Relocating is a planner’s worst nightmare — includes chart

Investment Executive research shows advisors at major financial planning firms across Canada are finding it more difficult to leave their firms than in the past. With ratings as low as 3.3 in the “ease of moving firms” category, financial planners are pointing to stringent contracts, fear of losing clients and, above all, strict Mutual Fund Dealers Association regulations as the main sources of their unease.

“I don’t think anyone really can move,” says an advisor at Laurentian Financial Services in Ontario.

It’s a widely echoed complaint, but one that isn’t necessarily directed at individual firms. In March 2001, the MFDA issued a policy that prohibited the “bulk transfer” of client accounts without the written authorization of the client. At the time, the MFDA provided a two-year transition period that allowed salespeople to transfer clients’ accounts to a mutual fund dealership they themselves had established. This March, that two-year transition period timed out, forcing any soon-to-be-moving planners to gather the written consent of their clients. In theory it may sound like straightforward process, but it can be a tricky business for an advisor with 500 clients or more.

Greg Ljubic, director of policy at Toronto-based MFDA, acknowledges the difficulty of the regulation but maintains it serves investors’ interests first and foremost. “If you had an account with a bank and your teller decided to move to another financial institution, you wouldn’t expect him to take your account with him, would you?” he says. Under MFDA regulations, the same logic applies: if an advisor decides to move to another dealer, it’s the advisor’s responsibility to inform clients beforehand.

“It’s a matter of treating clients with respect,” Ljubic says. “The account belongs to the client.”

Confidentiality plays a big part, as well. If bulk transfers were permitted, all clients’ personal financial information would belong to the new dealer, often without the knowledge or consent of the client.

But the MFDA regulations are not the only obstacle for planners looking to move elsewhere. Cartier Partners Financial Group president and CEO Dan Richards speculates the reason for advisors’ immobility is fear of losing existing clients.
Given the tough markets now, Richards says, advisors may hesitate to shake investors’ confidence with a proposal to switch dealers. “Some clients may think that because they’re making a change anyway, they might as well take a step back and look at the alternatives,” he says.

Others say the MFDA regulation metaphorically separates the men from the boys. A skilled advisor, some argue, should be able to move, keeping the book of clients intact. “I think if advisors are not confident in their relationship with clients, they’re going to feel a lot more challenged about suggesting a move,” says Dianne Carmichael, president and CEO of WorldSource Wealth Management Inc. in Markham, Ont. “The good ones will be able to make that transition.”

Don Charter, executive vice president of Toronto-based Dundee Wealth Management Inc., agrees. “Good advisors will take the vast majority of their clients,” he says. “Typically, when an advisor moves, the relationship with the client is closer to the advisor than the company. That’s the trust relationship.”

The CEOs of Canada’s major planning firms are split on banning bulk transfers.
While some see it as a logical step to protect clients’ rights, others view it as an unnecessary chore for advisors wanting to go elsewhere. Timothy Calibaba, president and CEO of TWC Financial Corp. in Radville, Sask., claims the process is not only difficult for the advisor, but also somewhat futile. “I’ve seen the firm try to keep the clients and probably 80% of those clients go with the planner. It becomes difficult for the client to understand why there’s a fight over his account,” he says. “Why fight it? He’s going to go anyway.”

Regardless of where they stand on the issue of bulk transfers, planning firms have no choice but to play by the rules. And while they won’t let clients go without written consent, most firms won’t stand in the way if clients choose to leave with their advisor. At Cartier, a contractual agreement points out that advisors have the prerogative to move at any time. Likewise, at TWC, WorldSource and Berkshire Investment Group Inc., advisors are free to take their books with them to other firms, provided they have the written consent of clients.
Mississauga-based PFSL Investment Canada Ltd., on the other hand, requires advisors to sign a contract outlining an agreement to reassign their clients in the event of their decision to leave.