Advice: Talk about banking

“Participation in those products has grown quite astronomically over the past several years,” says Todd Asman, vice president of banking and mortgages with Winnipeg-based Investors Group Inc. The firm, which offers its own mortgages as well as other banking products through a partnership with Montreal-based National Bank of Canada, has seen 25% growth in the number of loans originated through its network of consultants in the past year.

Investors Group has 75 mortgage specialists across Canada who manage transactions involving mortgages and lines of credit; as this business grows, the firm is adding new members to this team, says Asman: “We’ve made it a priority.”

Other banks that distribute pro-ducts through independent advisors have also seen hefty growth in this channel. Alex Lucas, assistant vice president of product and marketing at Waterloo, Ont.-based Manulife Bank of Canada, says the number of advisors who have referred clients for a banking product in the past year has grown by about 10%.

And Toronto-based B2B Trust, a subsidiary of Montreal-based Laurentian Bank of Canada, has accumulated more than $3 billion in assets in its high-interest investment account, which it launched in 2008 and is available exclusively through advisors.

“It’s been doing very, very well,” says Christine Zalzal, vice president of marketing at B2B Trust. “There’s a lot of activity in the [advisor] community.”

Advisors traditionally have stayed away from the banking realm, but the shift toward comprehensive financial planning has prompted many advisors to broach the subject of banking products with clients.

“Culturally, it’s a bit of a challenge to encourage advisors to integrate banking into their offerings — or it was, historically,” says Gordon Gibson, vice president of financial strategies and planning with National Bank. “But the business is morphing, and we hear a lot about the transition from asset management to wealth management, which is a more global financial offering.”

Gibson estimates that 25%-30% of advisors in Canada are proactively talking to clients about their total financial picture, including banking products. “We have seen a pretty big sea change,” Gibson says. “The interest is growing, and we’ve seen a big pickup in the past five to seven years.”

This shift is partly being driven by increasingly aggressive competition from the big banks, which continue to beef up their financial planning offerings, says Lucas: “They’ve been pushing farther and farther into the advice territory.”

The banks are leveraging their existing customer relationships to drive growth on the advice side, which threatens the relationships that these clients may have
with independent advisors. By helping clients with their banking needs, advisors find their clients are less exposed to solicitation from the banks. (Advisors generating banking business under referral arrangements are typically protected by non-solicitation agreements with the banks.)

“There’s a competitor on every corner, plus a bank, plus an insurance company,” says Ahmet Jakupi, an advisor in Kitchener, Ont., with Investment Planning Counsel who offers banking solutions. “You have to have built that relationship so that when your clients have a question, when they have a need, or a concern — whatever it is, financially — they’re going to call you first.”

Jakupi began talking to his clients about mortgages in the 1990s, and later began assessing their broader credit needs, exploring opportunities to reduce clients’ interest costs or accelerate debt payments. It’s now a topic he discusses with more than 90% of his clients.

When Jakupi first introduced these offerings, very few other advisors had done so. “Back then, it would be frowned upon,” he says, “because it was taking away from what I was supposed to truly do.” But Jakupi now sees many more advisors broaching this subject with their clients.

Contributing to this trend is the surge in household debt levels, which has clients more eager to discuss debt management. It’s become critical for advisors to address this topic as part of their clients’ overall financial picture, says Asman: “If you’re ignoring the liability side of the balance sheet, there’s a big part of the whole financial planning process that’s being missed. We believe that this is a huge opportunity and a responsibility to get involved in mortgage and debt planning as part of your financial practice.”

As an incentive, advisors typically receive commissions for generating banking business. But, Jakupi says, he’s more motivated by the longer-term payoff associated with helping clients eliminate debt and build wealth.

“I don’t use it as a means to rely on revenue,” he says. “But I do use it as a tool to help my clients to get closer to what they want, on the wealth side.”

Some advisors continue to be wary that talking to clients about mortgages and bank accounts will take away from their core business of providing investment advice. Annette Howland, a financial planner with MD Management Ltd. in Halifax who helps clients with their banking through a partnership between her firm and National Bank, says she had shared that apprehension when she began offering banking solutions.

In most cases, however, a bank representative works with the client on the administrative work involved in the transactions, so, Howland says, the process doesn’t consume too much of her time.

“We’ve worked together to ensure that we basically provide the client with the best level of service from each end,” says Howland, “as opposed to me becoming the banker — which is certainly not the intention.”

As advisors’ concerns are addressed, Gibson expects the advisor community to continue embracing banking offerings in far greater numbers: “We have gone quite a distance in the past 10 years, and I think [this growth is] going to be exponential.” IE