With Calgary-based mutual fund dealer Portfolio Strategies Corp. recently getting the green light from regulators to create a securities arm, two-thirds of the 15 firms surveyed in Investment Executive’s 2008 Dealers’ Report Card now operate an Investment Dealers Association of Canada platform or have access to one through their parent companies. However, any movement in that direction by advisors is gradual.
“We have one advisor in the process of registering and we expect to have five to 10 register in the next 90 days,” says Mark Kent, president of Portfolio Strategies, which has 300 advisors.
And at least one Portfolio Strat-egies advisor in British Columbia has misgivings about the new platform. “I am very nervous about it,” he says.
He is concerned that his Mutual Fund Dealers Association of Canada firm will slowly but surely head into IDA-only territory.
But that’s not going to be the case, Kent says: “I’d be very surprised if more than 5% to 10% of advi-sors move to the IDA platform in the next year or so. Most will come from other IDA firms; they are not necessarily MFDA people who are moving to IDA.”
Although 112 of the 580 advisors surveyed in this year’s Report Card are securities-licensed (see page C7), creating an IDA platform can be a money- and time-sucking endeavour for dealers and their advisors, which is a turnoff for the remaining MFDA-only firms left on the playing field.
“I’m not rushing to get an IDA licence at this time,” says Vince Valenti, president of Ottawa-basedIndependent Planning Group Inc., which has 150 advisors. “It could be a money-losing situation.”
Instead, Valenti is satisfied with IPG’s existing referral arrangements because the firm doesn’t get a lot of client requests for equities, he says. And his view — that selling stocks isn’t a major part of an advi-sor’s job at a mutual fund dealer — is one that’s shared by the MFDA-only dealers surveyed in this year’s Report Card.
For instance, clients of the majority of Mississauga, Ont.-based PFSL Investment Canada Ltd. ‘s 5,511 mutual fund reps just aren’t looking for securities, says president and chief marketing officer Jeff Dumanski: “We aren’t even considering an IDA platform.”
Adds Hugh Gabruch, general counsel and chief operating officer of Regina-based Partners in Planning Financial Services Ltd.: “In our experience, there’s a substantial difference between being a mutual fund advisor and a stock jockey.”
Nevertheless, PIP did broach the topic of changing to an IDA platform with some of its 460 advisors — only to find that the interest just wasn’t there. “We’ve had ongoing discussions with our advisors, especially those with larger books of business whom we thought were more likely to be interested in transitioning to an IDA platform,” Gabruch says. “But there are systemic barriers that don’t make the transition very easy. We found that the more our advisors found out about what was involved in the shift, the less interested they became.”
At least one PIP advisor on the West Coast, however, doesn’t consider having a securities arm a dead issue: “PIP could end up buying an IDA firm.”
Ken Rousselle, president and CEO of Markham, Ont.-based Pro-fessional Investment Services (Canada) Inc., agrees that changing to an IDA platform is too much of a headache for the majority of reps. “If you’re focusing on financial planning,” he says, “the MFDA offers everything you need, with a lot less bureaucracy, red tape and expense than the IDA.”
NO STOCK-PICKING
And stock-picking isn’t a skill that PIS’s 120 planners need to possess, Rousselle adds: “I don’t think that offering advice on individual trades is something on which we should be focused. Having said that, the reality is that our clients still hold securities, for whatever reason, and we need to be able to accommodate that in some way, shape or form.”
For the foreseeable future, that accommodation at PIS will continue to be via a referral arrangement, not the establishment of an IDA platform.
This is also the case at Saskatoon-based Sentinel Financial Manage-ment Corp. and Toronto-based GP Wealth Management Corp.
“We have a referral agreement with National Bank Financial Inc., and it’s an easy system for our 33 licensed reps to use,” says Merlin Chouinard, Sentinel’s president and chief compliance officer. “We are not looking to expand into the IDA model. So far, we’ve been able to do without it.”
@page_break@That’s not to say Chouinard is overly fond of the MFDA. “I would move to the IDA in a heartbeat just to rid myself of the MFDA,” he says. “But I’m not prepared to spend half a million dollars. I’m hoping this whole regulatory environment goes down some reasonable path — not the draconian nonsense that’s currently going on.”
GP Wealth’s referral arrangement is also meeting the needs of its 44 advisors for the time being, says George Aguiar, the firm’s president and CEO. “It’s a debate we’re having internally, as to whether we should pursue the IDA platform or not.”
The firm plans to stick it out with the MFDA while assessing interest in an IDA platform.
The situation is slightly different at Toronto-based Desjardins Financial Security Investments Inc. The mutual fund dealer currently has a referral arrangement with sister company Desjardins Securities Corp. But Steve Cole, regional vice president of Desjardins, admits he’s worried about losing some of his 1,100 advisors to an IDA firm. He says his firm is also weighing its options.
CONCERN BEING ADDRESSED
“It is a concern, one that’s being addressed by senior management,” he says. “It’s a matter of taking a look at what currently exists through the Desjardins group of companies. We have been working very hard over the past year to create synergies among those companies — one of those potentially being a stronger relationship with our IDA platform at Desjardins Securities.”
For the remaining firms whose IDA platforms are fully launched, take-up among advisors varies.
At Toronto-based Assante Corp., approximately 360 of the dealer’s 800 advisors are on the IDA side. “Their books tend to be larger when you look at average size,” says Bob Dorrell, senior vice president of business development.
Waterloo, Ont.-based Manulife Securities International Ltd. acquired an IDA platform when it bought Berkshire-TWC Financial Group Inc. this past summer. Berkshire has 400 advisors, vs 1,100 MFDA reps in the merged firm. That is causing concern with at least one advisor in Ontario: “As an MFDA advisor, you feel as though you’re being swept along.”
About 60 of Mississauga-based Investment Planning Counsel‘s 600 advisors operate on the firm’s IDA platform, while Montreal-based Peak Financial Group boasts about 46 advisors out of about 300 on the IDA platform. Nevertheless, Robert Frances, Peak’s president and CEO, says it is advantageous for the firm to operate on both platforms.
Those advantages remain to be seen at Winnipeg-based Investors Group Inc., which a year ago opened its IDA platform to advi-sors. Only a select few — four of 4,330 advisors — have taken up the offer.
“The platform is very much in its infancy,” says Kevin Regan, executive vice president of financial services at Investors Group. IE