Although stock markets have bounced back and the economy appears to be emerging from the recession, financial advisors surveyed for Investment Executive’s 2010 Dealers’ Report Card aren’t jumping for joy. In fact, many firms got a beating from their advisors, as ratings plummeted throughout a number of categories, including “firm’s public image,” “firm’s consumer advertising” and “firm’s marketing support for advisor’s practice.” (See table on page C4.)
IE researchers Fiona Collie, Olivia Li, Anna Olejarczyk and Dinah Zeldin spoke with 481 advisors at 13 dealerships across the country, including full-service dealers, mutual fund dealers and independent dealers. Advisors were asked to provide performance and importance ratings for 31 categories on a scale of zero to 10, with zero meaning “poor” or “unimportant” and 10 meaning “excellent” or “critically important.”
Individual ratings were then averaged for each category, both firm-wide and Report Card-wide. The “IE rating” is the average rating for all categories for each firm — excluding the “overall rating by advisors,” which is the rating advisors gave their firms out of 10.
New to this year’s questionnaire are two questions regarding support services. Advisors were asked to rate their firms’ “support for helping clients accumulate assets for retirement” (i.e., planning ahead for their retirement) and “support for helping clients plan for post-retirement income.” Also new to this year’s survey is a question on “firm’s due diligence process for new products.”
And, in light of the market conditions that continued to rattle advisors and their businesses throughout 2009, advisors were once again asked to rate their “firm’s support during the market downturn” in a supplemental question.
In recent years, overall performance ratings for individual categories had remained relatively unchanged. But after tallying up this year’s results, it is obvious that advisors’ expectations are not being met in a number of areas. Overall scores in “firm’s image with the public,” “firm’s corporate culture,” and “firm’s strategic focus” all took a nosedive, dropping by as much as 0.8 of point in some cases.
Seven firms saw major declines of at least half a point in five or more of the Report Card categories, with Toronto-based Assante Wealth Management (Canada) Ltd. rated lower in 19 of the 31 categories in the survey that applied to the firm. Assante also saw its IE rating drop to 7.1 from 7.9 last year.
“The firm’s corporate culture is deteriorating over time,” says an Assante advisor in Alberta. “We are doing it alone. For example, everyone’s revenue declined, so they cut our grid. Our revenue declined even further to make theirs look better.”
Richmond Hill, Ont.-based Global Maxfin Investments Inc. — which last year acquired Calgary-based Professional Investment Services (Canada) Inc., a firm listed in previous Report Cards — was not far behind Assante. Performance ratings for the firm fell by half a point or more compared with those given to PIS last year in 17 of the 20 categories in the survey that applied to the firm, with many advisors questioning the firm’s compensation structure, technology, back-office platform and its delivery on promises.
This decline in scores doesn’t come as a surprise. Many firms that have gone through a merger in previous years have seen similar results in IE‘s Report Card series and managed to rebound the following year. When Global Maxfin acquired PIS late last year, the intention was to combine the two groups of advisors as soon as possible. However, prolonged legacy compliance issues brought over from PIS have put a halt to those plans, causing some advisors to become aggravated with the new regime.
“They have started to take hold of all of the compliance problems PIS had, but the methodology they are using is very frustrating,” says a Global Maxfin advisor in Alberta. “They bombarded us with compliance bulletins daily instead of taking a reasonable, problem-solving approach.”
@page_break@But some advisors are looking at the bright side and hope that the constant movement has finally come to an end and that stability, for both their clients and themselves, is here to stay. Says a Global Maxfin advisor in Manitoba: “I am hoping this will affect my business positively and there will be more business coming in.”
(For more on Assante’s and Global Maxfin’s struggles, see story on page C10.)
Burlington, Ont.-based Manulife Securities saw only a slight dip in its IE rating to 7.5 from 7.8 last year, but the firm saw ratings drop by half a point or more in 10 categories, with only one category increasing by the same margin.
Manulife advisors complained of a lack of strategic focus, and many said they don’t think the firm knows where it is going. “It does not have any coherent, long- or mid-term strategy that includes its advisors,” says an advisor in Alberta. “[Management] does what’s good for [the firm]. They are not interested in growth because it’s so big that they don’t care.
A Manulife advisor in Ontario, who would not recommend the firm to others, agrees: “They have lost sight of who their advisors are, and it is to their detriment. Manulife had a certain camaraderie four years ago, but it has grown too big too quickly, and [management has] lost sight of who brought them there.”
