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This article appears in the May 2021 issue of Investment ExecutiveSubscribe to the print edition, read the digital edition or read the articles online.

Most of the firms included in Investment Executive’s (IE) 2021 Brokerage Report Card emerged from the market plunge of March 2020 in a position of strength. Advisors reported their books of business grew, and positive ratings fill this year’s main chart.

This year’s results reveal how Canada’s brokerage channel fared during the first year of the Covid-19 pandemic (last year’s brokerage research was completed prior to the first lockdown). Overall, business was booming.

“The fact that we’ve thrived despite the [current] environment is a testament to everyone,” said an Odlum Brown Ltd. advisor. (Odlum Brown’s IE rating was 8.6, compared with 8.7 a year ago. An IE rating is the average of all of a firm’s category ratings and excludes the Net Promoter Score.)

“Through Covid, the firm was exemplary,” said a Raymond James Ltd. advisor in B.C. “[I was] up and running in a matter of days. Everything went smoothly.” (Raymond James’ IE rating was 8.8, up from 8.4 in 2020.)

The average book of business for an advisor reached $209.7 million this year, up from $201.3 million in 2020. Equities and ETFs continued to gain stronger footing in most client portfolios, while bonds and banking products were less prevalent.

For the first time, IE asked for the proportion of assets in an advisor’s book dedicated to environmental, social and governance (ESG) mandates. Advisors with a proportion above zero reported that, on average, 23.8% of their clients’ assets were invested in ESG products.

This year’s research also revealed changes in how books of business are managed. More advisors reported having a discretionary portfolio manager licence: 54.5% in 2021, compared with 47.0% in 2020. On average, advisors gave greater importance to the “Support for discretionary portfolio management” category (rated 9.4, up from 9.1 a year ago).

“If we have any questions about compliance or risk levels, they’re right there to help us,” said an advisor in the Prairies with RBC Dominion Securities Inc., one of the leading firms in that category. “The reality is a mistake here could cost hundreds of thousands of dollars, so we need their help.”

Just as advisors’ books are evolving, so too are the brokerages. In general, advisors approved of the changes they’ve seen. This sentiment was most clearly reflected in the 96 category ratings in the main chart that saw significant year-over-year improvements of 0.5 or more. Only 26 category ratings decreased by the same margin (this tally excludes IE ratings).

Two brokerages stood out: iA Private Wealth (formerly Industrial Alliance Securities Inc.) and National Bank Financial Inc. (NBF), both of which saw their performance ratings increase significantly in 17 and 20 categories, respectively.

For iA, this turnaround came after two tough years, with IE ratings of 6.8 in 2020 and 7.2 in 2019. Despite a name change and leadership shuffle at the start of 2021, advisors appreciated the communication they received regarding executive plans for the company. (See Are brokerage leaders listening?)

“It was sloppy for a number of years, but they’re getting better with having and developing a vision,” said an iA Private Wealth advisor in Ontario.

At NBF, advisors were happy with the company’s entrepreneurial spirit. “They’re very entrepreneurial. It’s bank-owned but it doesn’t feel like that at all,” said an NBF advisor in Quebec.

But advisors outside of Quebec said that branding and corporate culture issues remained a concern. “It is still a bit Quebec-centric,” an advisor in B.C. said about NBF’s corporate culture.

NBF executives are aware of a perceived divide between advisors in Quebec and the rest of the country and have worked hard in recent years to bridge that gap, said Simon Lemay, senior vice-president and national manager with NBF. Part of that effort, he said, has included hiring more bilingual staff and expanding the head office staff beyond Quebec to cities such as Toronto, Calgary and Vancouver.

The firm that struggled the most in this year’s Report Card was BMO Private Wealth Canada and Asia, continuing last year’s downward trend in performance ratings. There were indications, however, that the bank-owned brokerage is righting the ship. Categories such as “receptiveness to advisor feedback” rose 0.7 to 5.1, despite the firm’s IE rating dropping to 6.6 this year from 6.9 in 2020. Further, there was a slight improvement in BMO’s Net Promoter Score, which rose to -14.0 from -34.6 a year ago.

