Preparing this report card — Main chart attached

They prodded financial planners to rate their firms in dozens of categories, and to answer myriad questions on how they run their businesses.

Although planners are usually more generous with their time than brokers, whom we surveyed for our Brokerage Report Card (in our May 2003 issue), it is still no easy feat to question an average of 27 planners at each firm.

The task takes hundreds of hours, but the time spent is very fruitful. The results give us a measure of the average planner and how each firm compares with the others.

For the survey, planners are randomly selected from IE’s mailing list and must have a minimum of one year of industry experience to participate. The firms surveyed must have at least 200 registered reps and a national presence.

Using telephone and fax questionnaires, we ask the planners at each firm to rate their employer on a scale from zero to 10 (poor to excellent) in 21 categories, ranging from what they think about their firm’s advertising to the quality of mutual fund research.

Each interview typically takes about 10 minutes.

The ratings reflect what front-line planners think about the support, services and products they receive from head office. We then average the planners’ ratings in each category and produce a firm’s overall score for that question.

To create the IE rating, we take each firm’s category scores (excluding payout percentage) and average them. We then award extra marks for how many times a firm took the top spot in a category. We use the IE rating to rank the firms from highest to lowest.

As with our Brokerage Report Card, comparing the overall rating to the IE rating reveals a certain “goodwill” factor at work at most firms. Advisors give a higher rating to their firm as a whole than their category responses would indicate.

This year’s winner was PFSL Investment Canada Ltd. of Mississauga, Ont. James Langton’s story on page C2 describes why PFSL advisors think so highly of their firm.

And several firms, for example, WorldSource Wealth Management Inc. of Markham, Ont., and Cartier Partners Financial Services of London, Ont., are works in progress. Read Jeff Sanford’s story on page C6 to see how these companies are repositioning themselves.

There is one new company in this year’s report, the distribution arm of the giant Desjardin group, Laurentian Financial Services, based in Montreal. The extra firm in this year’s survey helped to lower the category averages, but the overall picture is considerably less dismal than in 2002. Only two categories are lower in 2003 by more than 0.5 points — ease of moving firms and client Web tools. In particular, planners tell us, it is becoming more difficult to switch firms each year. This year’s average rating fell to 6.0, a five-year low.

Following last year’s practice, we’ve included Markham, Ont.-based FundEX Investments Inc. and Money Concepts (Canada) Ltd. of Toronto in our survey, but we’ve excluded them from our rankings because they have unique structures.

Money Concepts is a franchise organization and FundEX provides its planners with a 100% payout, leaving the advisors to assume responsibility for an number of services that other firms handle.

We also survey planners to obtain their payout percentage. The answers to this question surprised us this year, as the average payouts at two firms, PFSL and Investors Group Inc. of Winnipeg, were sharply below averages at the other firms. Kate McCaffery’s compensation story on page C8 details our findings.

The blurring of lines between brokers and financial planning firms isn’t making our task any easier. Many reps now hold licences to sell both securities and mutual funds, and it can be tricky to determine whether an advisor is a “broker” or a “planner.”

We don’t expect this problem to go away, and we will be watching to see how the industry comes to grips with dual-licensed reps. IE