This article appears in the June 2022 issue of Investment Executive. Subscribe to the print edition, read the digital edition or read the articles online.
Advisors in the dealer space have two favourite words: “independence” and “freedom.” Whether they’re talking about choosing products or business tools, the flexibility offered by their firms often is the key to their happiness.
Once again, “freedom to make objective product choices” was rated as the most important category to advisors’ businesses (9.6 out of 10, down from 9.8 in 2021) as well as the best-performing area (9.5, down from 9.6 in 2021). In total, Investment Executive’s 2022 Dealers’ Report Card assessed 29 areas across 10 dealer firms.
Often overlooked areas such as “corporate culture” and “reputation with clients and prospects” were deemed more important this year than last year: the categories were rated 8.5 and 9.0, respectively, up from 8.2 and 8.5. The average performance ratings for corporate culture and reputation rose too, to 8.6 and 8.5, respectively, from 8.3 and 8.1 a year ago.
Regarding corporate culture, advisors with the Report Card’s top-rated dealers by IE rating (the average of a firm’s category ratings) said they appreciated the balance their firms achieved between respecting advisors’ autonomy and meeting their needs.
When asked about the best aspects of their firm, an advisor with Carte Wealth Management Inc. said, “You’re able to sell a wide range of products and you have total independence,” even as “there’s a lot of training” and guidance. (The firm’s Report Card-leading IE rating was 9.1, unchanged from a year ago, while its rating for corporate culture was the highest of all the firms surveyed at 9.4: also unchanged.)
Advisors were similarly pleased at IG Wealth Management, which tied with Peak Financial Group for the second-highest IE rating of 8.8 (up from 8.6 in 2021 for IG Wealth, and down from 8.9 for Peak).
“It’s a combination of freedom and [the firm doing] a lot of the stuff I don’t like to do,” said an IG Wealth advisor in Ontario. One of the dealer’s advisors in Atlantic Canada said, “I like the support that we get in terms of availability of professionals. I like the culture we have. People are not in competition with each other but helping each other out.”
Regarding Peak, an advisor in Quebec said, “Being independent, we can select products for clients according to their needs.” The advisor added, “The family approach of the culture is a nice touch.”
Both IG Wealth and Peak were rated above average in performance for culture, at 8.8 and 9.3, respectively (up from 8.3 and 9.2, respectively, in 2021).
Carte Wealth led its peers in 13 of 29 categories (with a tie for top-rated in five additional areas — in all cases with Peak or IG Wealth). IG Wealth led in three categories, even while its product freedom rating lagged those of other firms, and Peak led in one category (“branch manager,” with a rating of 9.0, compared with 9.2 a year ago).
In a year marked by the final implementation of the client-focused reforms, one category that also separated the top-and bottom-rated dealers was “support for dealing with regulatory changes.” That category was rated 8.9 for performance and 9.3 for importance (compared with 8.9 and 9.2, respectively, in 2021).
Carte Wealth and IG Wealth led their peers in the regulatory support category (both were rated 9.7, up from 9.5 and 9.2 a year ago), and advisors touted the firms’ proactiveness.
A Carte Wealth advisor highlighted that dealer’s monthly compliance updates, which are “live and interactive.”
An IG Wealth advisor in Ontario said, “They’re not burying their head in the sand. [The dealer is] using technology to make sure we’re compliant.”
One such tool is CapIntel, an investment sales platform that helps advisors with client interactions, among other capabilities.
“Over the past 12 months, that [tool has been] supporting them with the client-focused reforms, [particularly] with regards to know-your-product,” said Brent Allen, head of strategy and business operations with IG Wealth. “It’s also making for good, educated conversations with clients.”
Leveraging updated client account statements also is important, said Maria Jose Flores, Carte Wealth’s chief compliance officer and, since May, its president. The firm added information to the documents pertaining to conflicts of interest and referral arrangements before Dec. 31, 2021. It also has used its monthly calls to get ahead of regulatory news. “There are no surprises,” Flores added.
In contrast, the Report Card’s two lowest-rated firms were at the bottom of the scale for their regulatory change support.
Manulife Securities, which had the lowest IE rating (7.2, down significantly from 7.9 in 2021), was rated 7.8 for the quality of its response to regulatory change.
That’s down from 8.6 a year ago, with some of the dealer’s advisors now saying the firm could use its clout more often to advocate for them.
Education on the reforms has been available, they said, but one Manulife advisor in Ontario said the firm could “lobby the regulators to make better choices. The regulatory environment is too restrictive.”
Evolving regulation wasn’t the only hurdle Manulife faced this past year. The dealer’s ratings dropped in 17 of 29 Report Card categories compared with 2021. The largest dips occurred in “back office & administrative support” (6.1, down from 7.7) and “client account statements” (5.3, down from 6.9). “Leadership stability” (7.4, down significantly from 8.7) also was weak.
Richard McIntyre, who’s been Manulife Securities’ president and CEO since March, stepped into his role partway through the 2022 research period.
“There’s a [support] gap between where we’re going and where we want to be,” he said. “There’s a lot of wood to chop.”
McIntyre added that he’s on a mission to “fix the foundation” for advisors, focusing in part on revamping legacy technology and coming up with an “agile system that’s scalable.”
Investia Financial Services Inc. had the second-lowest IE rating (7.8, down from 8.1 last year) and the lowest rating out of all firms for its regulatory change support (7.7, down from 8.0 in 2021). The firm’s advisors cited a need for more compliance advocacy and faster technology implementation.
While the firm has offered new regulatory tools, an Investia advisor in Atlantic Canada said, “[The firm has] great intentions but their ability to follow through is very poor.” An advisor in Ontario noted, “I think they’re doing the best they can, [but] I don’t think they spend enough time listening to their advisor committee. It feels like our voice gets lost in the relationship between dealer and regulator.”
Investia, too, has undergone widespread change, a factor that could help explain advisors’ requests to tweak everything from technology to internal communications when they were asked what could be improved.
Louis DeConinck, president of Investia, pointed to iA Financial Group’s merger of Investia with FundEX Investments Inc., which has been ongoing since July 2021.
The firms together have slightly less than $60 billion in assets, DeConinck said, and the goal is “to put two good organizations together, using what’s best on both sides.” However, he conceded the process of revamping key aspects like compensation, advisor branding and the dealer’s IT infrastructure has been “disruptive.”
DeConinck said the firm is dedicated to innovating quickly. But, given the advisors are highly independent and have varying needs, DeConinck added, “We have to do probably a better job of saying, ‘Hey, look, we’ve got this strategy and you’ve got this tool.’” Amid all the changes shown on this Report Card, one positive outcome is that the average IE rating for all firms was 8.4, up from 8.3 in 2021 and marking a new 10-year high for that metric.
Two firms saw their IE ratings improve by half a point or more compared with a year ago: Desjardins Financial Security Independent Network (DFSIN) and Worldsource Wealth Management Inc. These firms were rated 8.4 and 8.5, respectively (up from 7.3 and 7.8 in 2021). Last year, only IG Wealth showed significant improvement in its IE rating.
For firms to improve, both new and seasoned advisors need to be supported, said a DFSIN advisor in Ontario. Regarding growth goals, the advisor added, “I’m never left wondering. There’s always an open dialogue. Without this support, I don’t know that I would have stayed in this industry this long.”
To view the 2022 Dealers’ Report Card results chart, click here.