2001 PLANNERS’ REPORT CARD

Is there pressure to sell house funds?

 

2001

2000

1999

Regal Capital

9.9

9.5

9.7

FundEX

9.7

n/a

n/a

Sun Life

9.5

n/a

n/a

TWC Financial

9.5

9.7

9.6

Berkshire

9.4

9.7

n/a

Manulife

9.4

9.5

n/a

Money Concepts

9.4

9.6

8.9

W.H. Stuart

9.4

9.5

9.9

CMG Worldsource

9.2

9.8

9.9

Balanced Planning

9.1

9.7

9.7

Dundee

9.1

9.6

n/a

IPC Financial

9.0

n/a

n/a

Primerica

8.8

8.9

8.3

Assante

8.7

n/a

n/a

Investors Group

7.6

8.8

7.2

 

SOURCE: INVESTMENT EXECUTIVE RESEARCH

INVESTMENT EXECUTIVE CHART

In the beginning, the financial planning industry was based on a desire to provide clients with advice they could count on, and to give planners a place to work free of head-office influence.

Alas, all good things must end. In fact, this year’s Planners’ Report Card seems to suggest that heaven on earth may be slipping further away.

The survey indicates planners in 2001 are feeling slightly more pressure from head office to toe the party line and sell proprietary funds to their clients. When asked about the freedom from pressure to sell proprietary products, the overall average rating this year was a 9.2. That compares with 9.5 last year and 9.2 in 1999, the first year of the survey. (The higher the score, the more freedom planners have.)

But what is more disconcerting is the rate at which the ratings for the individual firms are changing. Whereas last year’s numbers were relatively unchanged from the year before, save for a half-point difference among planners with Money Concepts (Canada) Ltd., this year’s numbers are relatively volatile — and heading downward.

This year, four planning firms register scores that are a full half-point lower than last year on the proprietary product issue, while only Regal Capital Planners Ltd. records an increase in its score.

There are some planners who talk up their freedom, but they are the exception rather than the rule. Planners at FundEX Investments Inc., for example, are among those having the most freedom. “This is paramount to why I went to FundEX,” says a planner from Ottawa.

Compare that with planners from Balanced Planning Financial Group, CMG Worldsource Financial Services Inc., Dundee Private Investors Inc. and Investors Group Inc., who all said they felt they had less freedom than a year ago and are feeling more pressure to sell proprietary products.

IG recorded the lowest score, receiving a 7.6 from its planners. Assante Corp. was next up with 8.7 and Primerica Financial Services Ltd. recorded 8.8.

That IG and Primerica are at or near the bottom is no surprise. At both IG and Primerica, it is company policy to sell only proprietary products. “There is no recommended list, it is simply all that we are allowed to sell,” says one Primerica rep from Alberta.

Nor is it surprising to see Assante near the bottom of the ranking, or Dundee on its way down. Both distribution arms grew out of fund companies, Loring Ward Investment Counsel Inc., which manages Optima funds, in the case of Assante and Dynamic in the case of Dundee. Assante president Marty Weinberg has said that it is in the sales of proprietary product that he sees the potential for increased profitability. And Dundee’s patriarch, Ned Goodman, wanted to protect sales of Dynamic funds when the firm took in Fortune Financial Corp. reps.

The surprise comes from Toronto-based IPC Financial Network Inc.; 11% of its reps surveyed admit to feeling increased pressure to sell proprietary funds.

No planners at Berkshire Investment Group, FundEX or Sun Life Financial Services of Canada Inc. say they feel any pressure.

Although there is some pressure to sell certain products at all firms, it is often from a compliance angle or an administrative perspective, which seems to be the case at this group of firms.

“We are under pressure to sell only from companies that provide electronic feeds. There are A, B and C lists, but it has all to do with administration,” says a CMG planner from British Columbia.

That perspective may make sense for the client. But increasingly, that approach identifies one side of a major split opening up in the industry in terms of corporate structure.

Some managers are betting the firm, and the proverbial farm, on the proprietary business model, while others in the financial services industry are betting on a different model, the “open product architecture” method. This is a fee-based model, in which proprietary products are shelved, leaving the rep free to provide the best product to the client. The basis of wealth in the firm no longer depends on the units of proprietary product moved but rather on the advice dispensed.

Planners are free to use any product they think fits the client, using head office for back-office functions; the proprietary group supports large management structures on the fees from their proprietary products.

For some, open product architecture is a must. “They are not pushing anything on us — yet. If it comes, I’m gone,” says a Balanced planner from Alberta.

For others, the proprietary model makes sense in terms of immediate payoff. The trend toward in-house brands has caught on for a number of reasons. Firms will often waive some of the fees, such as trustee fees on RRSP accounts, if planners use the house products. However, some house products may not otherwise warrant a second look on the basis of performance. IE