LOOK­ING TO THE FU­TURE

As the fi­nan­cial ser­vices sec­tor un­der­goes pro­found changes, ad­vi­sors will need sup­port from their firms to meet the in­creas­ing chal­lenges and build strong prac­tices

Investment Executive - - CONTENTS - BY FIONA COL­LIE IE

Ad­vi­sors will need sup­port from their firms to meet in­creas­ing chal­lenges and to build strong prac­tices.

canada’s fi­nan­cial ser­vices sec­tor is in the midst of pro­found change, thanks to new reg­u­la­tions and evolv­ing busi­ness mod­els. How­ever, fi­nan­cial ad­vi­sors be­lieve their firms can pro­vide the sup­port needed — from tech­nol­ogy to reg­u­lar up­dates to train­ing — to help them build the suc­cess­ful busi­nesses of the fu­ture.

As the re­sults of In­vest­ment Ex­ec­u­tive’s 2017 Re­port Card se­ries re­veal, ad­vi­sors have many good things to say about firms that are help­ing them to face com­ing chal­lenges and build strong prac­tices.

“[We have] all-around good ac­cess to re­ally good sup­port — tech­nol­ogy, ev­ery­thing; the whole nine yards — that can help you build a re­ally good busi­ness,” says an ad­vi­sor on the Prairies with Toronto-based RBC Do­min­ion Se­cu­ri­ties Inc.

Al­though there’s al­ways room for im­prove­ment, most ad­vi­sors sur­veyed for this year’s Re­port Card se­ries be­lieve their firms de­liver in the cat­e­gories that mat­ter most to them. Cases in point: the “firm’s ethics,” “free­dom to make ob­jec­tive prod­uct choices” and “firm’s sta­bil­ity” cat­e­gories re­ceived the high­est over­all aver­age im­por­tance and per­for­mance rat­ings yet again.

In re­gard to the free­dom to sell cer­tain prod­ucts, ad­vi­sors be­lieve they can pull any de­sired item from their firm’s prod­uct shelf. Fur­ther­more, ad­vi­sors also gave high praise to firms that con­stantly re­stock their shelves with prod­ucts that can meet clients’ chang­ing needs. (See story on page C8.)

“[My firm] is al­ways search­ing for new of­fer­ings for us to help serve our clients bet­ter,” says an ad­vi­sor in Al­berta with Cal­gary-based Port­fo­lio Strate­gies Corp.

Even as com­pa­nies re­vamp their prod­ucts, reg­u­la­tors are con­sid­er­ing sev­eral ma­jor re­forms that could have a big im­pact on ad­vi­sors’ busi­nesses. To that end, the sur­veys for this year’s Re­port Card se­ries in­cluded a sup­ple­men­tary ques­tion ask­ing ad­vi­sors if they were in favour of the Cana­dian Se­cu­ri­ties Ad­min­is­tra­tors’ pro­posal to in­tro­duce a “best in­ter­est” stan­dard to the rules gov­ern­ing the client/reg­is­trant re­la­tion­ship.

In re­sponse, 74.1% of ad­vi­sors sur­veyed across all four of the dis­tri­bu­tion chan­nels in­cluded in the Re­port Card — bro­ker­ages, mu­tual fund and full-ser­vice deal­ers, banks and in­surance agen­cies — said that they do agree with the im­ple­men­ta­tion of such a stan­dard. Some ad­vi­sors said they agreed with the pro­posal be­cause they be­lieve it’s time to cre­ate a more pro­fes­sional in­vest­ment in­dus­try. Other sur­vey par­tic­i­pants said they al­ready act in the best in­ter­ests of their clients and would like to see an even play­ing field. (See page 1.)

“[Ad­her­ing to such a stan­dard] is how we op­er­ate to­day, so I think ev­ery­one should be op­er­at­ing that way any­way,” says an ad­vi­sor i n Al­berta with Toronto-based Richard­son GMP Ltd.

Should a best in­ter­est stan­dard be adopted, or any other reg­u­la­tory re­forms for that mat­ter, ad­vi­sors are con­fi­dent their firms will help them pre­pare for the changes. Ad­vi­sors gave their firms an over­all aver­age per­for­mance rat­ing of 8.6 in the “sup­port for deal­ing with changes in the reg­u­la­tory en­vi­ron­ment” cat­e­gory, sig­nalling that most ad­vi­sors are happy with their firms’ sup­port in this cat­e­gory. By and large, ad­vi­sors praised firms that proac­tively pro­vide rel­e­vant com­mu­ni­ca­tion and train­ing in new reg­u­la­tions. (See page C4.)

