Financial planning firm executives eager to find out what advisors think it takes to be Canada’s premier firm won’t find any easy answers in this year’s Planners’ Report Card. With businesses models as unique and varied as the advisors themselves, each of the 11 firms that were surveyed has its own idea of how to stand apart in an increasingly competitive industry — and what works for one advisor doesn’t always work for another.
So, rather than pointing to the “one perfect firm,” this year’s Report Card results are better suited to offer some clues into what hundreds of advisors think about their dealerships and, by extension, the industry as a whole. The survey taps into three dominant business models: the full-service firms, which have both Investment Dealers Association of Canada and Mutual Fund Dealers Association operations, as well as some mix of insurance managing general agency, mortgage brokerage, debt consolidation, even banking under their umbrellas; the MFDA-based firms; and finally, the no-frills, bare-bones dealership.
But, just like last year, there are a couple of standouts. Although Mississauga, Ont.-based PFSL Investments Canada Ltd. gets no respect from its peers, it scooped first-place ratings in more than half of the survey’s categories, including those rated most important by advisors, such as total compensation, the firm’s strategic focus and its delivery on promises. The advisors who hang their hats at PFSL obviously think highly of the dealer.
PFSL president and chief marketing officer Jeff Dumanski describes the firm’s 4,800 advisors as “middle-class folks helping themselves by helping other middle-class folks.” None of PFSL’s advisors are required to obtain a certified financial planner designation (although it’s encouraged, Dumanski says), meet sales targets or even have a background in financial services.
The firm’s insurance arm, Primerica Life Insurance Co. of Canada, gives advisors access to proprietary insurance products, making life insurance the firm’s most profitable line of business. It also acts as a financial cushion in tough markets, Dumanski says: “It’s all about providing a diverse compensation range so that when cyclical things happen — when the markets come down and affect the mutual fund business, for instance — the insurance side carries you over.”
PFSL’s debt consolidation business, which is offered by referrals to sister company CitiFinancial Canada Inc. , is a large part of the firm’s service offering. “Canadians are up to the hilt with debt right now, and we’re able to reallocate the resources,” says Dumanski, adding that advisors get a referral fee when they direct business to CitiFinancial.
Advisors can also take part in PFSL’s ownership program, whereby those who have been in the business for at least 10 years and who reach a certain level of production and cash flow qualify to own their book of business — or “own their code,” as Dumanski puts it. The ownership program is a particular advantage at retirement, at which time the rep can sell his or her business to another advisor from either within or outside the firm. It’s a model that Dumanski says “hits the right buttons” with advisors.
“For people who want to be challenged, who want to grow without restrictions, this is the best place to be,” says a PFSL advisor in Ontario. “If you want to build a small business, you can. If you want to build a big business, you can. If you want to build an international business, you can.”
How other firms strive to “hit the right buttons” with their advisors depends on the way each firm runs its business.
Advisors at Winnipeg-based Investors Group Inc. gave their firm standout ratings in firm stability, corporate culture and ethics. As one of the few traditional career shops left on the Street, Investors Group also gained stellar marks for its array of support services and training programs, an area in which many firms fell short.
Support for insurance planning is a key focus for the firm this year, particularly as all Investors Group advisors are required to get their insurance licence by their 12th month with the firm, says Kevin Regan, executive vice president of financial services. Forty dedicated support staff members are on hand to mentor reps through their cases and offer guidance as needed.
The focus is all about keeping competition at bay, Regan says: “Fulfilling that client need is an important consideration. If you don’t fulfil it, the competitor may walk in the door.”
@page_break@The firm’s advanced planning group also offers support in areas such as tax planning and wills and estate planning.
Although Investors Group advisors’ product offering is limited to proprietary products and select funds from partners such as AGF Funds Inc. and Fidelity Investments Canada Ltd. , the firm scored a respectable 8.7 in the survey’s “freedom to make objective product choices” category.
For the most part, Investors Group advisors aren’t feeling the product pinch. “Most people think we only sell Investors Group funds, but it’s much less biased now,” says an advisor in Ontario. Adds an East Coast rep: “No one’s pushing anything specific on us. We have a very broad spectrum of products.”