“I truly feel senior leadership wants to do the right thing,” said a BMO advisor in Ontario. “Unlike some of my colleagues, who think they’re trying to screw us, I don’t. I think they have a problem of getting out of their own way despite their [best] intentions.”

Each of the 14 firms included in the Report Card are in some state of transition due to the pandemic. This year, respondents were asked to rate their firms’ support during the pandemic. (This was a supplementary question; see Sweatpants and Zoom.) By and large, advisors were impressed with their firms’ responsiveness and investments in technology, as evidenced by an average rating of 9.1 for firms’ efforts during Covid-19.

“They had good planning in place for a worst-case scenario. As a team, we’ve always worked from home several days a week even before all this, so it was easy for me,” said an advisor with Leede Jones Gable Inc. (The firm received a 9.7 rating for its pandemic support, the second-highest of the Report Card brokerages.)

While advisors were impressed with how technology enabled them to work from home in their pyjamas, there were hiccups along the way. Advisors were asked to rate a new category this year, “Client onboarding tools,” and it had a significant satisfaction gap of 1.2 (a satisfaction gap is the difference between a category’s performance and importance ratings). Advisors said e-signatures were a main pain point, although respondents noted that firms were moving faster on implementation.

“It’s amazing how fast we got e-signatures when the pandemic started,” said a Richardson Wealth Ltd. advisor in Ontario. (Richardson Wealth had a top-five rating of 8.6 for client onboarding tools.)

One area that didn’t pick up speed during the pandemic was advisors’ succession planning. In this year’s Report Card, 37.3% of advisors said they had a documented succession plan, compared with 40.5% a year ago. Yet many firms stepped up their efforts in this area, and some advisors had positive things to say. (See Succession planning remains on backburner for advisors.)

“I’m in the middle of [succession planning] right now. Every Thursday night, I work on it. It’s quite detailed, and there’s a lot of head-office support,” said a Raymond James advisor in Alberta. “It’s a win-win.”

How we did it

Research for Investment Executive’s 2021 Brokerage Report Card was conducted by five research journalists: Camille Côté, James Gaughan, Emily Fox, Surina Nath and Daniel Reale-Chin. The researchers spoke to 633 investment advisors from across the country at 14 brokerage firms: six national independents, two regional independents and six bank-owned brokerages.

No brokerages were added in 2021, although iA Private Wealth (formerly Industrial Alliance Securities Inc.) changed its name in January.

Research was conducted via phone interviews between Jan. 4 and Feb. 12. Participants were asked to provide two ratings for their firm’s services, one for performance and the other for importance, on a scale of zero to 10 for each of the 30 categories included on the main chart (this tally excludes the IE rating and Net Promoter Score). A rating of zero means “very poor” or “unimportant,” while a rating of 10 signifies “excellent” or “critically important.” Advisors were asked to provide ratings only for services with which they had direct experience.

As part of ongoing efforts to improve the research, the team removed four categories: “Support for developing an investment plan for clients,” “Firm’s delivery on promises,” “Online account access for clients” and “Firm’s reward/recognition program.” The rewards category was replaced with “Bonus structure,” which had previously been included under “Firm’s total compensation.” The aforementioned account access and “Client account statements” categories were merged.

Some category names were rephrased to better reflect the service being rated. For example, “Firm’s marketing support for advisor’s practice” is now “Business development support.” The “Firm’s stability” category is now “Leadership stability.” Previously, advisors were asked to rate their firm’s financial and leadership stability; now they’re asked to focus on the stability of their leadership team.

The team also added the “Client onboarding tools” category to reflect the growing trend in digital onboarding and to obtain insight on this area of firms’ back-office processes.

Finally, other categories in the main chart were renamed for simplicity, but the criteria being evaluated did not change.

Each year, the team asks two supplemental questions. This year, advisors were asked to rate how well their firms supported them during the Covid-19 pandemic, as well as how prepared advisors were for the introduction of the new conflict of interest requirements from the Canadian Securities Administrators, which take effect June 30.

— Fiona Collie and Katie Keir