There is no question that this past year’s market collapse and economic recession have had a deep impact on financial advisors’ businesses. However, the results of Investment Executive’s 2009 Report Cards also suggest that advisors and their firms are holding steady.

Given the volatility in equities markets that began to heighten around this time last year, it’s no surprise that advisors most vulnerable to equities saw a real decline in their bottom lines, which had held relatively steady in 2008. In the brokerage channel, in which advisors’ books of business have a direct bearing on income, book values fell to an overall average of $70 million from $86.2 million a year prior. Similarly, the books of advisors at dealer firms shrank to an overall average of $20.6 million from $23.7 million. (See story on page C4.)

It’s also worth noting that the percentage of advisors surveyed across all four distribution channels — brokerages, dealers, banks and credit unions, and insurance agencies — who are earning more than $500,000 annually dropped to 16.9% from 20.9%.

So, given this situation, what was on advisors’ minds in the first half of 2009? To find out, IE researchers Sarah Phillips, Ashley Spegel and I spent the months of January through June interviewing 1,746 advisors at 46 firms. The results were published in a series of four special sections: the Brokerage Report Card, the Dealers’ Report Card, the Report Card on Banks and Credit Unions and the Insurance Advisors’ Report Card.

Those surveyed were chosen at random, and their participation was voluntary. They were asked to rate their firms’ performance in various categories, as well as how important those categories were to their businesses, all on a scale of zero to 10 — zero meaning “poor” or “unimportant”; 10 meaning “excellent” or “critically important.” The average performance and importance scores were then calculated for each of the categories, both firm- and Report Card-wide.

Despite a very tough year, advisors reported that they’re mostly happy with their firms, and most performance ratings were on par with last year’s. In neither the brokerage channel nor the dealer channel did the average performance score in any category drop by 0.5 of a point or more; in the insurance channel, such significant drops occurred in only two categories, of which just one — firm’s corporate culture — was relevant to advisors at all types of insurance agencies.

Things were different in the banking and credit union channel, however, as those advisors reported more disillusionment. Average performance scores dropped by a half-point or more in four key categories: firm’s marketing support for advisor’s practice; support for developing a financial plan for clients; firm’s corporate culture; and firm’s delivery on promises made.

Many advisors at banks and credit unions felt that their firms had kept outdated, unrealistic revenue benchmarks. “Their targets were set before the downturn. And when the market crashed, they expected us to reach them,” says an advisor in Ontario with Toronto-based Royal Bank of Canada. “They sent rude emails saying we were doing a terrible job.”

Although performance ratings reveal much about advisors’ satisfaction with their firms, the importance scores reveal what advisors really care about — and to which areas they want firms to pay the most attention and allocate the most resources.

When all the importance ratings were averaged out, advisors across all channels rated their firm’s ethics as the most important — as has been the case almost every year prior. (The ethics category also received the best overall performance rating, at 9.1.) This shows that despite the prevailing economic climate, advisors do not waver on what they deem to be the most important.

An advisor on the East Coast with Win-nipeg-based dealer Investors Group Inc. says his firm is designed in such a way as to make ethical behaviour a prime concern to advisors: “The way our compensation works, there are systemic means of making sure the clients’ interests are first and foremost. And anytime there’s an administrative error, I’ve never seen [the firm] not make it right.”

Another category of perennial importance to advisors is that of firm stability. Last year, it received the third-highest importance score overall; stability was top-of-mind again this year as it received an overall average importance score of 9.2, good enough for fourth place. Like the ethics category, stability also had one of the highest overall performance ratings, at 9.0.

@page_break@It’s worth noting that RBC and two of its subsidiaries were surveyed in three of this year’s four Report Cards; and in each Report Card, the RBC-owned firms received the top performance rating for stability — surely a sign of the revival of pride and confidence in the stability of Canadian bank-owned institutions, with RBC-related firms best exemplifying it.

Case in point: an advisor in British Columbia with Toronto-based brokerage RBC Dominion Securities Inc. says his firm’s stability seemed more important than ever “during the last year, which was disastrous. We got a report saying Canadian banks are No. 1, and here we are at the No. 1 Canadian bank. There’s quite a bit of solace in that.”

“[Stability] is very important,” adds an advisor in Ontario with Mississauga, Ont.-based insurer RBC Life Insurance Co. “I go to the U.S. twice a year for conferences, and my American colleagues are glad to be working for RBC. We’re the oldest and richest [Canadian bank], so what do we have to worry about?”

Perhaps the year’s most interesting development, in terms of what advisors considered most important, was that stability was bumped out of the top three categories by firm’s public image. (In 2008, public image was only the seventh most important category overall.) And unlike ethics and stability, public image had an overall performance score that was significantly lower, at 8.6, than its importance score of 9.3. It seems that advisors, while satisfied with their firms’ ethics and stability, aren’t necessarily convinced that their positive outlook is shared by the recession-plagued public.

An advisor in B.C. with Vancouver-based brokerage Canaccord Capital Inc. says a weak public image made a tough situation even more difficult over the past year: “Because of a lack of advertising and the asset-backed commercial paper scandal, we were portrayed negatively in the media; and Canaccord didn’t defend itself. This was annoying.”

That also rubbed other Canaccord advi-sors the wrong way, as they rated their firm’s public image at 6.7, one of the lowest scores for the category in all four Report Cards.

On the other hand, advisors who rated their firms highly for their public image say that this positive perception helped them retain clients. An advisor in Saskatchewan with RBC Life — whose public image rating of 9.4 was tied for second-best among all firms — says: “Public image is big. [RBC is] the biggest company in Canada. People know their money won’t disappear.”

An advisor in Ontario with Toronto-based TD Canada Trust, which was tied with RBC Life for its 9.4 public image rating, says his firm’s good health is being properly communicated: “We are well positioned, in terms of risk. We have a good outlook and very few losses, and we have had lots of exposure on how well we’ve done.”

The growing importance of public image was most pronounced among advisors in the dealer channel, as they gave it the highest average importance rating of 9.6, up 1.3 points from 2008.

Burlington, Ont.-based Manulife Securities Inc.’ s parent firm, Manulife Financial Corp. , has garnered much negative press in the past few months as a result of certain product-related difficulties; if public image was going to be of concern at any firm, it would be at Manulife. But, interestingly, the firm’s importance rating for public image was second-highest in the dealer channel. “[The firm is] in the news and getting a bum rap for it,” says a Manulife advisor in Ontario. “I think people read the news and don’t understand what is going on.”

In all four of the categories rated most important by advisors — firm’s ethics, freedom to make objective product choices, firm’s public image and firm’s stability, respectively — two firms in particular, the Toronto-based boutique brokerages GMP Private Client LP and Richardson Partners Financial Ltd. , performed exceptionally well.

GMP CEO James Werry credits his firm’s performance to experience: “Our advisors have been through tough market conditions. That experience has put us in good stead.”

And Sue Dabarno, Richardson Partners’ president and CEO, says the key to excelling in a year such as 2009 was advisor-to-client contact: “Without question, we’re in extreme market conditions that we’ve not seen to this degree in our lifetimes. One thing we know is that the strength of the client relationship remains stronger the more you’re in touch with your client. So, we’re very focused on making sure our clients are well communicated to and that they’re at least given the opportunity to work with us to understand the market and what’s best for them and their families.”

That GMP and Richardson Partners did so well in many of the same key areas was a small sign of things to come: the two firms announced their merger in August. IE