Over each of the past five years, a growing number of respondents to Investment Executive’s Brokerage Report Card have reported holding a discretionary portfolio licence. More than half (54.5%) of the advisors surveyed in 2021 held a discretionary licence, compared with 47.0% last year and only 35.8% in 2017.
Further, respondents this year said 69.9% of their clients had discretionary accounts, up from 66.6% a year ago and 54.3% five years ago.
The average performance rating for the “Support for discretionary portfolio management” category was basically flat at 8.6 in this year’s Report Card, compared with 8.5 in 2020. However, in line with the growth in advisors’ discretionary assets, the importance rating for this category was up to 9.4 in 2021 from 9.1 in 2020, leading to a slightly wider satisfaction gap (the amount by which a category’s importance rating exceeds its performance rating).
The category leader this year was Wellington-Altus Private Wealth Inc., with a rating of 9.9 (up from 9.7 in 2020). Shaun Hauser, Wellington-Altus’ founder and president, said that discretionary portfolio management is the firm’s largest line of business. Wellington-Altus employs a team of data architects who help customize software for advisors, including discretionary management tools, Hauser said.
“We have excellent tools for [discretionary portfolio management]; lots of research and guided portfolios,” said a Wellington-Altus advisor in Alberta. Advisors at Wellington-Altus also lauded the flexibility of their main back-office system, Advent Genesis.
Canaccord Genuity Wealth Management (Canada) was rated second-highest in the discretionary management category: 9.6, up significantly from 9.1 a year ago. The firm struck a deal with Chicago-based Envestnet in May 2020 to provide an integrated unified managed account platform for Canaccord advisors, and new technology and reporting capabilities were fully implemented in fall 2020.
That effort helped a “growing” number of advisors move to discretionary accounts, said Stuart Raftus, president of Canaccord.
Respondents at Canaccord said discretionary planning was “the future,” with several saying they’re moving more assets that way. One advisor in B.C. said that Envestnet “has been a big help. The product shelf is large and you have lots of flexibility.”
RBC Dominion Securities Inc. (RBC DS) was rated third-highest at 9.3 for its discretionary support (results were non-calculable last year due to an insufficient number of respondents in the category). Advisors mentioned minor hurdles — including “little hiccups” and a system that’s “not as smooth as it could be” — but they largely blamed compliance requirements, rather than their firm, for these annoyances. In fact, several advisors called their system “the best” for technology, back-office and portfolio-modelling support.
“They’re starting to encourage people to do more [discretionary management] and I’m more than happy to,” said an RBC DS advisor in the Prairies. “They have a great platform for it.”
RBC DS has “invested very heavily” in its in-house discretionary management abilities, including portfolio modelling, trading and risk management software, said Mike Scott, the firm’s senior vice-president and managing director. “Close to 50% of our advisors are now portfolio managers and that continues to grow tremendously.”
Other than Canaccord, two other firms saw significant improvements in their ratings: CIBC Wood Gundy, rated above-average at 8.7 and also up significantly from 8.2 in 2020; and TD Wealth Private Investment Advice (TD Wealth PIA), rated 7.3 compared with 6.6 a year ago.
While a few Wood Gundy advisors said they were satisfied with their discretionary management support, an advisor in Alberta said, “I feel like they haven’t dialed in[to] the process of switching people over faster.”
As of mid-March, Wood Gundy was roughly halfway through replacing its current systems with Montreal-based CGI Inc.’s Wealth360 portfolio management platform for wrap products and managed accounts. The final result will be faster client onboarding and administration as well as greater portfolio flexibility, said Ed Dodig, managing director and head of CIBC Private Wealth.
Despite the improved rating for TD Wealth PIA, the firm remained one of the lowest-rated in the discretionary category. Advisors there, who use the Croesus platform, said technology blips were the platform’s Achilles’ heel, with technical glitches affecting advisors’ efficiency, speed and client reporting capabilities.
“It’s very difficult; the system keeps breaking down,” said a TD Wealth PIA advisor in Alberta. Other respondents, however, noted that improvements had been made.
Discretionary assets at TD Wealth PIA have more than doubled within the last three years, said Craig Meeds, head of private investment advice. “With that growth, we’ve definitely experienced the challenges that come along with that,” he said. Meeds added that a “a next-generation portfolio management tool” should be available to advisors “in the not-too-distant future.”
At BMO Private Wealth Canada and Asia, which had the category’s lowest rating of 6.9 (down significantly from 8.0 a year ago), advisors also were dissatisfied with technology. “The technology platforms are backward and complex,” said a BMO advisor in Quebec. “There have been improvements but not a lot.”
Andrew Auerbach, head of BMO Private Wealth, said the firm’s advisors are in the midst of a technology transition and that, in 2020, the firm upgraded its discretionary platform. “A lot of our portfolio managers have told me directly that they’re really enjoying the new platform: that it’s modern and intuitive, and it’s a more sophisticated version,” he said.
More than 40% of BMO Private Wealth advisors are portfolio managers, Auerbach said. He acknowledged that some advisors have been displeased with certain elements of the firm’s new discretionary platform, “so we’ve been working hard to address that.”