Brokers feel they are under more pressure this year than last to sell the products their firms are offering. Marks in the “freedom to choose” category have declined in this year’s Brokerage Report Card. It seems advisors are feeling pressure to push what’s best for the firm’s bottom line rather than what may be best for the client.
Overall, brokers rate their sense of freedom and independence almost a half-point lower than they did in 2003. In interviews, they say they’re being pushed to promote in-house product, and also strongly encouraged to explore new business models. Individual firms, however, did buck the trend.
At Edward Jones, the freedom rating stayed roughly the same, at 8.8 out of 10. Like everywhere else, the firm’s brokers felt the heat from head office, but more in the form of pressure to adhere to a strict investment strategy. In the words of one Ontario rep: “As long as it’s conservative, there’s no pressure.” Gary Reamey, head of Edward Jones‘ Canadian operations, says: “Our brokers are free to choose a wide variety of high-quality investments, although we avoid aggressive investments.”
TD Waterhouse Investment Advice, which had a strong 9.1 rating in the 2003 Brokerage Report Card, fell this year to 7.6, even lower than its 2002 ranking.
Even at Canaccord Capital Corp., whose reps gave the firm the second-highest rating, 9.4 points, for freedom from pressure, brokers feel some pressure. “There are invitations, in the form of higher payouts,” says a Canaccord broker in the West.
Executives at all firms surveyed feel that pressure on brokers is minimal, especially in regard to house products. “Proprietary products represent a very small part of our total asset mix; it’s about 8%,” says Mike Scott, chief operating officer of RBC Dominion Securities Inc. Dave Agnew, RBC DS’s national director, adds: “Our RBC funds have a lot of top-quartile performers, but the investment advisors have resisted selling them because they don’t want the clients to think they’re selling in-house product because they’re getting paid more for it.”
Nevertheless, RBC DS brokers do feel some pressure from the firm. As one Ontario rep says: “Pressure to move larger assets, pressure to sell new issues” is one of the worst parts of the job.
At CIBC Wood Gundy, a Western broker says the “slight push to sell internal products” is one of the major drawbacks of the firm. Another CIBC Wood Gundy broker based in Ontario says that there’s “higher payout for internal products,” which affects freedom and independence.
However, some brokers see CIBC Wood Gundy in a more benevolent light. “When we were Merrill Lynch [Canada Inc.], they were very irritated because we didn’t do managed-money,” says an Ontario broker.
“CIBC is tolerant of our business,” even though the firm’s strategic focus is “180 degrees from what we’re doing.” Overall, CIBC Wood Gundy stayed fairly consistent, with its rating dropping by only 0.2.
At Raymond James Ltd., concern over corporate pressure and the firm’s strategic focus was more widespread. “They say that we’re moving toward more asset-based [products],” says one Ontario broker. “But I’m not going to.”
It’s the same across the country. Another Raymond James broker complains: “There’s pressure from the firm to go into managed programs, but I’m not interested.”
The majority of Raymond James reps, however, do seem interested in moving with the firm toward an asset-based revenue structure. The company’s strategic focus rating went up 0.9 to 6.8, and Raymond James was one of only two firms surveyed to receive a higher rating for freedom in 2004. Terry Hetherington, national sales manager, says, “In no way do we encourage, either by compensation modelling or by suasion, moral or otherwise, our IAs to sell one particular kind of product over another.”
Still, several Raymond James brokers are feeling the difference between their goals and those of the company. “They’re trying to become asset managers,” says an Alberta rep, “but that’s not what I do.”
At ScotiaMcLeod Inc., the pressure is on the size of brokers’ business, rather than the type of business. An Ontario ScotiaMcLeod rep says the company has instituted “punitive policies” on smaller accounts.
“Corporate philosophy used to be to grow business by taking people with a certain asset size,” he says. The push to larger accounts “has hurt our business, and it’ll really hurt in the future.”