities.

Toronto-based brokers also have more fee-based relationships: 5.9% of them compared with a low of 1.5% in Quebec. Fee-based accounts are more popular in the Atlantic provinces, at 6.4%. IE