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This article appears in the June 2020 issue of Investment Executive. Subscribe to the print edition, read the digital edition or read the articles online.

From the upbeat outcome of this year’s Investment Executive Dealers’ Report Card, you wouldn’t know that a global pandemic is rocking the economy. Eight of the nine companies included in the main results had improved IE ratings (the average of all of a dealer’s category ratings), while the ninth kept the same rating year-over-year.

More importantly, the average IE rating (8.2, up from 7.9 a year ago) hit a 10-year high. Only 10 category performance ratings across all companies dropped significantly year-over-year (by half a point or more), compared with 45 a year ago. Meanwhile, 72 performance ratings rose significantly year-over-year, up from 39 in 2019.

Business growth contributed to financial advisors’ rosy outlooks: respondents, who were polled from February 18 to April 3, reported an average book value of $70.1 million, up from $48.6 million a year ago and $38.4 million in 2018. (See Cushioning the blow.)

Heading into March, pandemic-related fears and criticisms cropped up.

“I had a client complain about the market because of coronavirus. [Their] account was actually up but [they] just complained because of what [they] had seen on the news,” says an advisor in the Prairies with Oakville, Ont.-based Manulife Securities.

Other advisors were concerned about their remote-working tools and the general support firms were offering at that time: one advisor in Ontario from Winnipeg-based IG Wealth Management said their mobile access “went down and I needed to get in touch with clients, especially looking at the market and the virus,” while an advisor from Calgary-based Portfolio Strategies Corp. wanted more materials to send clients. (See Supporting advisors through a pandemic.)

Nonetheless, when asked to reflect on the past 12 months, advisors looked on the bright side even after Covid-19 was declared a pandemic.

The best-performing and most important categories remained “firm’s ethics” and “freedom to make objective product choices.” Both were rated 9.3 for performance, up slightly from a year ago, and were rated higher for importance (9.8 and 9.7, respectively, up from 9.6). This suggests firms must stay focused on both areas.

Case in point: “I get no pressure [to sell] anything,” says an advisor in Atlantic Canada from Toronto-based Assante Wealth Management (Canada) Ltd. The firm tied for highest-rated dealer in both the ethics and product freedom categories with Mississauga, Ont.-based Carte Wealth Management Inc.

Ethics, says one Carte Wealth advisor, is a “very important part of their culture.” Multiple advisors added that, while they’re required to conduct due diligence when choosing products, they have “total freedom.”

At Portfolio Strategies, which was rated third-highest in the ethics and product freedom categories, sentiment was mixed. “We’ve had some fundamental disagreements on things like load [mutual funds], which [I] don’t use,” says a Portfolio Strategies advisor.

Yet, the independent dealer was rated above-average and it improved in both the ethics and product freedom categories year-over-year.

“I was pressured at the place I was before. I know that [CEO] Mark Kent always puts the client first,” says another Portfolio Strategies advisor.

“We do not promote deferred sales charges [DSC] as a firm; it is a very small part [7%–8%] of our revenue,” says Kent, adding that most of the dealer’s advisors switched to front-end-load funds and fee-based accounts many years ago. Still, he says, “The DSC issue is not automatically a conflict of interest,” depending on a client’s needs and what’s best for them individually.

Among the firms rated below-average in the ethics category were Lévis, Que.-based Desjardins Financial Security Independent Network (DFSIN; rated 8.6) and Manulife Securities (rated 9.0). IG Wealth, meanwhile, was nearly two points below average in the product freedom category (rated 7.4).

Some Manulife advisors suggested that the quality of new hires isn’t consistent and that they’re not sure whether the firm would support them if a compliance issue arose. Further, says one Manulife advisor in Atlantic Canada, “They cut out DSC on mutual funds with no notice, but they allow their own seg[regated] funds to be sold with DSC, and that’s wrong.”

Rick Annaert, president and CEO, Manulife Securities, says the dealer banned DSC funds in June of last year, which “wasn’t well-received [by] those using DSC.” By 2019, only 4% of all sales had used DSC, so the company stopped allowing them “for all product types in dealer accounts” and gave advisors “a few weeks’ notice” — which had been preceded by years of discussion, he says.

Annaert concedes that advisors working with Manulife’s managing general agency can sell DSC segregated funds, which fall outside of securities regulation.

At IG Wealth, advisors were vocal about restrictions placed on their product shelf. “It’s a constant battle over third-party versus packaged products here. We need more selection,” says one IG Wealth advisor in Ontario. Others mentioned the reins were loosening.

“We believe in managed solutions for our clients, with different sub-advisors from around the world,” says Brent Allen, senior vice president, distribution operations, at IG Wealth. He notes that the firm uses external sub-advisors almost exclusively and that it’s in the final stages of a five-year transformation plan that began in 2015. (See Dealers try to deliver on tech.)

Across all dealers, advisors rated “support for dealing with changes in the regulatory environment” significantly higher year-over-year for performance (8.9, up from 8.4). The category was rated 9.4 for importance, up from 9.1, but the resulting satisfaction gap (the amount by which the importance of a category exceeds its performance) shrank by 0.2 compared with a year ago.