“[ Hub Fi­nan­cial Inc.] holds sem­i­nars and bring [ex­perts] in for them,” says an ad­vi­sor in On­tario with the Wood­bridge, Ont.-based man­ag­ing gen­eral agency (MGA). “The firm has al­ways been de­voted to on­go­ing education.”

As a re­sult of the ma­jor reg­u­la­tory re­forms that have been and oth­ers still likely to be in­tro­duced, the cost of do­ing busi­ness has in­creased sub­stan­tially. In turn, sev­eral firms in­cluded in the Re­port Card se­ries are shift­ing their fo­cus in­creas­ingly to­ward more prof­itable client re­la­tion­ships.

This year, sur­vey par­tic­i­pants were asked in an­other sup­ple­men­tary ques­tion if their firms en­cour­age ad­vi­sors to drop the small­est clients from their books of busi­ness. Ad­vi­sors with bro­ker­age firms were the only ones who over­whelm­ingly an­swered in the af­fir­ma­tive, cit­ing reg­u­la­tory changes and the ris­ing costs of do­ing busi­ness. For the time be­ing, ad­vi­sors with mu­tual fund and full-ser­vice deal­ers, banks or in­surance agen­cies are happy to take on those smaller clients — al­though some of th­ese ad­vi­sors worry they may have to fol­low suit. (See page C8.)

“If [reg­u­la­tors] get rid of trailer fees, [the busi­ness] may go that way,” says an ad­vi­sor in On­tario with Markham, Ont.-based World­source Wealth Man­age­ment Inc. “It’ll prob­a­bly be an­other year or two be­fore that ac­tu­ally hap­pens.”

Re­gard­less of the client ac­count sizes ad- vi­sors serve, ac­cess to pro­duc­tiv­ity-en­hanc­ing tech­nol­ogy is key. Un­for­tu­nately, get­ting tech­nol­ogy tools right is no small feat for most of the firms in­cluded in the Re­port Card se­ries. In fact, the 1.5-point dif­fer­ence in the over­all aver­age per­for­mance rat­ing (7.5) and the over­all aver­age im­por­tance rat­ing (9.0) in the “tech­nol­ogy tools and ad­vi­sor desk­top” cat­e­gory rep­re­sents the sec­ond-largest “sat­is­fac­tion gap” in the Re­port Card se­ries.”

Yet, some ad­vi­sors ac­knowl­edged the in­vest­ments their firms have made in tech­nol­ogy and gave their com­pany credit for it. Case in point: ad­vi­sors with Mis­sis­sauga, Ont.-based Ed­ward Jones gave their firm the high­est rat­ing over­all (9.3) in the tech­nol­ogy cat­e­gory and had many pos­i­tive things to say about how their firm helps them serve their clients.

“The tech­nol­ogy is ex­cel­lent, [as is] the desk­top. We have all th­ese sys­tems that we can [use to] check if we’re in line with [clients’] goals,” says an Ed­ward Jones ad­vi­sor in On­tario. (See page C10.)

Ad­vi­sors ap­pre­ci­ate firms that make such nec­es­sary in­vest­ments in the busi­ness, and just as crucial is know­ing what’s go­ing on at both the firm and the broader in­dus­try. Firms with strong rat­ings in com­mu­ni­ca­tion-fo­cused cat­e­gories, such as “firm’s ef­fec­tive­ness in keep­ing ad­vi­sors in­formed” and “firm’s re­cep­tive­ness to ad­vi­sor feed­back,” tended to have higher IE rat­ings and over­all rat­ings by ad­vi­sors. (See page C4.)

(The over­all rat­ing in each Re­port Card is a score that ad­vi­sors’ give their firm, as a whole, on a scale of zero to 10. The IE rat­ing is the aver­age of all the rat­ings ad­vi­sors gave their firm in the cat­e­gories in­cluded, ex­clud­ing the over­all rat­ing.)

“Ev­ery Tues­day, I get an up­date on what’s go­ing on in the in­dus­try and [the MGA],” says an ad­vi­sor in On­tario with Mis­sis­sauga, Ont.-based IDC World­source In­surance Net­work Inc., which re­ceived high per­for­mance rat­ings in the com­mu­ni­ca­tions cat­e­gories and over­all. “I like that.”

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