From all indications, financial advisors have turned the corner on the market turmoil of 2008-09, gaining bigger books of business and even fatter paycheques, according to the results of Investment Executive’s 2011 Report Card series. But, although business seems to be on the rebound, advisors readying for a takeoff may find themselves held back by the renewed volatility in financial markets.
Coincidentally, some results in this year’s Report Card series reflect the same volatility as the current global economy. That’s because advisor satisfaction levels with their firms have varied widely this year.
“There’s a disconnect from the top about what’s going on and what direction we’re going in the future,” says an advisor in Alberta with Vancouver-based Canaccord Financial Ltd., echoing the concerns of many colleagues, who rated that firm significantly lower — by half a point or more — in several Report Card categories than in 2010.
In contrast, other advisors had more faith in their firms and were happy to back them up with strong ratings. Such was the case with Toronto-based Assante Wealth Management (Canada) Ltd. , which saw its ratings increase by half a point or more in 13 categories. “I’ve been very pleased,” says an Assante advisor in Atlantic Canada. “They say something, work on it and get it done.”
In order to gauge advisors’ sense of their firms, IE researchers Sanam Islam, Iris Leung, Olivia Li, Ayah Victoria McKhail, Yumi Otagaki and Laura Urmoneit surveyed a total of 1,820 advisors at 44 firms from the beginning of January through to the end of June. Their findings were published in a series of four special reports: the Brokerage Report Card, the Dealers’ Report Card, the Report Card on Banks and Credit Unions and the Insurance Advisors’ Report Card.
Advisors who participated in the surveys were chosen at random, guaranteed anonymity and made their feelings known. They were asked to rate their firms’ performance in various categories, as well as how important those categories were to their businesses, on a scale of zero to 10, with zero meaning “poor” or “unimportant” and 10 meaning “excellent” or “critically important.” The performance and importance scores were then averaged for each category, for both the firms and the Report Cards.
The results reveal that there are certain categories advisors will always hold close to their hearts — and no matter what the economy looks like or where markets are heading, the importance placed on these categories never wavers.
“Firm’s stability,” “firm’s ethics” and “freedom to make product choices for clients” consistently receive the top importance ratings. In addition, the high overall performance ratings for these categories this year suggests that firms, on the whole, are delivering in these areas and meeting their advisors’ expectations.
“I like the fact that I never have to defend the name,” says an advisor in At-lan-tic Canada with Toronto-based RBC Dominion Securities Inc. , referring to the firm’s stability. “It’s very powerful.”
And an advisor in Ontario with Win-nipeg-based Wellington West Capital Inc. cites “freedom” as the most positive aspect of working at that brokerage firm: “Being able to operate, in the sense of having my own business and having the freedom to choose the type of research I’d like. It’s a progressive firm, but it’s about personalized service and relationships.”
Another category that advisors rated highly in importance is “firm’s delivery on promises.” Yet, unlike the other categories rated highest in importance, performance ratings for this category diverged sharply for individual firms. In fact, many firms saw their ratings improve or decrease significantly, with firms’ restructurings being the driving force behind such changes.
Specifically, mergers and acquisitions made an impression on those who had to work through the integration — even if it began years earlier. For one firm in particular, Richmond Hill, Ont.-based Global Maxfin Investments Inc. , efforts to smooth out a rocky start earned an approving boost in ratings from its advisors.
“When [Professional Investment Ser-vices (Canada) Inc. ] joined Global Maxfin, there were some complaints about compliance,” says a Global Maxfin advisor in Manitoba with PIS. “But they seem to be back on track now.”
Almost two years ago, Global Maxfin acquired Calgary-based PIS, a dealer that had a history of compliance-related problems, and frustrated advisors were caught in the middle. However, they have noted improved communication with management since the acquisition, which caused the firm’s rating for the delivery on promises category to jump to 6.8 from 6.0 last year.
Toronto-based DundeeWealth Inc. is another firm in the dealer channel that saw its rating for the delivery on promises category increase by half a point or more this year — to 8.4 from 7.7 in 2010 — resulting from a positive outlook surrounding its acquisition by Toronto-based Bank of Nova Scotia. “I’m extremely excited with the new regime,” says a DundeeWealth advisor in British Columbia about Scotiabank’s acquisition of the shares in DundeeWealth it did not already own. “With Scotiabank owning us, there’s potential for more product availability — and [we] can become a full-service firm.”
Although other firms did not experience a change in ownership, their discouraging results for delivery on promises also points to problems with other aspects of company restructurings. For example, changes related to the support offered by management led to lower ratings this year for Great-West Life Assurance Co. That’s because the Winnipeg-based firm has consolidated personnel in its regional resource centres — and advisors say support has been limited since, with not enough managers available to take on cases.
“They used to offer a regional manager, and the position was very important,” says an advisor in B.C. with GWL. “They don’t understand how much help this position can offer.”
Another firm that suffered the same plight for similar reasons is Toronto-based Canadian Imperial Bank of Commerce. The bank had shuffled head-office roles earlier this year, a domino effect that was created when Sonia Baxendale, former senior executive vice president of retail markets, left the bank. The result, says a CIBC advisor in Ontario, has been a “disconnection between upper management and people doing the legwork.”
The uncertainty related to the bank’s new management resulted in lower ratings of half a point or more in 13 categories.
Yet, in a study of polar opposites, CIBC’s brokerage arm, Toronto-based CIBC Wood Gundy, garnered improved ratings of half a point or more in 17 categories this year. Wood Gundy advisors credited the appointment of Monique Gravel as head and managing director for reviving the firm.
“I think we’ve turned the corner with leadership,” says a Wood Gundy advisor in B.C. “It’s much better.”
A colleague in Atlantic Canada adds that one of the most positive aspects of working at the firm has been “the new leadership at Wood Gundy over the past 18 months. They’re trying to create boutique-style branding and increase services for high net-worth clients.”
Such client-oriented support has been a major focus for those expecting more from their firms. In the dealer channel, overall importance ratings for “support for wills and estate planning,” “support for tax planning,” and “support for developing a financial plan for clients” all rose. Similarly, the insurance sector saw a wave of increased importance ratings in those areas — as well as in “support for helping clients accumulate assets for retirement” and “support for helping clients plan for post-retirement income.”
Retirement planning support was on many advisors’ minds this year — and not just in terms of helping clients. With many advisors approaching retirement, they are looking to their firms to help them with their transition out of the business.
Most firms in the brokerage and dealer channels have a retirement or succession program in place so advisors can transfer their businesses to other advisors or sell their books back to the firm. In the insurance channel, however, independent sales firms, including managing general agencies, are just starting to plant the seed now.
“What we would like to offer, but haven’t completely developed yet, is a succession-planning process,” says Ron Madzia, president of Mississauga, Ont.-based IDC Worldsource Insurance Network Inc. , “including financing for [an] advisor to be able to buy other blocks of [business].”
Insurance advisors are depending on such initiatives. In fact, the importance rating for “firm’s/MGA’s succession/retirement program for advisors” category rose to 8.9 this year from 8.4 last year and 7.9 in 2009.
“The biggest issue the [insurance] industry faces,” says an advisor in Saskatchewan with Toronto-based MGA PPI Advisory, “is the transition to the next generation of producers.” IE