Canada can learn from U.S. experience, says IIAC chief

At that conference, Russell says various sessions examined the forces weighing on the U.S. industry; many of which are familiar to Canadian dealers. “The general consensus from conference participants and delegates was a cautious but pervasive optimism that a steady economic recovery is underway,” he says in his letter. “The pace of recovery, however, has been hesitant, traced to prevailing uncertainty in the consumer and corporate sector.”

At the same time, Russell says that the U.S. securities industry is concerned that regulatory reform “will have a debilitating impact on the capital markets.” He notes that “for the most part” U.S. regulatory reforms are needed, “given the weaknesses in the regulatory framework exposed by the 2008 financial crisis.” However, there’s a concern that the retail financial business is being impacted, despite the fact that the weaknesses were largely elsewhere in the system.

Russell says that SIFMA is shifting its strategy from a near-exclusive focus on political lobbying over the details of the reforms to also trying to bolster retail investor confidence. “SIFMA will initiate a campaign focused on Main Street to explain the key role the securities industry plays in the savings investment process,” he reports. “It is hoped this publicity campaign will strengthen investor trust and confidence in the securities industry and marketplace, encourage more active market participation and increase influence in the rule-making process.”

In the meantime, firms are grappling with issues such as demographic change. “Ageing clients require a greater focus on estate and tax planning, and the need to generate income as well as asset growth of the portfolio. The corollary of this ageing demographic is the shift to a higher proportion of women and young clients that will require a different approach to wealth management, different modes of communication and a different mix of financial products and services.”

Additionally, Russell says that it’s estimated that 25,000 advisors will retire in the next four years in the U.S. “and discussions indicate the securities industry has not adequately prepared for this transition.” While firms are trying to address this trend by building teams of older and younger advisors, “This not an easy or straightforward exercise. It requires incentives for older advisors to build teams, and effective recruitment and education programs to attract talented younger advisors,” he says.

Finally, the industry is also looking to strengthen advisors’ productivity and effectiveness. “The evidence indicates that building deeper relationships with clients by meeting the demand for a holistic approach to financial services builds trust and confidence, and increases client referrals. However, the time required for more customized services for individual clients conflicts with the time required for providing investment advice and managing client portfolios,” he notes.

“The challenge for many advisors will be finding the right balance. Some of the solutions include specialized discretionary managed accounts and the application of technology,” Russell concludes.