Road map to success

Financial advisors understand the importance of planning for the future – at least, financially speaking – and more and more of the advisors surveyed for Investment Executive‘s 2018 Report Card series are looking to their firms for help in creating road maps for both advisors’ future and that of clients.

In fact, the results of this year’s Report Card series indicated that advisors are putting various plans in place – such as a succession plans for their businesses and financial plans for their clients – more than ever before. And advisors are especially appreciative when their firms provide the right support to ensure all these plans are heading in the right direction.

“Here, the external tagline is ‘life well planned.’ Internally, it’s ‘life well lived’ – and [the firm’s management] really encourages that [last bit],” says an advisor in Ontario with Toronto-based Raymond James Ltd. “They really encourage [being a] fully well-rounded individual beyond just the business. [And they also offer] support for growing your business. For me, that’s a priority.”

In the case of succession planning, advisors depend on their firms for support more and more when thinking about retirement. In fact, the percentage of advisors who reported they had documented succession plans in place this year was 46.7%. Although this still is less than half of all advisors, the long-term trend is noticeably positive – only 27.3% of advisors reported having documented succession plans in 2009.

Indeed, having a succession plan in place – and getting help from the firm in that process – is becoming more important for advisors. Overall, advisors gave the “firm’s succession program for advisors” category an average importance rating of 8.7, also a significant increase from 7.5 in 2009. (See story on page 18.)

“[Having this support] is very important because the [advisor] population is aging,” says an advisor in Ontario with Lévis, Que.-based Desjardins Financial Security Independent Network. “We have to get the younger generation into this thing so there’s a seamless flow.”

Of course, the main focus for any advisor is his or her clients – and, increasingly, that means creating full financial plans for those clients. Indeed, the percentage of advisors who reported that they create financial plans for their clients has increased steadily, to 85.1% in 2018 from 77% in 2009. In fact, advisors pointed out that their firms have invested resources in this area, such as hiring experts and providing software. (See page 17.)

“They give us the software that we need and good support. It’s robust enough, for sure,” says an advisor in British Columbia with Toronto-based Royal Bank of Canada. “[The plan] is printed up professionally and bound. Clients really like [the presentation].”

Although a financial plan acts as a client’s map to retirement, clients still need checkpoints along the way to make sure they’re on the right path. Account statements are one way clients can check on their plan’s progress. However, many advisors argued that their firm’s client account statements, which have been updated to reflect the enhanced performance and cost disclosure required as part of the second phase of the client relationship model (CRM2), are not very useful to clients.

In fact, the “client account statements” category was tied for the third-highest overall “satisfaction gap” in the Advisors’ Report Card. (That gap is the difference between a category’s overall average performance and overall average importance ratings.) For some advisors, the implementation of the CRM2-mandated reforms have been a setback for client account statements rather than an improvement because of delays, inaccurate information and puzzling layouts. (See page 16.)

“[The firm] is doing everything possible to be compliant with CRM2, but the statements themselves are extremely confusing to the average client,” says an advisor in Ontario with Waterloo, Ont.-based Sun Life Financial (Canada) Inc.

Meeting advisors’ expectations for account statements may be difficult for most firms, but it’s even harder when it comes to back-office support. Case in point: the “back office and administrative support” category had the highest overall satisfaction gap in the Report Card series this year.

Yet, there are some firms that get the back office right. For the most part, the advisors who were happiest with their back-office support praised their firms for having dedicated staff for advisors to contact who have deep knowledge of the relevant industry and follow through on advisors’ requests. (See page 18.)

“[The back-office staff] are here in our [office], and if you have any problems, you can walk down the hall to talk to them,” says an advisor in B.C. with Vancouver-based Odlum Brown Ltd. “They do great work.”

One area in which advisors were almost unanimous in their praise was for their firm’s efforts regarding cybersecurity. As more financial business is conducted online, the risks of cyberhacks and the loss of business or personal information increases, which is a big concern for financial services firms and securities regulators alike. As such, advisors were asked in a supplementary question this year if they felt their firm’s cybersecurity efforts were adequate to ensure that data – of both advisors and their clients – were protected properly.

The overwhelming response to this question was “yes.” Many advisors pointed to their firm’s efforts, from financial investment to strong information-technology (IT) teams and rigorous password procedures that are required when accessing devices. (See page 16.)

“If you ever go onto remote access, you have to give a quart of blood to get into the damn thing,” says an advisor in Alberta with Toronto-based BMO Nesbitt Burns Inc. “[The IT department] has pretty good restrictions in place to protect clients. [Gaining access] is a bit onerous, but it helps protect the clients and the advisor.”

Despite a few bumps along the way, most advisors believe that their firms provide a clear path ahead for advisors’ businesses by delivering on what matters most. Once again this year, the firms included in the Report Card series, regardless of distribution channel, have, by and large, met advisors’ expectations in the categories that are most important to advisors: “freedom to make objective product choices,” “firm’s ethics” and “firm’s stability.”

Product choice and ethics ranked highest overall in both performance and importance. Advisors praised their firms for having well-stocked product shelves from which advisors can choose freely and for building ethical company cultures that help to preserve the reputations of the institutions, as well as that of the advisors.

“The [firm] really does prioritize [ethics], and it has a reputation for this,” says an advisor in B.C. with Toronto-based Assante Wealth Management (Canada) Ltd. “Without good ethics, this can affect my reputation.”

How we did it

Every year, Investment Executive (IE) conducts four surveys – the Brokerage Report Card, the Dealers’ Report Card, the Report Card on Banks and the Insurance Advisors’ Report Card – that are included in the annual Report Card series to explore what advisors think of their firms. For the Advisors’ Report Card, IE seeks to provide greater clarity to broader themes raised by the 1,743 advisors at a total of 38 firms who are surveyed.

As in years past, these results were gathered by a team of four research journalists. This year, Sophie Allen-Barron, Anthony Burton, Ramona Leitao and Curtis Panke asked advisors to provide two ratings for each category: one for the firm’s performance and another to gauge the importance of that category to the advisor’s business. Each score was ranked on a scale of zero to 10, with zero meaning “poor” or “unimportant” and 10 meaning “excellent” or “critically important.”

Advisors also were asked to share their thoughts on industry trends in two supplementary questions added to the 2018 questionnaire.

In one such question, advisors were asked if they were in favour of the Canadian Securities Administrators taking regulatory action to address the concerns surrounding the use of embedded commission models.

In the second question, survey participants were asked whether they felt their firm’s cybersecurity efforts were adequate to ensure that the data of both advisors and their clients are protected properly. (See story on page 16.)

As in previous years, this year’s Advisors’ Report Card also includes web-exclusive content that aims to provide greater insight into the results of this year’s research.