Carte Wealth also was a leader in this regulatory category, rated a 9.8, followed by Assante at 9.4. Carte Wealth’s advisors said the dealer hosts monthly regulatory meetings and “pushes a lot of compliance,” while Assante’s advisors said that, despite the “chaotic” rate of regulatory change, the firm is proactive.

Top performers

There was a three-way tie for top-rated firm between Assante, Carte Wealth and Windsor, Ont.-based Sterling Mutuals Inc. All had IE ratings of 8.9, and also were the top three firms a year ago.

However, Assante was the only firm to see a significant increase in its rating (up from 8.3) and it had the highest Net Promoter Score (86.0), indicating exceptional advisor loyalty (a measure used for the first time this year). While Carte Wealth and Sterling did improve significantly in a handful of categories combined, with better technology being a common denominator, Assante improved significantly in 15 categories vs two last year.

“[There’s] true independence in the products offered. I also enjoy the professionalism. We’ve always been taught to change before you have to,” says an Assante advisor in Ontario.

“Over the last three to four years, [there’s been a] shift toward including advisors in decision-making. [The firm has] stepped up its game on improving technology,” says another Assante advisor in Atlantic Canada.

“With the backing of [Toronto-based] CI Financial [Corp.], we continue to invest in [technology] tools and capabilities to support growth in the high-net-worth segment, meet the planning needs of clients [and] strengthen our brand,” says Sean Etherington, president of Assante Wealth Management. (See Does dealer reputation matter?)

At Carte Wealth and Sterling, advisors expressed satisfaction with their independence, technology, mentorship opportunities, and management’s accessibility. Further, one Carte advisor says, “The reason I joined was their focus on women; [it’s a] very diverse workplace.”

Executives at both dealers discussed their focus on technology, while noting that face-to-face interactions remain important. To help promote firm culture and camaraderie among independent advisors, Sterling Mutuals CEO Nelson Cheng says, “We have assigned all advisors to one of three teams. The advisors get to know each other and that improves communication.”

The firm with the lowest IE rating (7.4, up from 7.2) also was the same as a year ago: DFSIN. Yet the dealer saw significant improvement in five categories and no significant year-over-year declines, compared with 15 significant category rating drops in 2019. Some DFSIN advisors said they wanted more support for English-speaking advisors and that the firm’s strategy could be clearer.

Another in Ontario was more optimistic, saying, “Desjardins is in the middle of a major change, which I think [is] going to be for the better.”

“Across Desjardins, the purpose is to provide financial services to clients. So how can we make sure that the advisor is [doing] what makes sense for the client?” says Denis Dubois, president and COO, Desjardins Financial Security, who took over from Gregory Crispin in October 2019. Dubois says the dealer is boosting technology and leveraging data analytics.

Looking ahead, the ability of dealers to help advisors communicate their value and deal with fluctuating client needs will be paramount. For example, when asked about responsible investment discussions (which 56.1% of advisors overall said they start with clients), one Portfolio Strategies advisor says, “[Those discussions] do come up more and more, [but] I think that might disappear after the virus thing; people just want to get back to where they were before.”

Kirk Purai, president and CEO of Carte Wealth, says firms can also hire business development coaches. “[They provide] sessions for our branches and independent advisors, teaching how to manage your practice and adapt to the technology. It’s the unknown we find resistance on.”

How we did it

The 2020 Dealers’ Report Card research team consisted of Emily Fox, James Gaughan, Surina Nath and Swikar Oli. Between February 18 and April 3, they interviewed 427 advisors from 11 firms, asking for performance and importance ratings for up to 31 categories (some categories did not apply to multiple firms). On a scale of zero to 10 — with zero meaning “very poor” or “unimportant” and 10 meaning “excellent” or “critically important” — performance ratings were based on a firm’s performance while importance ratings were based on how crucial a category is to an advisor’s business. Participating advisors were registered to sell securities and/or mutual funds; must have worked with their dealer for at least one year, and have derived at least 50% of their business from investments products.

A firm’s “IE rating” is calculated based on the performance average of all categories rated by advisors surveyed. For 2020, “overall rating by advisor,” where respondents would offer a single rating from zero to 10 for their firm, was replaced with Net Promoter Score (NPS) — a tool that gauges loyalty on a -100 to 100 scale. An NPS 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).

Due largely to the impact of the Covid-19 crisis, Investment Executive was unable to attain sufficient survey samples for Montreal-based Peak Financial Group and Markham, Ont.-based Worldsource Wealth Management Inc. Their qualitative results are discussed in Supporting advisors through a pandemic.

As in past years, the main chart includes a breakdown of the total number of advisors surveyed for each firm. The target was 50 for large, national mutual fund and full-service dealers, 40 for independents Portfolio Strategies Corp. (based in Calgary) and Sterling Mutuals Inc. (based in Windsor, Ont.), and 30 for smaller independent Carte Wealth Management Inc. (based in Mississauga, Ont.). In our coverage, we don’t mention the locations of advisors with these three independents to preserve anonymity.

Advisors were asked two supplementary questions, one about responsible investing discussions with clients and another about the Canadian Securities Administrators’ client-focused reforms.