Financial advisors surveyed for this year’s Dealers’ Report Card placed greater reliance on their dealer firms to provide the necessary support and education as advisors either look to make the transition to or continue to operate within a fee-based model.

The move toward fee-based advisory practices is accelerating because of both the regulatory changes required as part of the second phase of the client relationship model (CRM2, which will bring enhanced cost disclosure to clients) and the discussions among regulators regarding embedded commissions.

“The trends show that rules such as CRM2 and the international debate on advisors’ compensation are pushing us to tell advisors: ‘You have to look at fee-based as an alternative [form of advisor compensation]’,” says Robert Frances, chairman and CEO of Montreal-based Peak Financial Group.

Thus, it’s no surprise that advisors, who were asked to rate their “firm’s support for advisors operating within a fee-based model” for the first time in the Dealers’ Report Card, gave the category a moderately high overall average importance rating of 8.5 as they look at their firms’ plans in this area in greater detail.

However, advisors also said they expected more from their firms in this support, giving their firms an overall average performance rating of 7.7 in the category. This resulted in a “satisfaction gap” that was the sixth largest in the Report Card.

Much of this advisor dissatisfaction has to do with the fact that for many firms and advisors, the evolution toward a fee-based practice is a work in progress – and time is needed to beef up the IT platforms and support necessary to make the switch to and operate within a fee-based model.

“[Fee-based compensation] is relatively new, so we are all still learning,” says an advisor in Ontario with Winnipeg-based Investors Group Inc. “It takes us a long time to make the turn because we’re a big ship.”

Not enough Investors Group advisors rated their firm in this category to provide a relevant rating; thus, the firm’s rating appears as “not calculable” in the main table on page C4. Nevertheless, Todd Asman, the firm’s senior vice president of products and financial planning, says that advisors’ move to the fee-based model has “been our fastest-growing space. We have close to $6 billion now invested in that program for our high net-worth individuals.”

Investors Group also is planning to launch a new fee-based platform in August, Asman notes. Several advisors said they’re waiting for that launch to learn more about making the switch to a fee-based practice.

But firms new to supporting a fee-based model are not the only ones looking to make improvements. For example, Toronto-based Assante Wealth Management (Canada) Ltd. has offered support for a fee-based platform for about 10 years – and is looking to improve. For these reasons, Assante advisors gave their firm one of the highest ratings in the category, at 8.2.

“It’s a top priority [for the firm],” says an Assante advisor in Atlantic Canada. “It has a [fee-based] model and [is] improving it.”

Assante has been implementing enhancements to the platform based on advisors’ feedback, says Bob Dorrell, Assante’s senior vice president, distribution services. The improvements, to be rolled out later this summer as part of the enhanced platform, include giving advisors the ability to bill and collect fees monthly instead of just quarterly, as well as the ability to create a tiered pricing schedule that will mean lower fees as clients add assets.

“There will also be expanded reporting capabilities, so the advisors will be able to understand, at any given time, what kind of fees are being billed to their clients,” Dorrell says.

Advisors with Toronto-based HollisWealth Inc. were especially pleased with how their firm handles its support for advisors making the transition to and operating within a fee-based practice, giving their firm a performance rating of 8.5 in the category, which was tied with Peak’s for first place.

“We have lots of support as far research, process, structure and for how to bring in new business goes,” says a HollisWealth advisor in Ontario. “We also have exclusive product and marketing resources.”

One particular aspect of this support that many HollisWealth advisors lauded is the education component. For example, a HollisWealth advisor in Ontario says, “The company has done some education to prepare me to explain [the fee-based model] to clients, so I’m able to articulate my value. I had to put together a presentation to clients, and I felt the firm did a good job in preparing me.”

Education about the fee-based model – or lack thereof – is a major reason why some advisors rated their firms lower than average in this category.

“[Fee-based compensation] is becoming a bigger part of my business,” says an advisor in British Columbia with Lévis, Que.-based Desjardins Financial Security Independent Network. “But there is very little help with training and how to make the transition.”

Nevertheless, Desjardins, which received a performance rating of 6.7 in this category, is doing what it can to spread the word. Specifically, Desjardins holds strategic learning days to address the topic of operating under a fee-based model every month, says Mia Chang, the firm’s vice president of distribution, Western Canada, in Burnaby, B.C.: “The branch manager is providing coaching and mentoring, and we’re holding information sessions to keep our advisors up to date.”

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