On the street, it can be difficult, especially for a bank-owned dealer, to stand out from the pack with so many firms making similar promises to clients and advisors. But CIBC says it can do so by creating a big, efficient shop at which top-notch advisors will be happy to work.

It’s a lofty goal, and one that will require hard work, as the retail investment business is exceptionally competitive. Firms on both the product and distribution sides are engaged in a endless clash for assets, clients and advisors who can deliver the goods. In the face of the struggle, many firms seem to be promising much the same thing: to focus solely on clients’ needs and provide all the products and services to meet those needs.

Times have also changed for big players such as CIBC. Historically, the large, integrated firms have had an advantage because they had the scale and scope necessary to deliver on their promises. In the past few years, however, technology has enabled smaller, independent firms to remain competitive. Sophisticated products, such as managed-account programs, aren’t just for the large firms any more, as technology enables small players to run their own cost-efficient versions. Technology also allows boutique dealers to offer the sort of mass customization that would previously have been available only at larger shops or very high-end investment counsellors. Technology also helps smaller dealers keep up with growing compliance obligations.

Big firms have seen many of their size advantages dissipate, but they are still saddled with all the negatives of being large: stifling bureaucracy, advisor alienation and overzealous internal compliance in an era when the banks are increasingly sensitive to corporate reputation. As a result, many advisors find they are happier at the independents, as illustrated by the fact that smaller firms have consistently done better than bigger ones in Investment Executive’s Brokerage Report Card surveys in recent years.

It wasn’t always this way. In the late 1990s, the bank-owned dealers scrapped for supremacy in the Report Card. The trick for the big firms was figuring out how to press the advantages of size in a business that remains very dependent on relationships.

There are advantages to belonging to a huge organization. Each bank has a massive retail customer base and natural clients for the investment business. Banks control access to the lion’s share of new issues and maintain the wherewithal to develop sophisticated new products, such as principal-protected notes, to meet clients’ evolving needs. Scale should also allow for greater efficiency, but truly capitalizing on those strengths has often proven easier said than done.

Victor Dodig, CIBC executive vice president, wealth management, in Toronto, is committed to pulling it off.

Dodig says he sees genuine competitive advantages for CIBC over its main rivals for retail investment clients; its rivals include the other bank-owned dealers, the independents and investment counsellors. In a world of “me too” investment offerings, Dodig says, the bank has a strategy and the tools to “put clear water” between his firm and the rest of the Street.

The strategy partly involves capitalizing on CIBC’s scale advantage for the sake of brute efficiency and delivering superior investment performance. It also relies on several, more nebulous factors such as improving the client experience.

“In the high net-worth space, a lot comes down to the client’s experience with the overall firm. It all comes down to the execution and the delivery of it,” Dodig says.

He aims to make CIBC Wood Gundy into the leading advice-based distributor on the Street by focusing the entire bank on meeting clients’ investment needs, delivering strong investment performance and improving efficiency.

Pledging to focus on the needs of clients is motherhood in the retail investment business. Every firm pledges to do it, although many are not successful. Unfortunately, the needs of firms, advisors and clients often come into conflict. And when that happens, it is easy for advisors and firms to convince themselves they are looking out for their clients, when they’re actually serving the bottom line.

Living up to a credo of putting clients first may be as much a cultural challenge as a philosophical or organizational one. Dodig says CIBC aims to get everyone in the disparate parts of the bank focusing on the client, and serving him or her in whatever way is best. He calls it his “one firm” philosophy. Getting people in the retail bank or the investment bank to spot possible clients for the wealth-management division is largely a “learning and communicating” experience, he says.

@page_break@Other banks have tried to capitalize on their existing relationships with clients, but the task always seems to prove easier said than done. Getting the compensation system right appears to be a perpetual challenge for firms.

Dodig insists it takes more than this to be successful. “Compensation is an important factor,” he says, “but if you want to get people to behave as one firm, you can’t just lay out a compensation strategy that will fulfil all of that. [It’s] a cultural thing; you have to get people to work better together.”

This kind of team effort means selling employees on a vision, which Dodig has been trying to do in a recent cross-country tour. The vision he wants to sell involves “making sure advisors feel that this brokerage firm is the best brokerage firm in which to practice in the country, making sure we’re committed to the transactional-based business, that we’re committed to the fee-based business and we’re committed to having a leadership position in both of these,” he says.

“[CIBC] World Markets helps us continue to build a transactional-based business, scale in the fee-based business allows us to reinvest there, and [advisors] know they can reach out to other parts of the bank to build better, stronger client relationships,” he adds. “That, for me, is nirvana. That is living up to being the leading wealth-management franchise in the country.”

Although working as one firm should certainly improve the client experience, solidifying a leadership position in wealth management, as Dodig repeatedly insists, also involves delivering superior investment performance. CIBC aims to do this through its in-house managers and its commitment to “open architecture” on the asset-management side.

Dodig says CIBC’s devotion to open architecture is the strongest on the Street, a position that enables it to focus on sifting out the best managers rather than looking to build the biggest asset manager on the Street through further consolidation. “Open architecture means we have lots of relationships with outside managers, which we are very happy about. I am more obsessed with how we bring the ‘alpha’ that’s out there to client portfolios than with deal-making,” he says.

“Alpha” is a buzzword for investment outperformance that’s common in the institutional world, and it is a notion Dodig aims to spread throughout CIBC’s wealth-management business. He views the asset-management world as a continuum from retail to institutional investors, and he wants to “bring the best of institutional thinking to retail clients.”

Dodig dismisses the idea that no one can truly deliver superior performance over the long run. “You need to have a good process for identifying skills in a money manager,” he says, noting CIBC has a 25-person due diligence team to do just that, on both a qualitative and quantitative basis.

“If you get confidence from the repeatability of the performance and the stability of the organizations you’re dealing with, I can unequivocally say investment excellence will continue to be at the forefront,” he says. “For those who hide behind saying, ‘I can’t predict that,’ or ‘It’s a transitory thing,’ they can’t be in the wealth-management business without delivering good investment performance.”

Success in wealth management takes more than mere performance. In the long term, Dodig admits, it’s tough to maintain a competitive advantage through product structure and pricing alone: “It needs to come from the customized delivery of those solutions to our clients.”

To some extent, such ideas reflect the evolution of the retail investment business. Historically, it was focused on stock trading and transactions. In the past few decades, it has evolved from a marginal activity for the wealthy to a mainstream necessity as people have taken more responsibility for their retirement savings. As the audience for retail investing has changed, so has its function. As the population ages, clients’ needs are evolving from simple asset accumulation to risk management and managing portfolio liquidation — things pension managers have always had to worry about.

These changes mean good performance at the individual product level, Dodig says, but also ensure that advisors are providing clients with solid advice about asset allocation, and are paying close attention to risk and its relationship to return. If advisors can deliver on the promises, Dodig says, the clients and assets will follow.

Although other players in the wealth-management business may be on the lookout for acquisitions, CIBC is not. Instead, Dodig says, it is investing in its platform, spending money on things such as technology, professional development, providing leadership training and developing an internal mentoring program. It is also investing in its ability to compete for key clients. “I’d rather use every extra nickel to recruit good clients,” he says.

The strategy is taking root. But whether CIBC can prove that a bank-owned firm can once again stand out as the alpha dog on the Street remains to be seen. IE