Although robo-advisors are disrupting the investment industry, their digital “onboarding” processes and portfolio recommendation capabilities are helping to expand the business options of mutual fund-licensed financial advisors.
For example, Toronto-based Invesco Canada Ltd. recently launched its advisorDUO platform, which allows advisors licensed with the Mutual Fund Dealers Association of Canada (MFDA) to onboard new clients digitally and access one of five recommended portfolios that consist of ETFs in a mutual fund wrapper.
These new products allow advisors who are not able to trade ETFs for operational reasons to gain access to these increasingly popular products, notes Andrew Manning, head of marketing, with Invesco Canada: “We think that’s an interesting new value proposition for some advisors we’d be working with.”
The first dealer to take advantage of the new platform is Windsor, Ont.-based Sterling Mutuals Inc. That platform is being tested, and there are plans to roll it out to its wider advisor network by the middle of this month.
According to Nelson Cheng, Sterling’s CEO, the platform meets several of the dealer’s objectives: it gives mutual fund reps access to ETFs and does so through a guided process that helps advisors meet their compliance requirements. Says Cheng: “It’s just a good way to introduce the advisor to the ETF world.”
As well, Toronto-based robo-advisor Justwealth Financial Inc. recently partnered with Vexo Technology Solutions Corp. , also of Toronto, to offer Justwealth’s ETF portfolios through Vexo’s ETFbahn platform, which is designed to give MFDA dealer firms access to ETFs. ( Vexo had not yet signed an agreement with a mutual fund dealer as of press time.)
However, the financial advisory industry soon could see access to ETFs for virtually any firm that offers mutual funds.
“Everything points to 2018 being the year in which any firm that wants to have ETFs for their clients will have the ability to do so,” says Pat Dunwoody, executive director of the Canadian ETF Association.
Advisors who meet the MFDA’s proficiency standards can trade most ETFs now. However, actually doing so is a challenge, as most mutual fund dealers lack the infrastructure and systems required to access securities exchanges.
Since 2015, several companies and mutual fund industry organizations have worked to bridge that gap. For example, National Bank Independent Network created an omnibus account solution that allows MFDA Level 4 (carrying) dealers to access ETFs following discussions with other industry organizations and regulators.
In other cases, individual mutual fund dealers have built their own systems for accessing ETFs. For example, Burlington, Ont.-based Mandeville Private Client Inc. and Montreal-based Peak Financial Group have created systems that allow their MFDA-licensed advisors to access ETFs.
Mandeville also has partnered with a robo-advisor, Toronto-based Smart Money Capital Management Inc., to offer Mandeville’s clients ETF portfolios. This partnership is a referral arrangement in which the investor becomes a client of Smart Money. Invesco’s advisorDuo and Justwealth’s ETFbahn agreements, on the other hand, allow advisors and their dealers to maintain control of the client relationship.
The advisorDUO platform is a digital wealth-management platform available only to advisors and their clients. There’s no direct-to-consumer option on the platform. The online platform is a white-label offering that guides new clients through the process of opening an account by gathering required personal information, such as “know your client” details, via clients’ smartphone, tablet or laptop.
Clients also can use a digital platform to complete a basic goals-based planning questionnaire. The entire process can be completed on the client’s own time or with the advisor at his or her office. As well, all of the required documents for the accounts, including Fund Facts, can be delivered and signed by the client electronically.
Once the application process is complete, advisorDUO will recommend one of five ETF portfolios, although advisors can choose what percentage of a client’s assets they wish to allocate to the portfolio.
Using a fund-of-funds structure that has been available at Invesco Canada since 2009, the portfolios range from conservative to high growth. The portfolios also are managed by more than one portfolio manager and may include third-party products, such as BlackRock Asset Management Canada Ltd.’s iShares and Vanguard Investments Canada Inc.’s ETFs. These ETF portfolios are designed by Invesco Canada’s global solutions team and are intended for a fee-based platform, although the portfolios can accommodate trailer fees.
Advisors using the Justwealth/Vexo partnership can access ETF portfolios through Vexo’s ETFbahn, a so-called “platform-agnostic” product that allows MFDA dealers to access ETFs. Dealers also can choose the ETFs that will be available through the platform. For example, a dealer may limit ETF selections to certain brands or risk levels.
Through the ETFbahn platform, advisors can access individual ETFs or choose a Justwealth portfolio. To access Justwealth’s portfolios, advisors fill out a questionnaire on behalf of their clients and the platform either recommends a portfolio or the advisor chooses a portfolio directly.
“We wanted to make sure that [advisors] still were engrained within the client relationship,” says Andrew Kirkland, president and co-founder of Justwealth. “But we wanted to help them manoeuver into the ETF market.”
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