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This article appears in the September 2023 issue of Investment Executive. Subscribe to the print edition, read the digital edition or read the articles online.

Fee-based compensation is a significant revenue source for advisors in the dealer space, but the related tools leave something to be desired, according to the 2023 Dealers’ Report Card.

On average, dealer advisors interviewed for the Report Card reported that 47.4% of their gross revenue (as of Dec. 31, 2022) was fee-based compensation (predominantly non-discretionary). Among dealers’ investment arms only, that percentage was higher, at 55.9%.

Reflecting those high proportions, the new “systems for fee-based advisors” category received an 8.7 importance rating. However, the category only received a 7.9 performance rating — placing it among the 10 with the highest satisfaction gaps for 2023 (see “10 categories”).

The main factor that contributed to advisors’ struggles with their fee-based business was technological issues.

Manulife Securities Inc., which received the lowest performance rating in the “systems for fee-based advisors” category (6.4), is aware of issues with its digital tools and plans to address them, said Richard McIntyre, Manulife’s president and CEO. The firm recently implemented Fidelity Clearing Canada ULC’s uniFide tools and Envestnet’s unified managed account platform.

A Manulife advisor in Ontario said the firm needs a more “flexible” system that would be better suited for “an industry that has changed drastically.”

An advisor with Manulife in Atlantic Canada welcomed the chance to “start all over,” recommending that the firm “look at what the advisor needs and [what] client desires are, looking forward.”

“We have seen growth in our fee-based business and expect it to accelerate once we have converted to the new, more integrated and efficient platform [that] we’ve invested in,” McIntyre said. He added that fee-based advisors will benefit from enhanced portfolio-management platforms and integration capabilities.

Advisors with Investment Planning Counsel Inc. (IPC), which tied for second-lowest rating in the fee-based systems category (7.5), also said their firm’s current systems need improvement.

“This is one of the areas where I think advisors should be getting [more] bang for their buck,” said an IPC advisor in Ontario. “A system for fee-based accounts should be more automated.”

Other IPC advisors pointed to limited functionality that was being addressed by the dealer. One IPC advisor in Ontario said their current tools were “not user-friendly [and] not client friendly.”

Sam Febbraro, executive vice-president with IPC and president and CEO of Counsel Portfolio Services, said the dealer’s fee-based and discretionary areas are “growing,” especially among advisors who are confident in their investment knowledge and strategies. He cited IPC One, a discretionary platform that offers faster digital onboarding and trade execution, and detailed reporting abilities.

Also rated 7.5 was CI Assante Wealth Management, where advisors identified gaps in both technology and training.

“The systems associated with operations for fee-based accounts need improvement,” said a CI Assante advisor in Ontario.

“A lot of tools are being launched but I would say that the training isn’t so good,” said a CI Assante advisor in Quebec.

An advisor in Alberta suggested the firm move “toward a more automated process and away from a manual process.”

The firm is listening: in an emailed statement, CI Assante said it’s been active in the fee-based space for nearly 10 years and has “continued to see momentum there.”

“We’re developing more automation to make [fee-based] processes more efficient and faster for advisors because it can be highly manual,” said Joady Guyot, vice-president, advisor engagement, with CI Assante Wealth Management.

Sean Etherington, president of CI Assante, said that, in early 2022, the firm launched a new discretionary platform focused on fee-based activity.

Advisors at dealers with highly rated fee-based systems still saw room for improvement. Those top-rated firms include Peak Financial Group (8.8), IG Wealth Management(8.3) and Portfolio Strategies Corp. (8.2).

For example, while one IG Wealth advisor in Alberta said their firm’s focus on fee-based accounts was “one of our major advantages,” others suggested the firm needed to increase investment in client tools. Occasional glitches with the Transact investment platform also were mentioned.

Brent Allen, head of strategy and business operations with IG Wealth, said updates were made to Transact due to the client-focused reforms. He said the firm also uses tools such as CapIntel, and advisor portals built through Salesforce.

Allen noted that IG Wealth is “an industry leader [in] the percentage of our assets in fee-based assets,” with those assets exceeding 80% of the firm’s total assets under management. The fee-based model has been the only option for new accounts at the firm since 2021, Allen added, because that’s “the right thing to do” to ensure transparency.

10 categories with largest satisfaction gaps*

Advisor’s experience with back-office tools & services: -1.4

Client onboarding tools: -1.3

Client account statements & portals: -1.2

General technology training & IT support: -1.1

Client relationship tools: -0.9

Receptiveness to advisor feedback: -0.9

Systems for fee-based advisors: -0.8

Succession program: -0.7

Products & support for high net-worth clients: -0.6

Financial planning support & technology: -0.5

*A satisfaction gap is the difference between a category’s performance average and importance average