Firms may be falling short when it comes to providing products and services for wealthy clients, according to findings in the 2019 Brokerage Report Card.
Many advisors said their firms are failing to provide a broad enough selection to meet the demands of high net-worth (HNW) clients. Further, service and support for those clients is inadequate or inaccessible. While the overall average performance rating for “products and support for HNW clients” rose by 0.1 to 8.2 year-over-year, firms’ individual ratings were mixed, ranging broadly from 6.6 to 9.6.
About Toronto-based ScotiaMcLeod Inc., an advisor in Ontario says, “[The firm] is still on the learning curve,” though its HNW products and services have been improving. ScotiaMcLeod received a rating of 8.3 in the category, up from 7.2 in the 2018 Report Card.
When asked to rate the importance of “products and support for HNW clients,” survey respondents gave the category an overall average rating of 9.0. However, when asked to rate the performance of their firms in terms of providing these products and services, advisors’ overall average rating of 8.2 resulted in a significant “satisfaction gap” of -0.8 of a point. (A satisfaction gap is the difference between a category’s performance and importance ratings.)
The 2019 results continue a dubious trend for brokerage firms in this category: since 2013, the satisfaction gap has ranged from -0.6 to -0.9 of a point, widest in years where the importance of HNW support has peaked.
April-Lynn Levitt, a business coach with The Personal Coach in Waterloo, Ont., says that as competition for the HNW segment grows, products and support for these clients will become increasingly important, affecting how advisors view their firms: “I see [HNW products and support] becoming more and more of a demand from advisors.”
Advisors at some independent shops said one issue is their firms lack access to enough banking products and services tailored to HNW clients.
“The bank[-based brokerages] are better at this,” says an advisor in Ontario with Vancouver-based Canaccord Genuity Wealth Management (Canada). The firm was rated 8.1 in the category.
“The high net-worth [segment] is a unique market, and banks have been much better at serving it,” says an advisor in the Prairies with Quebec City-based Industrial Alliance Securities Inc., which received a rating of 6.6 in the category.
And it was a bank-based brokerage, Toronto’s RBC Dominion Securities Inc. (DS), that received the highest performance rating (9.6) among all firms in the Report Card for products and support for HNW clients.
“The firm has done an excellent job of bringing the right people in to support [HNW] clients,” says a DS advisor in B.C.
However, two independent brokerages were also among those that received some of the highest average performance ratings for supporting HNW clients: advisors with Toronto-based Richardson GMP Ltd. rated their firm at 9.2, while advisors with Calgary-based Leede Jones Gable Inc. rated their firm an 8.7.
Says an advisor at Richardson GMP in the Prairies: “It’s crazy how many products we have access to; we have a huge product shelf.”
An advisor with Leede in B.C. says, “Every resource is there.”
At firms that received ratings for HNW products and support that were closer to the industry average of 8.2, advisors spoke about inadequate access to investment vehicles such as alternatives and private equity.
“Products could be improved; there could be more offerings,” says an advisor in Quebec with Toronto-based CIBC Wood Gundy, which received a rating of 8.0 in products and support for HNW clients.
An advisor in Ontario with Mississauga, Ont.-based Edward Jones, which received a rating of 8.2 in the HNW category, says, “I wish we did new issues, but we don’t.”
Another recurring complaint was related to access. For instance, an advisor in Atlantic Canada with Montreal-based National Bank Financial Inc. (NBF) says, “I like that I have access to all of the specialists, but the access is limited because they are all so busy.”
Senior executives at brokerages firms say that they recognize the importance of having strong support services for their advisors when it comes to affluent clients. Edward Jones, for example, offers advisors access to expert guidance via a “client consultation group.”
“We partner closely with our financial advisors, clients and our clients’ trusted professionals to assist with the organization, protection and transfer of wealth,” says Justine Reed, principal, client solutions, at Edward Jones.
For its part, Canaccord has emphasized highly personalized wealth management for its HNW clients. “Our platform supports highly sophisticated portfolio management; it supports transactional business, cash management practices, and every variation in between,” says Stuart Raftus, executive vice president and chief administrative officer at Canaccord.
On the plus side, advisors surveyed for the Report Card were happy with their firms’ general product shelves and their objective portfolio freedom.
“It’s top-notch,” says an advisor in B.C. with Canaccord Genuity, about the quality of his firm’s products. The firm was rated 9.2 for the quality of its products category and 9.7 for advisor freedom.
Brokerages were consistent when it comes to “quality of firm’s product offering” and “freedom to make objective product choices.” Firms received an overall average performance rating of 8.8 for the quality category, up from 8.7 last year, and 9.5 in the product choice category, up from 9.4 last year. This closely matches the overall average importance ratings for those categories, at 9.0 and 9.7, respectively.
“They’re very good with [freedom], and it’s hugely important to us,” says an NBF advisor in B.C. NBF received a rating of 9.4 in the freedom category.
Says an advisor in Ontario with Toronto-based BMO Nesbitt Burns Inc., which received a 9.0 in the product quality category: “We have everything we need to compete.”
That kind of outlook is positive, given brokerage advisors prioritize independence, says Sara Gilbert, founder of Montreal-based Strategist Business Development: “Most advisors find it important to have that liberty, that autonomy, to choose the product they believe in.”