Special Feature

Advisors’ Report Card 2016

Canada's financial services sector is in the midst of adapting to significant changes, including the rise of robo-advisors and the growing regulatory complexities of working with an aging clientele. Thus, advisors surveyed for Investment Executive's 2016 Report Card series are thinking carefully about the support they need from their firms to meet these new realities.

The percentage of advisors who create financial plans for clients and the percentage of clients with a financial plan are rising

By Rudy Mezzetta | September 2016

Financial advisors and their firms are placing greater emphasis on creating financial plans for their clients. The goal is to deepen relationships and deliver more meaningful, long-term value at a time when regulatory changes and low-cost automated advice providers are shifting the competitive landscape.

"There's far more value in helping a client stick with a robust, documented strategy than worrying about shaving five or 10 basis points by going with this product over that one," says Patrick French, director of financial and retirement planning with Mississauga, Ont.-based Edward Jones. "The long-term implications of better decisions, supported by a financial plan, far outweigh any potential cost differences."

That's a message advisors are taking to heart. The percentage of advisors surveyed for this year's Report Card series who said they create financial plans for their clients rose to 86.2% from 81.8% year-over-year - and from 74.2% in 2010.

And firms with the highest percentage of advisors' clients with financial plans in place typically have placed an organizational priority on the value of having a documented financial plan in place.

"[The high priority] is baked into the organization's [culture]," says Debbie Ammeter, vice president of advanced financial planning with Winnipeg-based Investors Group Inc. "It's been there for a long time and expanded upon over the years."

Advisors are on board with their firms in placing a greater value on financial planning. The overall average importance rating in the "support for developing a financial plan" category rose to 8.8 from 8.4 in 2015.

"If you're not guiding your client, what are you doing?" asks an advisor in Ontario with Toronto-based Canadian Imperial Bank of Commerce (CIBC). "The financial plan is a big deal."

In turn, there are indications that advisors are finding greater success in convincing clients of the wisdom of having a documented plan in place. The percentage of clients with a financial plan rose to 54.2% from 50% last year - and from 48.7% in 2010.

"The typical client I work with is looking for advice," says an advisor on the Prairies with Toronto-based Toronto-Dominion Bank (TD). "They want to sit down and have someone explain things to them."

Media attention and greater public awareness about the adequacy of government pension plans, increasing life expectancies and individuals' relative ability to fund their own retirement has also helped clients focus on the value of having a documented financial plan in place, Ammeter says.

However, the disparity between the percentage of advisors who create financial plans for clients and the percentage of their clients with a financial plan in place remains significant. This gap indicates that there's more work to be done to convince clients about the value of having a plan.

Clients cite common obstacles or reservations, including not having enough time or not wanting to put in the work to gather all the required information.

"A lot of folks don't know what their spending requirements will be over time," says an Edward Jones advisor in Ontario. "I ask them to come back to me with numbers so that we could work out a plan, but that's always the hardest part [of the process]."

Some clients procrastinate because they fear the unknown or aren't sure of what their financial goals are in the first place, French says: "It's like when people don't go to the doctor. It's an avoidance tactic."

Overcoming these concerns often involves keeping things simple, Ammeter says: "Some clients might be overwhelmed, thinking you have to account for every dollar you spend. But that's not the case."

Even with some basic financial information from a client, an advisor can begin to establish the client's key goals and begin designing a financial plan, Ammeter adds.

Many firms make the job easier on advisors by extending support for financial planning, including offering updated planning software and providing access to teams of experts in topics such as taxes, trusts, estates and business succession.

TD, for example, is developing tools and training to boost its advisors' "discovery capability," helping them to move conversations with clients from "'what you own and what you owe' to 'who you are and what's important to you'," says Lee Bennett, senior vice president of TD Wealth Financial Planning in Toronto.

TD advisors reported that 97% of their clients had a financial plan in place - the highest percentage among all firms included in the Report Card series.

Executives at firms in which advisors have a high percentage of clients with financial plans in place point out that having a robust financial planning focus is helping advisors win and keep business.

"We can track the level at which the relationship deepens, and it accelerates once [clients] have a comprehensive financial plan in place," says Scott Wambolt, senior vice president of national sales and service with CIBC.

A proper financial planning process helps to remind clients of the value of personal advice relative to alternatives, and having clients with a plan in place is in the long-term interest of both advisors and their firms.

"Offering financial planning is part of our duty and obligation as professional advisors - that's our strong belief," says Jim Burton, chairman and CEO of PPI Advisory in Toronto.

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