Referral ar­range­ments an­nounced in Au­gust cre­ate new ways for ad­vi­sors to serve clients’ and prospects’ needs

Investment Executive - - CONTENTS - BY ME­GAN HAR­MAN

Robo-ad­vi­sors are turn­ing to tra­di­tional fi­nan­cial ser­vices firms for re­fer­rals, and this trend presents an op­por­tu­nity for fi­nan­cial ad­vi­sors.

as robo-ad­vi­sors strive to gain trac­tion in Canada’s fi­nan­cial ad­vi­sory mar­ket, they’re be­gin­ning to look to tra­di­tional fi­nan­cial ser­vices firms for re­fer­rals. That presents an op­por­tu­nity for fi­nan­cial ad­vi­sors to ex­pand their scope of of­fer­ings and earn an­other source of in­come.

How­ever, the ex­tent to which ad­vi­sors are will­ing to send busi­ness to their on­line coun­ter­parts is still a big ques­tion mark.

In early Au­gust, Van­cou­ver­based robo-ad­vi­sor WealthBar Fi­nan­cial Ser­vices Inc. and Cal­gary-based life in­surance dis­tri­bu­tion firm PPI Fi­nan­cial Group Inc. an­nounced a new part­ner­ship that will al­low in­surance ad­vi­sors op­er­at­ing within PPI’s two man­ag­ing gen­eral agen­cies (MGAs) — PPI Ad­vi­sory and PPI So­lu­tions Inc. — to re­fer clients to an in­vest­ment plat­form pow­ered by WealthBar.

The new ini­tia­tive, called PPI Valet, al­lows ad­vi­sors who are li­censed to sell only in­surance to of­fer their clients ac­cess to in­vest­ments with­out the need for ad­di­tional li­cens­ing. The ad­vi­sor can con­tinue to man­age the re­la­tion­ship with the client while WealthBar looks af­ter port­fo­lio man­age­ment and com­pli­ance.

“[The al­liance] re­ally is mar­ry­ing di­rect, face-to-face ad­vice with robo-ad­vice,” says Jim Virtue, pres­i­dent and CEO of PPI So­lu­tions Inc., an­other MGA un­der the PPI um­brella. “We’ve taken robo-ad­vis­ing, and turned it into ad­vi­sor­friendly robo-ad­vis­ing.”

In an­other part­ner­ship an­nounced in Au­gust, Burling­ton, Ont.-based Man­dev­ille Pri­vate Client Inc. joined forces with Toronto-based robo-ad­vi­sor Smart Money Cap­i­tal Man­age­ment Inc. to launch a new on­line port­fo­lio-man­age­ment plat­form called WealthPort.

Man­dev­ille, the in­vest­ment dealer sub­sidiary of Michael LeeChin’s Man­dev­ille Hold­ings Inc., will be able to re­fer clients and prospects to the WealthPort plat­form in ex­change for a referral fee.

The referral ar­range­ment pro­vides a new way for ad­vi­sors to help clients or prospects who aren’t an ap­pro­pri­ate fit for that ad­vi­sor’s prac­tice, or whose needs could be bet­ter served by an on­line plat­form.

“Clients have dif­fer­ent needs at dif­fer­ent life stages,” says Tu­ula Jalas­jaa, a Smart Money ad­vi­sory board mem­ber. “This [al­liance] should be viewed as a tool to help ad­vi­sors be more ef­fec­tive and em­brace the ef­fi­cien­cies that come with lever­ag­ing tech­nol­ogy.”

Th­ese referral ar­range­ments are the lat­est ex­am­ples of part­ner­ships be­tween fi­nan­cial tech­nol­ogy (fin­tech) star­tups and tra­di­tional fi­nan­cial ser­vices firms, al­liances that are be­com­ing in­creas­ingly com­mon as tra­di­tional firms strive to mod­ern­ize their ser­vices.

This past spring, for ex­am­ple, Toronto-based Nest Wealth As­set Man­age­ment Inc. an­nounced part­ner­ship agree­ments with Van­cou­ver-based Cre­den­tial Fi­nan­cial Inc. and Mon­tre­al­based Na­tional Bank of Canada that en­able ad­vi­sors at the lat­ter two firms to use Nest Wealth Pro, a dig­i­tal plat­form for ad­vi­sors.

“The in­no­va­tion com­ing from the fin­tech or­ga­ni­za­tions is ex­cit­ing,” says Gre­gory Smith, part­ner and na­tional wealth and as­set man­age­ment leader with Ernst & Young LLP’s (E&Y) Cana­dian di­vi­sion in Toronto. “So, rather than an in­de­pen­dent or a smaller ad­vi­sory firm need­ing to build [a robo-ad­vi­sory plat­form] them­selves, they can ac­cess some of that fin­tech in­no­va­tion more read­ily and at a lower cost.”

For robo-ad­vi­sors, referral ar­range­ments can pro­vide new clients. E&Y re­search found that Cana­di­ans are slow to adopt fin­tech, a chal­lenge for fin­tech star­tups.

“The [typ­i­cal] fin­tech com­pany has ac­cessed ven­ture cap­i­tal,” Smith says. “[That firm] needs to show its busi­ness case by get­ting peo­ple in the door, get­ting peo­ple on­line, get­ting peo­ple us­ing its ser­vices, get­ting as­sets on the books.”

By part­ner­ing with tra­di­tional fi­nan­cial ser­vices firms, roboad­vi­sors can tap into a mar­ket com­posed of peo­ple who are more com­fort­able deal­ing with a hu­man ad­vi­sor, but who may ben­e­fit from the ser­vices of an on­line wealth-man­age­ment plat­form.

“Even though a lot of peo­ple see the ap­peal of the low-cost port­fo­lio, they still pre­fer to deal [with an ad­vi­sor] face to face,” says Tea Ni­cola, CEO and co­founder of WealthBar. “This is a per­fect op­por­tu­nity for us to de­liver this to more peo­ple.”

For ad­vi­sors, th­ese referral ar­range­ments can strengthen re­la­tion­ships with clients by ad­dress- ing more of their needs. In the case of the PPI Valet, for ex­am­ple, in­surance ad­vi­sors can pro­vide their clients with ac­cess to in­vest­ments, which means clients may be less in­clined to seek out a dif­fer­ent ad­vi­sor for their in­vest­ment needs.

“[This kind of referral ar­range­ment] al­lows you to de­liver more value to the client,” says Lorne Marr, di­rec­tor of new busi­ness de­vel­op­ment with Markham, Ont.based LSM In­surance Ser­vices Ltd., “[and] al­lows you to cre­ate a fence around your clients, so other com­peti­tors are go­ing to be less likely to take that client from you.”

Some ad­vi­sors, though, may be re­luc­tant to send busi­ness to a chan­nel that re­places the ad­vi­sor’s role with an au­to­mated process, says Marr:“It’s a con­cern, [but] ad­vi­sors have to step back and look at what they’re de­liv­er­ing as op­posed to just sell­ing prod­ucts.”

How­ever, ad­vi­sors should con­sider the ways that tech­nol­ogy can com­ple­ment their ser­vices, says Frank La­fer­riere, se­nior vice pres­i­dent and chief op­er­at­ing of­fi­cer with Man­dev­ille.

“We be­lieve tech should be an en­abler that al­lows ad­vi­sors to build deeper and more mean­ing­ful re­la­tion­ships with their clients,” he says. “So, we be­lieve this is sim­ply a com­ple­men­tary strat­egy to their other ac­tiv­i­ties.”

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