Thumbs down – again – on statements

“They’ve got to change the statements. Management: are you listening?” asks one Montreal-based broker for National Bank Financial Inc. “Please include the cost of securities. The holdings only show the market value, they don’t show what the client actually paid for those securities. Then, on certain points the statements are way too detailed, whereas on others there is almost no information. Clients end up asking us to read the statements to them and it takes up a lot of our time,” he says.

Advisors also complain about the lack of long-term performance data. “They aren’t clear enough. They don’t show adjusted cost of the security or what you paid for it. They only show the month-to-month changes,” says one Winnipeg broker at BMO Nesbitt Burns Inc.

“There should be graphics, including pie charts and line charts, showing annual returns. Once I take a client through it, they seem to understand it reasonably well, but you shouldn’t have to do that,” he says. He adds that he has heard through the grapevine that his company’s statements were the best in the industry.

“If we’re supposed to be the best, then there are lots of statements out there with lots of problems. There’s no way ours are the best,” he says.

Another broker at National Bank Financial in Vancouver called the firm’s statements “pathetic and terrible.”

“There is no record of the initial purchase price, so you never know how well you are doing. The scary thing is, they are actually better than they used to be,” the broker says.

Sentiment was most negative at Merrill Lynch Canada Inc., which brought up the rear in 2000 after placing ninth out of 10 in last year’s report card. “They should consult with us before they design statements,” says one Merrill advisor in Hamilton, Ont. “And they should have new statements soon. Ours are the worst in the industry. They suck.”

Peter Kahnert, vice president of corporate communications for Merrill in Toronto, says the company has been aware for some time of the perceived inadequacies of its client statements, but Y2K and transition issues from the merger with Midland Walwyn Capital Inc. have interfered with designing and implementing replacements.

“We’ve heard from our people loud and clear about the changes required. We’re now working toward making significant improvements in this area – which should be in place as of September’s month end statement run,” he says.

In January, Merrill put together a committee representative of the firm – including financial consultants – to look at client statements and improve them, Kahnert says. He adds that the revamped statements probably will include book values and more detailed information on mutual fund holdings, among other changes, and the company is looking at working with counterparts in the U.S. to see if there are attributes of their statements that the Canadian arm should include.

“We can understand why our financial consultants would give us that rating at this point, but we hope this will be changed by the time the next report card rolls around,” Kahnert says.

There were two bright spots this year. Canaccord Capital Corp. placed second, up from seventh last year, and ScotiaMcLeod Inc. came in sixth, up from last in 1999.

Peter Virvilis, senior vice president, operations and treasury, at Canaccord in Vancouver, credits his firm’s high standing to focus group-driven changes made to the company’s statements last year. The groups included a broad section of sales staff from across Canada who were encouraged to solicit feedback from their clients. “We provided them with examples of statements used by other Canadian and U.S. dealers,” he says.

The statements went through four or five drafts before the company had a soft launch at one office for its December statements and a company-wide launch a month later.

The changes include consolidation of accounts into one format, a summary of consolidated information, a breakdown by asset class at the beginning of the statement, month-to-month changes in the portfolio’s value and percentage of foreign content.

Virvilis says he expects, as further input is received, that a statement update will occur in about six months.

One Winnipeg-based broker at ScotiaMcLeod with eight years’ experience in the industry, says he wasn’t surprised by his firm’s improved showing because the company has revised its statements significantly in the past year. “The biggest change is now they have an asset-class summary showing how much in equities, bonds, cash and preferred shares a client has. They’re more clear. The front page tells you the cash balance and what income you received in that month.

“Now we’re showing the cost of the investment, so you can do a quick calculation to determine if you are showing a profit or a loss on the investment.

“But they’re still not where I’d like them to be,” he says.

He’d like to see a column showing profit or loss on individual investments and an internal rate of return because “that way both my clients and I will know whether I’m doing a good job.”

In his career he has seen almost 20 different statements at the companies he has worked at, and he admits that now he doesn’t get too worked up about it. “God can grant me the wisdom to know what I can change and what I can’t,” he says.

Still, one relatively straightforward change annoys him. Last year, the company began printing its statements on double-sided paper, and he’s lost track of the number of clients who have called asking where the rest of their statement is.

“Out of all of the questions I get, the answer to most of them is, ‘Look on the other side of the page.’ It’s such a simple thing, but for some reason they have difficulties with it. But if they changed it all at once, it would be too difficult for the client to understand,” he says.