Financial planners fall into three camps concerning proprietary products. There are those who believe in and happily sell their firm’s housewares; those who ignore the pressure, if any, to do so; and those who are so averse to house products that they refuse to work for firms that carry them.
Overall, planners say they regard freedom from having to sell proprietary products as an important factor in maintaining their independence and serving their clients’ interests. The good news, however, is that most advisors surveyed for the 2005 Planners’ Report Card don’t think their companies are putting undue pressure on them to sell house products.
An Ontario advisor at Assante Corp. says he never feels pressure to sell the company’s in-house line of products, while a West Coast advisor at Money Concepts Canada says his firm’s products are “offered but not pushed.”
Six of the firms surveyed (FundEx Investments Inc., IQON Financial Inc., Partners in Planning Financial Services Ltd., Peak Investment Services Inc., W.H. Stuart & Associates and Worldsource Financial Management Inc.) don’t carry proprietary products on their shelves. Of the firms that do, all say they neither put pressure on their advisors to sell products nor set quotas or targets for them to hit.
“One of the reasons [advisors] are with us is we don’t enforce those kind of [proprietary product] targets,” says Greg Gray, president and CEO of Manulife Securities International Ltd. in Waterloo, Ont. Although Manulife Securities doesn’t carry custom-branded house products, its corporate parent, Manulife Financial Corp., does, including Elliott & Page Ltd. mutual funds.
“Elliott & Page is one of the mutual fund lines [Manulife Financial] offers, but there are no requirements here for anybody to sell them. [E&P has] to earn the right to do business, just like anybody else,” Gray says.
An Ontario-based Manulife advisor, however, says there is an economic incentive — or pressure, depending on how you look at it — to sell house products. “If a client has less than $50,000 in funds, there are fees to pay unless that client is invested in E&P. It almost forces the client to invest in them because of the fees that will be waived,” he says.
Dealers say they don’t exert influence on advisors to sell proprietary products, but it’s clear that house products generate revenue.
“On a corporate level, the manufactured product is more profitable than non-manufactured product,” says Scott Sinclair, president and CEO of Money Concepts Canada and AEGON Dealer Services Canada Inc., both based in Toronto. “And that’s true for us as well.”
But, he says, neither ADSCI nor Money Concepts has quotas or targets for proprietary products.
Partners in Planning, which doesn’t sell house products, hasn’t ruled out introducing them in the future because of their revenue-generating potential. “In the industry, one of the [characteristics of] the very successful firms with cash flow is the revenue they get from MERs on the proprietary product side … It’s a consideration we’ve had [to manufacture house products],” says Michael Wolfond, CEO of Regina-based PIP.
A number of advisors say they ignore pressure to sell proprietary products. “I don’t succumb easily to such pressure. I look at the track record of the investment itself,” says an Ontario advisor at Burlington, Ont.-based Berkshire Investment Group Inc.
Laurentian Financial Services, part of the Desjardins group of companies, sells a custom-branded line of proprietary products and received the lowest score (7.9) of the companies surveyed in terms of pressure to sell house products.
Steve Cole, Laurentian’s national sales manager in Toronto, says house brands can be a wise buy for clients. “Most clients have a definition of competitive products that goes beyond price, and that is met by Desjardins — particularly in the ability of our advisors to deal one-on-one, on the phone or in person, with the underwriting staff,” he says.
There are advisors who don’t mind selling proprietary products, and not just because that is their only choice. Winnipeg-based Investors Group Inc., which offers only proprietary products, rated high among its advisors in terms of recommending the firm to other advisors. So did Mississauga, Ont.-based PFSL Investments Canada Ltd., whose advisors sell only in-house insurance products.
“Those who are interested in planning their clients’ portfolios along an asset-allocation philosophy are not left wanting product diversity or quality of performance,” says Kevin Regan, IG’s executive vice president, financial services. “There are no limitations, unless you want a specific name — in which case you go to our securities operations [IG Securities Inc.].”