Three firms up, three firms down

A trio of Canada’s largest brokerages saw their performance scores increase sharply in a wide variety of categories in Investment Executive‘s 2013 Brokerage Report Card compared with last year. On the other hand, a threesome of smaller players struggled, with their financial advisors rating these firms significantly lower in many categories.

Although each brokerage is unique, a noticeable trend this year is that advisors appreciate the stability, support and strong brand reputation that they say comes with working for one of the big bank-owned shops.

“We have an amazing image with a fantastic product lineup, a great work environment and great support [services],” says an advisor in Saskatchewan with Toronto-based RBC Dominion Securities Inc. (DS), which saw its ratings rise significantly in 17 of 38 categories. (This count excludes the “overall rating by advisors” and the “IE rating.” A significant increase or decline is one in which a firm’s rating in a particular category rises or falls by more than half a point vs the previous year.)

Advisors with TD Wealth Private Investment Advice (TD Wealth PIA) and ScotiaMcLeod Inc., both of which also saw significant increases in a variety of performance ratings, expressed similar sentiments, saying that these Toronto-based firms’ positive images with the public and perceived stability helped the advisors in building their books of business.

On the other hand, three firms – Vancouver-based Canaccord Wealth Management, Toronto-based Raymond James Ltd. and Montreal-based National Bank Financial Ltd. (NBF) – received significantly lower ratings in several categories than they did last year, which apparently can be attributed in part to the difficult transitions that each firm has undergone recently.

Since the financial crisis, Canada’s financial services industry has experienced significant upheaval, with revenue under constant pressure. In this context, the bank-based brokerages have the resources to stick to their strategy even during tougher times.

“We’ve had tremendous consistency, in terms of investing back into the business,” says David Agnew, DS’s CEO and national director.

The benefits of being backed by a big bank also appear to be a factor behind the improved scores at ScotiaMcLeod, which received much higher ratings year-over-year in an impressive 30 of 38 categories. “[The firm’s stability] is why I stay,” says a ScotiaMcLeod advisor in Ontario. “It matters more to me than the compensation.”

ScotiaMcLeod stumbled in last year’s Report Card, falling heavily in the majority of categories, so this year’s rebound could be viewed as simply a reversion to the mean. To be sure, technology and communication remain relatively weak areas for the brokerage. However, the firm’s advisors awarded significantly higher ratings this year for all the firm’s support services, as well as for categories such as compensation, client account statements and succession programs for advisors.

Over the past several years, the brokerage has reinvented itself, focusing on the high net-worth segment, investing in technology and support services, and tweaking its compensation structure to reward advisors who bring in new business.

“We’ve earned a reputation as an innovative and collaborative firm that’s ideal for advisors to reinvigorate and grow their business,” says Hamish Angus, ScotiaMcLeod’s head and managing director.

Advisors with TD Wealth PIA also gave their firm significantly higher ratings in 18 of 38 categories compared with last year. In particular, they rated their firm higher for its stability, strategic focus, corporate culture and several support services categories, as well as for consumer advertising, the firm’s consumer website and its image with the public.

“The reputation of the firm and the integrity of senior management are great,” says an advisor in Ontario with TD Wealth PIA. “Delivery on promises have been positive, and the relationship with the retail bank is excellent, [including] referrals.”

In contrast, NBF sticks out as the laggard among the bank-owned dealers. It received significantly lower ratings in 13 categories this year vs 2012. The weaker performance ratings appear to be a reaction to the integration of two acquisitions the firm made in the past 18 months: Wellington West Capital Inc. in late 2011 and HSBC Securities (Canada) Inc. in 2012.

Some NBF advisors say the integrations haven’t been handled well and that communication has been lacking. “The firm is still finding its way,” says an NBF advisor in Atlantic Canada, who suggests that some of the new advisors may be struggling to adjust to the more bureaucratic culture of a bank-owned brokerage.

NBF’s leaders say they are aware of the issues and are working hard to make sure that the new advisors know that they have a home at the firm. “Sure, there are different cultures that are integrating,” says Martin Lavigne, president of NBF’s wealth-management division. “But sooner rather than later, everyone’s going to realize how entrepreneurial NBF is. Advisors have the freedom to build their own practices the way they want.”

Meanwhile, Canaccord advisors rated their firm significantly lower in 15 categories, including stability, strategic focus, corporate culture and image with the public. The firm went through a tumultuous 2012, announcing the closure of 16 branches in an effort to boost earnings.

Canaccord advisors suggest the decision to cut branches wasn’t communicated well to the public, media or clients, and that the firm didn’t do enough to inform these groups of the firm’s longer-term strategy. Says a Canaccord advisor in Ontario: “I lost assets because people are concerned about the firm. During the closures, Canaccord didn’t [communicate] that it is expanding [globally].”

The firm’s leaders acknowledge that the communication regarding the decision could have been handled better, but maintain that the strategic moves Canaccord is taking will make it stronger in the long run as the firm invests more in building the business.

“Our average assets are much higher,” says John Rothwell, Canaccord’s president and executive vice president and managing director of parent Canaccord Financial Ltd. “Our productivity is much higher, our profit contribution is much higher and, all along the way, we are cutting costs.”

Finally, Raymond James advisors gave their firm much lower ratings in nine categories, with compensation being the most notable. Last year, the firm made changes to the lower end of its compensation grid, which was not well received by its advisors.

Raymond James executives defend the changes as being necessary, both to ensure the firm continues to invest resources in the business and to keep the firm profitable. (See story on page C14).