Lessons for firms in flux

Stock indexes around the world hit all-time highs in early 2020 and played a major factor in book values. Markets and economies have taken a dive since then, and this year’s Report Card shows that advisors’ success and satisfaction hinge on whether firms help them navigate shifting markets.

“We’ve got significant experts in areas like capital markets and we can offer some interesting investment options and portfolios,” says an advisor with Toronto-based CIBC Wood Gundy in Alberta. The firm’s IE rating (the average of all a firm’s category ratings) rose nearly a full point year-over-year to 8.3, and advisors rated “quality of firm’s product offering” significantly higher (by half a point or more) at 8.9.

An advisor in Alberta with Toronto-based Richardson Wealth had the opposite view, saying that firm “needs to improve upon capital markets” because Toronto-based GMP Capital Inc., one of Richardson Wealth’s controlling shareholders, sold that business unit in 2019. As a result, the advisor says, “We need better research.” Richardson Wealth, formerly known as Richardson GMP Ltd., saw its IE rating dip 0.1 to 8.7 and its product quality rating drop 0.8 to 8.4.

This year’s IE ratings were flat year-over-year across most firms, with the average IE rating rising only 0.1 to 8.4. This continued improvement over the 2019 results is meaningful, however, given that the average IE rating from 2015 to 2018 was 8.1.

Not all firms were equal. The gap between the IE ratings for the top- and lowest-rated firms was significantly wider than a year ago (at 2.7 in 2020 vs 1.9 in 2019), and it seems that a clearly communicated firm strategy can make or break a rating. Advisors with new entrant Wellington-Altus Private Wealth Inc., based in Winnipeg, gave the firm an IE rating of 9.6, while Quebec City-based Industrial Alliance Securities Inc. (iA Securities) received a 6.8. (See Newcomer outperforms in Report Card debut.)

“We’re on fire,” says one Wellington-Altus advisor, referring to the firm’s exponential growth over the past few years. As of April 2020, the firm had more than $10 billion in AUM and over 140 investment advisors and offices in 22 locations, up from $2.5 billion, 14 and five in 2017.

While several of the firm’s advisors acknowledged resulting back-office issues, they generally praised management’s focus and the calibre of new hires. Says another Wellington-Altus advisor: “The ability to share, work together [and] collaborate is unreal.”

Others noted the firm may not be for everybody. To fit in, “[You] have to be able to create business, meet people and be outgoing. Some people prefer structure,” a Wellington-Altus advisor says.

Shaun Hauser, founder and president of Wellington-Altus, says the firm plans to offer more support. “The one thing we think we’re going to invest in over the next three to five years is advisor development. Every dollar we spend into advisor development, we think we’ll get it back threefold.”

iA Securities had some of its highest ratings in the stability and products categories, but the firm’s performance dropped significantly in 13 other categories.

Aside from technology issues, roadblocks mentioned were a fragmented national reputation and lack of holistic planning support, such as access to wills and estate planning experts. The firm’s lowest rating was 4.8, for “support for developing a financial plan for clients,” which fell from 5.7 last year.

Many iA Securities advisors were looking for a sense of direction. As one advisor in Ontario puts it, the main aspect to improve would be “getting their act together on amalgamating their business. They’ve got to get a vision of what they want the company to look like.” Another advisor in Quebec says, “There’s integrity, [a] good name [and] stability. It’s a good firm that needs to improve.”

In a statement emailed to IE in late March, the firm says its approach was “very siloed” prior to 2018. Now, “We have a framework that brings together all wealth-management components,” including its mutual fund- and investment-focused businesses and its manufacturing arm. Going forward, “part of our ongoing structural change will see us sunset the HollisWealth name in 2020 and focus on our iA Wealth brand.”

In the bank-owned brokerage space, structural changes also drove performance ratings. The IE ratings for BMO Private Wealth Canada and Asia, Wood Gundy and ScotiaMcLeod Inc. (all based in Toronto) reflect advisor sentiment about management shifts within the past year and a half.

Following its decision to merge BMO Private Wealth and BMO Nesbitt Burns in early 2019, BMO’s 2020 IE rating for its brokerage business was 6.9, down more than a full point compared with a year ago. Many advisors said their value wasn’t recognized and that the brokerage culture was degrading.

