This article appears in the Mid-October issue of Investment Executive. Subscribe to the print edition, read the digital edition or read the articles online.

Advisors and planners who participated in Investment Executive’s 2023 Report Card series once again said their top priority was the ability to offer unbiased advice and products. Fair compensation and efficient planning tools also were important requirements.

The Advisors’ Report Card, which summarizes data from the Brokerage Report Card, Dealers’ Report Card and Report Card on Banks, revealed that the “freedom to make product choices” category remained the most important.

Advisors across the three channels rated the product freedom category’s importance to their business as 9.6, followed closely by “quality of product shelf” (9.3). Those averages were similar to last year’s ratings of 9.5 and 9.3, respectively (see How we did it; all 2022 data adjusted for comparison).

“This is one of the things that’s very attractive. If you’re an experienced advisor with a good understanding of the products, you pretty well have the ability to pick [any] product [that] is best for clients,” said a brokerage advisor in Ontario.

“When I’m dealing with clients, I want the best products and I don’t want to be limited,” said a dealer advisor in Ontario.

“There are [product-shelf] limitations, but we have a wide variety of mutual funds and investment solutions to pick from,” said a retail bank advisor in Quebec, referring to the degree to which bank branch planners must sell proprietary products. “[That variety] does allow us to put our recipe into it.”

Like in 2022, the brokerage channel received the highest performance rating for product freedom, while the retail bank channel received the lowest. However, some brokerage advisors requested greater access to derivatives, while several dealer advisors noted poor access to ETFs — a persistent challenge that may lessen as firms seek dual registration under the new Canadian Investment Regulatory Organization.

Also among the five areas rated highest for importance by advisors were the “financial planning support & technology” and “total compensation” categories, rated 9.2 and 9.1, respectively, for 2023. Both ratings were higher than in 2022 by 0.1 point.

The vast majority (88.7%) of advisors said they offer financial plans and guidance, an important service that many firms are investing in. (See “Advisors sound off”.)

“Every client needs a plan [and] it’s now part of our onboarding process,” said an advisor with a brokerage in British Columbia. “We tend to onboard families,” they added, and to encourage parents to gift to the next generation, paving the way for longer-term planning.

Advisors with the retail banks also are thinking about the next generation. “Clients who are younger don’t have plans; this is something that has come to the forefront,” said a retail bank advisor in the Prairies. “Having good support here is huge,” they said, citing their bank’s dedicated support line.

The brokerage channel was rated 8.9 for performance in the financial planning category, the highest among the three channels and unchanged from 2022. In fact, all three channels had consistent or improved results, driven by strategic investments by firms across the industry.

Regarding their pay, advisors offered mixed reviews. The total compensation category’s average fell to 8.4 for performance from 8.5 in 2022, while its importance average rose over the same period by the same margin.

Varying compensation models are used throughout the industry. But many advisors across the brokerage and dealer spaces commented on the burden of rising overhead costs, for which they would like more assistance from firms (the two channels were rated 8.8. and 8.6 this year for performance, respectively, compared with 8.9 and 8.7 in 2022).

As one brokerage advisor in Ontario said, “[There are] a lot of microtransactions that get charged back to financial advisors that add up.”

This trend was somewhat tied to inflation, but was more often attributed to a greater share of costs being “moved down to the investment advisor level from head office. That falls onto our teams,” said a brokerage advisor in B.C.

The area most in need of improvement by firms was, once again, “advisor’s experience with back-office tools & services.” That category was rated 9.2 for importance by all three channels on average, similar to 9.3 a year ago and placing it among the five most important categories in 2023.

Performance for the back-office category, however, was rated much lower: 7.7 in 2023, up from 7.5 in 2022. That led to the category’s importance exceeding performance by 1.5 points — the highest such gap among the 26 categories in the Report Card this year.

As with pay, back-office support for advisors also can vary by firm and channel. Brokerage firms tend to process more complicated market transactions than other channels, for example.

Still, retention of back-office talent and the responsiveness of those staff remained cross-industry challenges in 2023. Glitches in digital back-office systems also persisted. The brokerage and dealer spaces both received weaker performance ratings for back-office support than in 2022. The retail bank rating improved but remained the lowest of the three.

“The bank has to do a better job [of] keeping back-office staff. There’s a lot of turnover and it affects us,” said a retail bank advisor in Ontario.

Back-office support is “very uneven,” said one brokerage advisor in Quebec. “It’s improving but there are still shortcomings,” they added, citing “very old” software and the difficulty of checking transactions manually.

Those challenges aside, advisors’ loyalty to their firms remained solid. The collective Net Promoter Score (NPS) for all 31 firms assessed in 2023 was 63.2 this year, down only slightly from 63.5 across the 30 firms assessed a year ago. NPS is calculated based on the likelihood that respondents would recommend their firms to other advisors. An NPS of 50.0 or higher is considered excellent.

One brokerage advisor in Ontario summed up the general themes across each channel best. Inspiring an advisor to recommend their firm means a company “taking care of people [and] providing the tools they need.” Firms must offer a “collegial, friendly [and] supportive culture,” and “spend the money” required to help advisors remain competitive.

Most important categories to advisors across the industry

1. Freedom to make product choices: rated 9.6

2. Quality of product shelf: 9.3

3. Financial planning support & technology: 9.2

4. Advisor’s experience with back-office tools & services: 9.2

5. Total compensation: 9.1

6. Client onboarding tools: 9.1

7. Compliance relationship & support: 9.1

8. Branch manager: 9.1

9. Receptiveness to advisor feedback: 9.1

10. Leadership team: 9.0

Rankings are based on ratings to two decimal places.

Categories rated highest by advisors for firm performance

1. Freedom to make product choices: 9.2

2. Diversity, equity & inclusion policies: 9.2

3. Quality of product shelf: 8.9

4. Branch manager: 8.8

5. Financial planning support & technology: 8.6

6. Compliance relationship & support: 8.6

7. Leadership team: 8.6

8. Support for remote work: 8.6

9. Strategic focus: 8.5

10. Effectiveness in keeping advisors informed: 8.5