Industry News

The shift of client assets to competing firms will become more frequent as the costs of investing become more transparent

By James Langton |

As the transparency of investment costs improves, retail investors will be more willing than ever to switch firms, suggests Ian Russell, president and CEO of the Investment Industry Association of Canada (IIAC).

In his latest president's letter to the industry, Russell recaps the U.S. Securities Industry and Financial Markets Association's (SIFMA) latest retail brokerage conference.

He writes about the trends shaping the wealth management business in the U.S. (and elsewhere) — a topic addressed at the conference. These include: an increased focus on financial planning; intensifying client demand for value; demographic trends, such as the transition of the baby boomers into retirement, the rise of millennial investors, and the increasing importance of female investors; and rising demand for passive investments.

Russell also highlights that brand loyalty in the retail investment business is eroding. "Informed clients will search for an alternative provider of customized and well-valued financial services, if dissatisfied with the product and service suite at their firm, or if it is difficult to determine the value proposition for financial services," he says.

In addition, he suggests that as the costs of investing become more transparent "the shift of client assets and accounts to competing firms will become more frequent."

In Canada, Russell points of that the adoption of the Client Relationship Model (CRM) reforms put the Canadian industry ahead of the U.S. in terms of mandated transparency, and he foresees similar consequences for client loyalty here, too. "The likelihood of similar erosion in brand loyalty in Canada means greater incidence of client shifts in accounts across firms in the industry," he says.

Additionally, given the prevailing demographic trends, Russell advises: "Firms must pay close attention to the diversity agenda and increase the role and prominence of professional women in the firm, as women enhance their growing profile in the workforce and elderly women inherit existing portfolios and control the majority of retail financial assets."

Firms also have to adapt to serve the generation of millennial investors, he says, "… to cater to this expanding opportunity with millennial clients, often heavily indebted with limited savings power, skeptical of the investing process, tech-savvy and sensitive to the diversity agenda."

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