Living with change

Several factors are fuelling the evolution, according to almost 400 advisors at the country’s largest planning firms interviewed by Investment Executive for our 2002 Planners’ Report Card: client segmentation, technology and the new industry buzzword, “product integration.”

It’s an accepted fact that firms that are quick to adapt newer, stronger and faster systems can separate themselves from the rest of the pack. But the very nature of technology means it is always changing, and planners across the country are saying that keeping up with these changes is the most significant factor affecting their firms.

An advisor with IPC Financial Network Inc. in Toronto says the worst aspect of his firm is “the front-office and back-office systems,” but, he adds, the situation is the same everywhere: “I don’t think it’s any worse than any other firm, but it could definitely be a whole lot better.”

In the survey, conducted in April and May, advisors at Canada’s large national planning firms were asked to rate the importance of various factors affecting their businesses, and technology received an average score of 7.0 from the 14 firms polled. Consolidation, segmenting clients and product integration received scores in the 4s and mid-5s.

When asked what area the firm should focus on in the coming year, technology was the first pick by planners at 10 of the 14 firms polled.

Jim Bowman, senior advisor with Jim Bowman and Associates in Windsor, Ont., whose business is registered with Assante Capital Management Ltd., has seen much in the way of technological change in his 40-year career in the financial services industry. “It’s a lot different now than it was even 10 years ago, let alone 40 years ago,” he says.

Advances in technology, he says, have and will continue to have a great impact on advisors and the efficiency with which they run their businesses. But, he says, clients won’t shop companies based on how good the technology platform is. While relationships with clients can be solidified with good technology, maintaining good relationships with clients is what is really important.
“If we could provide clients with rate-of-return calculations and up-to-date account information — that kind of technology would be important because [clients now want access] to more and more information,” Bowman says.

The scramble to snag high net-worth clients, coupled with a more strenuous regulatory environment, are also contributing to the industry’s metamorphosis. Bowman says the two are closely linked.

“You see ads for people with $250,000 in assets to attend this seminar. What that’s saying is: ‘We don’t want you if you have less than that’,” Bowman fumes. “The regulatory environment has become really bad, and what I have to do to open a new account is horrendous. It discourages opening small accounts and it’s going to hurt the small investors who won’t be getting the advice they need.”

It seems more and more planners are feeling the crunch under new Mutual Fund Dealers Association rules. “It’s making it hard to operate in the industry,” says Tom Sullivan, partner with H&H Associates Financial Services Inc. in Kingston, Ont. “The MFDA brings in this stuff to help investors, which is good, but it means more fees levied on us and more restrictions.”

Like others, Sullivan, a 15-year industry veteran, is reeling from the fact that his dealer,
Manulife Financial Corp., will own his client files as per MFDA regulations.

“Essentially, we’ve given up total control of our books,” he says. He also wonders how the next generation of financial planners will break into the business.

The new regulatory situation is weighing heavily on advisors like Bowman who say their track records should be able to speak for themselves. With four decades in the business, Bowman finds the new complex regulatory regime frustrating. It really gets him down sometimes.

“What they’re saying is: ‘We can’t assume you’re honest because there are so many crooks out there.’ Well, I know these clients like my own family. I know their children and grandchildren, I know their hobbies, I know their favourite foods. But I still need to have my ‘know your client’ papers signed every couple of years,” he says.

“I don’t get paid because I spend 40 hours a week at my job but because I have 40 years’ experience,” he adds.

Bowman also concedes that not everything the MFDA is doing is bad. He says putting the emphasis on career advisors and getting away from financial planning as a part-time career (as a way for some people to ease into retirement) is a very good thing.

“They’re getting away from the house-call advisor and the basement advisor because regulations won’t permit that. I used to do a lot of business at the kitchen table, but it doesn’t happen much any more,” he says.

Sullivan, on the other hand, sees some planners retreating to the old ways because of the increased costs of running a business. “People are going back to working in their basements, and that’s not good for the industry,” he says.

Both Bowman and Sullivan agree that the financial planning business is rewarding, and while both have heard of colleagues fleeing to their cellars or heading for early retirement, neither thinks it’s time to leave the industry.

At 61, Bowman doesn’t see retirement in the near future because of the satisfaction he gets from doing a good job for his clients. He says the only thing that would stop him is his health or a funeral. IE