According to Andrew Auerbach, head of BMO Private Wealth, Canada and Asia, the firm’s overall approach “reflects what our clients want and have asked for: the ability to easily access all of BMO Wealth Management’s expertise in one place with ease.” He says advisors have better access to “comprehensive and holistic wealth advice and tools.”

Conversely, IE ratings for both Wood Gundy and ScotiaMcLeod improved significantly year-over-year, by 0.8 and 0.5, respectively, to 8.3 and 8.7. Respondents from both firms consistently praised new and innovative firm leadership.

To help advisors deliver “robust and adaptive” financial plans, ScotiaMcLeod has “invested heavily” in both technology and the team of experts available to them, says Craig Gilchrist, head of the bank-owned brokerage since May 2019. Quality equity selection is key, he adds, but “we have also focused heavily on alternative assets, which has protected capital during the downturn.”

Ed Dodig, managing director and head of CIBC Private Wealth Management and Wood Gundy since April 2019, says in a statement emailed to IE in late March that, despite job cuts planned across CIBC, “We have continued [to] focus on talent for Wood Gundy.”

The performance averages for the 31 categories rated in the 2020 Report Card provide insight for firms hoping to improve: the average rating that fell most year-over-year was for “firm’s succession program for advisors,” while the average that rose the most was for “support for tax planning” — both areas where several firms saw significant changes.

Advisors likely made better use of succession programs: 40.5% of respondents now have documented plans, up from only 28.9% a year ago, when many advisors felt they were too young to craft exit plans.

Regarding tax planning, four firms (out of the 12 rated in the category) saw significant improvement in their ratings and Toronto-based RBC Dominion Securities Inc. once again did well in the category. Advisors across all firms welcomed improvements in this area because they see it as a keystone, holistic service. As an advisor in B.C. with Toronto-based TD Wealth Private Investment Advice says, “It’s such a large part of transferring wealth. It should be a pillar we focus on.”

However, given economic and market pressures due to the Covid-19 crisis, firms looking to outshine their peers should focus on supporting struggling advisors. During interviews held in March, several executive teams highlighted their remote work capabilities and recent technological investments. (See Connecting the work-anywhere advisor.)

Boosting mobile access and customer relationship management tools, as well as remote program bandwidth, is “pretty timely,” not only due to the virus’s workplace impact, but because investors demand it, says Steve Galimi, senior vice president, branch administration, at Montreal-based National Bank Financial Inc. The firm saw significant year-over-year improvement in its mobile advisor rating (8.6, up from 7.8 in 2019). Mobile tools are “expected by clients [and] expected by the professionals in our business.”

Executives at TD Wealth PIA, which saw its mobile advisor rating rise significantly (to 7.3, up from 6.5 in 2019), similarly underlined the need for flexible client service. Now that the Covid-19 crisis has inspired innovation, “you can’t put the genie back in the bottle,” says Craig Meeds, head of private investment advice at TD Wealth PIA.

How we did it

Investment Executive research journalists Emily Fox, James Gaughan, Surina Nath and Swikar Oli spoke to 634 investment advisors from 14 brokerages: six national independents, two regional independents and six bank-owned investment dealers. This year’s sole addition was Winnipeg-based Wellington-Altus Private Wealth Inc. Two Toronto-based firms have rebranded since last year: Richardson Wealth, formerly Richardson GMP Ltd.; and BMO Private Wealth Canada and Asia, formerly BMO Nesbitt Burns Inc.

The research ran from Jan. 2 to Feb. 14, 2020, and focused on how advisors feel about their firms’ services, support and programs. The research was completed prior to the Covid-19 crisis in Canada.

Survey participants gave two ratings, each out of a total of 10, for each of the 32 categories on the main table: one for the firm’s performance in the category; the other for the importance of the category to their business. (See Brokerage Report Card 2020 main chart.) A rating of zero means very poor or unimportant while a rating of 10 means excellent or critically important. Advisors rated only support services they had used, and rated Support for developing an investment plan for clients only if that was separate from overall financial planning.

Overall rating by advisors has been replaced by Net Promoter Score, a tool that gauges loyalty on a -100 to 100 scale. A score over zero is considered good, over 50 is considered excellent and over 70 is considered exceptional. A score below zero indicates the presence of more detractors (people who wouldn’t recommend the firm).

The two supplementary questions also were updated. The first question asked whether advisors support the Canadian Securities Administrators’ client-focused reforms and the second asked whether or not advisors start responsible investing discussions with clients.