The typical Investors Group advisor has $13.8 million in AUM; although there are internal benchmarks for expected production levels, they’re used as a motivational tool rather than set in stone, Regan says: “We don’t sit back and say, ‘Here’s a target, you must obtain that.’ We say, ‘Here are the possibilities, why don’t you strive for them?'”
But all that support and training comes at a price. Investors Group advisors are well aware that their book of business belongs to the firm — not the advisor – making it almost impossible to move to a competing firm with clients intact — they rated their freedom to move to another firm a 5.3, the lowest-scoring category for Investors Group (and second-lowest in the survey for the category).
The score comes as no surprise to Regan, who says: “We will compete aggressively for clients when advisor leaves our firm. We have many other advisors who are interested in servicing those clients.”
Five full-service firms also figured prominently in this year’s Report Card. Montreal-based Peak Investment Services Inc. led the group this year with a business model that “caters to the fully independent advisor,” says Robert Frances, president and CEO.
A typical Peak advisor has $20 million in AUM, with 80% typically in managed products, such as mutual funds and wraps, and the remainder in insurance and securities.
One area in which the firm appears to succeed is in giving advisors a full range of support while allowing them to run their business as independent owners.
“What we try to do is provide [advisors with] access to all the tools they need — be it products, technology or support — so they can do a good job,” Frances says. But he is quick to note that advisors are given full autonomy, unrestricted by proprietary products or quotas. The firm offers no house products.
“Peak has a flexible contract with very reasonable terms,” says a Prairies advisor when asked to rate “freedom to move to another firm.” Other Peak advisors apparently feel the same. They rated their freedom to move a 9.5 — the highest score across the board.
But the remaining full-service firms didn’t fare quite as well, despite the popular notion that multiple platforms offer a broader service offering, and consequently, more advantages for the advisor. The five MFDA-only firms in this year’s Report Card rated slightly higher overall in telling categories such as “strategic focus” and “quality of product offering” than their dual-platform peers. What’s more, the single-platform firms also outscored the full-service firms in some of the most important aspects, including corporate culture, compensation and stability.
Still, full-service firms insist they’re on the right track with their multiple-platform model. “In terms of providing the best advice and the best environment for advisors, having a basket of infrastructure that covers all the pillars of the business is crucial,” says Kym Anthony, CEO of Toronto-based Dundee Securities Corp.
Twenty-six per cent of its 1,887 advisors are IDA-licensed; 74% are MFDA-licensed; and 63% are insurance-licenced.
It’s the same for Berkshire Investment Group Inc. which is building out its IDA platform. Of its 800 advisors, 280, or 35%, are IDA-licensed; the remaining advisors are MFDA-licensed. At Assante Corp. , 55% of advisors have their IDA licence and 45% have their MFDA licence; and at Investment Planning Counsel, only 12% are IDA-licensed, whereas 88% are MFDA-licensed. All say that offering both platforms is essential to providing clients with the best services, and ultimately, keeping assets in the firm.
“The advisor has one company that they can deal with for all of their services and have all of their client holdings in one consolidated package,” says Chris Reynolds, president of Mississauga, Ont.-based IPC. “Our IDA platform is one of the fastest-growing of all our business lines.”
Finally, there’s the lone bare-bones dealership in this year’s survey, FundEx Investments Inc. The Markham, Ont.-based firm acts as a back office for its advisors without providing any of the frills of a full-service dealer, such as marketing support or national branding. In return for a flat fee, advisors take home 100% of their commissions.
With an IE rating of 7.5, FundEx ranked solidly in the middle this year. Its 5.0 scores in “consumer Web site” and “image with the public” dragged its overall rating, which was buoyed somewhat by higher ratings in compensation (with 8.7, second only to PFSL), ethics and legal and compliance.
Although FundEx advisors griped about the lack of support systems and bemoaned the firm’s near-invisible public image — “I don’t think we have one,” says an Ontario advisor — most are fully aware that that’s not FundEx’s offering. It was a fact that was clearly reflected in the scores: advisors gave the firm a 8.8 on its delivery of promises. IE