From robo-advisors to regulatory reforms, there’s always some mortal threat facing the Canadian investment business. But, as the latest edition of Investment Executive’s (IE) Brokerage Report Card indicates, the industry is stronger now than ever despite all these threats.
This Report Card is IE’s longest-running, most venerable constituent of a survey series that has expanded to cover all facets of the financial services sector. Thus, the Brokerage Report Card is a useful benchmark for tracking the industry’s evolution. IE’s research has found that the industry repeatedly proves itself to be resilient in the face of competitive challenges, regulatory pressures and market turmoil.
This year, investment advisors in the survey reported having an average of $139.6 million in assets under management (AUM) – almost double the $70 million in average AUM reported in 2009 in the immediate aftermath of the global financial crisis. In addition, average productivity (as measured by AUM/client household) has more than doubled in that time frame as well, and now tops the $1 million mark. Indeed, the advisory business has moved relentlessly upmarket during the past decade.
For example, in 2010, accounts worth less than $100,000 composed 15.2% of advisors’ books, on average; this year, these accounts’ share of book is 4.7%. At the upper end, accounts worth more than $1 million represented 20.9% of the average book in 2010; now, that figure is 41.1%.
All this growth has come amid considerable economic and market turmoil: supposedly seismic regulatory reforms, such as the advent of the second phase of the client relationship model; and competitive challenges, including the emergence of robo-advisors and passive investing.
Throughout, though, the brokerage business has adapted and thrived. Not only should this be heartening to the industry, but policy-makers also should take note. As they contemplate measures to flush out some of the business’s more dubious practices, regulators can be confident that hysterical warnings about imperilling the industry surely are unjustified.
The brokerage business has transformed to accommodate forces far beyond anything the regulators could’ve contemplated. Thus, they can rest assured that doing the right thing for investors will not result in the industry’s ruin; rather, reform will shore up the foundation for future progress.