Canada’s investment industry CEOs are feeling hopeful about markets and the financial services sector as a whole in 2013, according to a survey released Tuesday by the Toronto-based Investment Industry Association of Canada (IIAC).
The IIAC 2013 Capital Markets Outlook: A Survey of Canada’s Investment Industry CEOs found that 67% of respondents anticipate improved profits for their firms next year. Another 25% of CEOs feel revenues will be flat next year while only 9% anticipate a smaller profit margin.
To IIAC president and CEO, Ian Russell, the positive feelings about the industry relate to the cautiously optimistic outlook CEOs have about the global markets.
According to the survey, 48% of CEOs feel that in 2013 global markets will be on par with this past year, while 43% think that things will improve. A scant 9% of CEOs surveyed are pessimistic about the global markets in 2013.
Some of the reasons for this hesitantly positive outlook, says Russell, is the small but steady improvement of the Toronto Stock Exchange in recent months, the slight improvement of the U.S. economy and the stabilization in Europe.
“A sparrow does not make a spring,” he says, “[but] these green shoots, if you will, that have popped up in the [last] couple of months have given hope to the industry.”
With profits expected to rise next year, CEOs are also planning on expanding their firms in 2013. Of those CEOs surveyed, 57% said they intend to hire next year, while 34% plan to maintain current level of staff. Nine per cent of survey respondents said they intended to downsize.
However, there is at least one dark cloud for the industry in 2013. The biggest financial hurdle facing the industry next year, according to senior executives, stems primarily from regulatory fees. CEOs who were surveyed say point of sale disclosure for mutual funds is expected to be the most onerous additional cost in the coming year. Other new regulatory costs in 2013 that concern senior executives include: IIROC’s fixed-income fair pricing rule and disclosure, the U.S. Foreign Account Tax Compliance Act (FACTA) and mandatory regulatory fees.
Having to set up new systems and invest resources to implement changes in order to comply with new regulations, says Russell, is very much on the minds of the senior executives at investment firms. “It isn’t surprising that [regulatory fees and expenses are] high on the agenda,” says Russell, “because that is a major activity in the capital markets.”
This is the first survey of its kind in Canada and the IIAC intends to conduct the study on an annual basis. The survey was issued in early December of this year to 175 member firm CEOs and had a 25% response rate with national representation. Survey respondents are also from every part of the industry: small retail dealers (39%), institutional dealers (25%), integrated dealers, including bank-owned (21%), medium dealers (11%) and large, non-bank owned retail dealers (5%).
IE