Corporate culture is an ephemeral aspect of a business. Yet it is critically important to advisors’ happiness and, therefore, to the investment firm’s success. The firms that get it right may find themselves with a powerful recruiting tool that doesn’t cost a dime.
The conventional thinking is that banks are stifling and bureaucratic, while small firms are independent and entrepreneurial. To some extent, the perception is borne out by the way in which advisors rated their firm’s corporate culture in this year’s Brokerage Report Card.
The bank-owned dealers, as a group, average 7.7 in the corporate culture category, compared with 8.2 for the independents. If we consider the two upstart boutiques — Richardson Partners Financial Ltd. and Wellington West Capital Inc. — the average score is even higher at 9.5.
But within the averages, there is considerable variation. The reps at Blackmont Capital Inc. give their firm a weak 6.3 in corporate culture, well below the average of even the bank-owned firms. Meanwhile, among the bank-owned dealers, National Bank Financial Ltd. and RBC Dominion Securities Inc. , both scored an 8.2, in line with the independents’ average.
The message is that bank-owned firms can have decent brokerage cultures and independents can have lousy ones, although that may not be the natural order of things.
It is not hard to see why this natural order exists. If not quite enemies, bankers and brokers are certainly not natural allies. The brokerage business traditionally attracts people who embrace the entrepreneurial spirit. Conversely, Canada’s banks are among the biggest companies in the country and, as such, tend to employ the stereotypical salaried worker.
Bringing those two mindsets together has proven to be a challenge at most bank-owned brokerages.
“They finally figured out that we’re brokers, not bankers,” says a DS advisor in Western Canada. While admitting that problems exist may be the first step to recovery, it can still be difficult to nurture a counterculture within a large organization. “It takes time to turn the Queen Mary around. But they’re going in the right direction with it,” the advisor adds.
The challenge is compounded by the fact that not only are bankers and brokers different animals, but the banks are also sprawling businesses. The diversity of their operations makes it infinitely more difficult to foster an entrepreneurial culture.
Advisors at independent firms have to contend with the whims of the wholesale side of their firms. That means bond desks that gouge their clients and equity syndication teams that tightly ration any good products they come up with while pushing advisors to take the garbage underwritings off their hands. Analysts can also be inordinately bullish. Retail brokers may have to swim with the sharks at an integrated dealer, but at least they are all swimming in the same direction.
Within the banks, however, brokers not only have to contend with the vagaries of the wholesale side, but also the interests of the retail and commercial bank divisions. (Those interests are typically the backbone of bank earnings, which gives them a large claim on senior management’s attention and overall strategic direction.)
There is also internal competition from bank-branch sales forces and discount brokerage arms; asset-management and structured-product manufacturers to please; as well as human resource divisions and legal departments that have their own agendas to serve.
So many disparate parts pushing in different directions makes it that much harder to create an atmosphere in which advisors are happy. The situation leaves some advisors wanting, and they express a vague sense of discomfort.
“I find that it’s too ‘banky’,” says a TD Waterhouse Private Investment Advice advisor in the West.
Others have more concrete concerns. “They want us to work closer with the bank, and for it to be a mutually advantageous partnership,” says a CIBC Wood Gundy broker in Ontario. “The problem is that we can give a lot more to the bank than the bank can give to us.”
Another TD Waterhouse advisor in the West expresses similar frustration. “Since Evergreen became Waterhouse, I am not sure what it is,” the rep says. “It is a culture in which everybody is lumped into a homogenous Waterhouse thing. There is too much banging of heads against the wall to get the different parts to meld. It isn’t going to happen.”
@page_break@Beyond the added internal conflict and competition, bank-owned brokers also face shareholders’ demands for steady improvements in quarterly profits, a pressure that has helped push the bank-owned brokerages toward stable, fee-based revenue streams. The demand has also conspired to drain some of the excitement from the retail brokerage business, resulting in a dull, anodyne culture at some firms.
“I don’t think the company has a culture — we just come to work,” says a BMO Nesbitt Burns Inc. advisor in Ontario.
“I don’t want to be a part of it. It doesn’t mean that much to me,” says another Ontario Nesbitt Burns advisor.
Brokers who want to do more than just punch in on the clock insist that life at an independent is much more to their liking. “I worked in a bank environment for a long time. It was very banky, very bureaucratic and corporate,” recalls a Canaccord Capital Inc. advisor in the West. At Canaccord, things are different, the advisor adds: “We are all independent business people.”
While brokers like to brag about how entrepreneurial they are, it is important to many of them that they are also part of a unit with shared goals. “It’s a lot of fun, compared with the bank I worked at,” says a Wellington West Capital Inc. broker in Ontario. “Everybody has a share in ownership; everybody cares about performance and client service. It is a positive place to work after working in a negative place for a long time.”
Some brokers go much further, saying a positive work environment is becoming critical. Corporate culture is cited by a number of brokers at independent dealers as one of the primary reasons for their choice of firm. As technology enables smaller firms to offer many of the sophisticated products and services as the big firms, culture becomes an increasingly powerful recruiting tool.
“The world is changing. Before, people would leave a firm for the three Cs: company, career and culture. Now, it’s the environment they work in,” says a Wellington West advisor in Western Canada. “Sometimes culture is the only thing that will move people.”
The sentiment is echoed by an advisor at Richardson Partners Financial Ltd. in Ontario: “The firm’s culture is one of the main reasons I’m here. The partnership culture is unbelievably positive.”
A Raymond James Ltd. broker in Ontario says much the same thing: “It is pretty simple and straightforward. There’s no BS. There are minimal layers of management; communication is efficient and rapid. That is pretty much why I am here.”
It is becoming increasingly apparent that the firms that can build the right culture will win the war for quality advisors. IE