But management says the firm has weathered the storm and, in the process, has been able to retain its 1,400 advisors. “Our retention [rate] is extremely high,” says Rick Annaert, Manulife’s president and CEO. “And right now, we’re in the process of recruiting significant numbers of advisors week by week. So, it’s resonating within our existing advisors — and that’s where we hope we will stay. We have lots of new people wanting to join us.”
Despite the turmoil of the past year, some firms did manage to pull through unscathed. Mississauga, Ont.-based Investment Planning Counsel and Calgary-based Portfolio Strategies Corp. both saw their “overall rating by advisors” increase by half a point, while Toronto-based DundeeWealth Inc.managed to see major improvements of half a point or more in six categories, including “firm’s total compensation,” “quality of firm’s product offering” and “firm’s stability.”
DundeeWealth is a full-service dealer with more than 1,100 advisors working on either the Investment Industry Regulatory Organization of Canada platform or the Mutual Fund Dealers Association of Canada platform. The firm provides advisors with an average payout of 80% and managed to maintain its compensation structure intact during the recession, as well as roll out a client communication program entitled What does your recovery look like?
The program has provided advisors with the necessary tools to explain the recessionary situation to clients, and includes a presentation that can be sent out to individual clients. In addition, the firm conducted a cross-country tour that allowed all of its advisors to meet president and CEO David Goodman. Says Richard McIntyre, DundeeWealth’s executive vice president, retail: “What we are trying to do is provide a very stable platform for advisors to process their business, as well as help them grow their business.”
Historically, DundeeWealth has housed 3,500 advisors, but the firm has intentionally downsized to about 1,100 over the past five to six years in order to focus on a smaller, higher-quality advisory base, says McIntyre. Over the past two years, the firm has accelerated this downsizing. “The thing they say about having strength in numbers, our strength is in quality,” he says. “Having a large number of advisors is not really the point of this. When you look at our averages, our average assets under management per advisor have doubled when our [total roster of] advisors has gone to just more than 1,000 from 3,500.”
Also dodging the bullet was Winnipeg-based Investors Group Inc. Not only did the firm manage to maintain its “IE rating” and its “overall rating by advisors,” but it also improved throughout most of the categories in the Report Card. The firm prides itself on its intense focus on developing financial plans for clients as well as its stability. Yet again, the firm had one of the strongest ratings in the stability category. At 9.7, this rating matches last year’s strong result.
“The best thing about this firm is having the support of a large corporation that’s got a great reputation,” says an Investors Group advisor in Ontario, “and Investors Group has been around for 80 years now.”
The firm’s advisors rave about the support from local regional management, the company’s compensation structure and the straightforward succession plan for advisors.
Investors Group offers its Assured Value program, in which advisors who are seeking to leave the industry are assisted in transferring their books of business. The firm helps the outgoing advisor find an advisor, or group of advisors, looking to take on more clients. The firm ensures that the departing advisor assists the incoming advisor with proper introductions to the clients in the book and transfer of knowledge and personal information about the clients. In return, the outgoing advisor receives an assured payout.
Although the firm is listed as a full-service dealer, only five of its advisors are licensed on the IIROC platform. The majority work on the MFDA platform.
• Investor Group’s Regan on topping full-service dealers
Kevin Regan, executive vice president for financial services at Investors Group Inc., describes how the firm topped the full-service firms in the Dealers’ Report Card including a discussion of ethics, compensation and strategic focus. He spoke with Gavin Adamson of Investment Executive at one of the firm’s Toronto offices. WATCH
In the mutual fund dealer world, Mississauga-based PFSL Investments Canada Ltd. continues to be a powerhouse when it comes to the ratings. Currently, there are 5,310 MFDA-licensed advisors, and those surveyed continue to give top marks almost across the board to the firm. Says a PFSL advisor in Ontario: “It’s one of the best firm’s still out there today.”
Adds a PFSL advisor in British Columbia: “[The firm] has never served us wrong. We have great leadership, and it’s always looking out for the little guy.”
The firm has an internal agency similar to a traditional managing general agency, as well as a hierarchal structure similar to that found in the real estate industry. In real estate, there are branch managers and then subrealtors working with them. The branch managers then get overrides, explains Jeff Dumanski, PFSL’s president and chief marketing officer: “It is a unique business model, as a whole. But when you look at it in parts, you see that it isn’t all that unique. So, it is the best of many models out there — and it has been finely tuned over the past 30 years.”
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