Although there are some firms that say they own their advisors’ books of business outright, more firms in this year’s Investment Executive Report Cards have programs or support in place for advisors to monetize their businesses — as long as they sell their books within their respective companies. And while it’s a rarity to find firms that give advisors unrestricted dominion over their books, such firms certainly do exist.

Advisors at Ottawa-based mutual fund dealer Independent Planning Group Inc. were alone among the 1,930 advisors surveyed in the four Report Cards who rated their firm a perfect 10 in the “ability to monetize your business” category. And a big reason for that is advisors with the firm own their books of business.

“Our associate agreement spells out that all of our advisors own their books,” says Vince Valenti, IPG’s president. “It’s a huge recruiting tool for us.”

But, although IPG advisors can shop their books where they want, Valenti admits advisors tend to sell their books within the firm anyway: “Because our financing capabilities mean it’s much easier for them to sell their books to familiar faces.”

Toronto-based Raymond James Ltd. has a similar agreement. Advisors there rated the investment dealer a 9.5 in the category.

It’s more usual, however, to see a firm act as matchmaker in the sale of a book within the firm than give an advisor the freedom to sell his or her book anywhere. For Toronto-based RBC Dominion Securities Inc., this comes into play most often when an advisor is ready to retire.

“If an advisor wants to retire and doesn’t have to retire overnight, the advisor can stage his or her retirement over a period of time,” says DS national director David Agnew. “The advisor, with the help of management, will find a purchaser. The firm stands in the middle; we have a contract with the vendor and a contract with the purchaser. So, we act as a matchmaker in bringing the two together.”

PLAYING MATCHMAKER

Some firms take it a step further, going beyond matching the buyer with the seller, and, instead, walk their advisors through the entire process, right down to the paperwork. Among such firms is Toronto-based Assante Corp.

“We provide the due-diligence support to buyers and sellers, making sure the buyers understand the questions that should be asked when they are buying a book,” says Bob Dorrell, Assante’s senior vice president of business development. “We provide advice on evaluations and we provide assistance in papering the transactions. We are just about to roll out a template purchase-and-sale agreement, which advisors can modify based on their circumstances.”

Some advisors seem well aware of the plans in place for them. “There is a formula to transfer the book, and it’s very good,” says an Assante advisor in Ontario.

Another Assante advisor from the same province is a little more skeptical: “I possibly could take my book, but we may not have as much of an ability to sell the book as they think we do.”

One other important aspect to monetizing a business is determining what happens to the book should an advisor die. Does it pass to the advisor’s family or revert to the firm?

Toronto-based TD Waterhouse Private Investment Advice, for one, uses its Legacy Life program to ensure monetization is still possible. The value of the book, which is determined beforehand, is paid to the estate and the book is then sold at a reduced rate to another advisor with the firm.

Mississauga, Ont.-based PFSL Investments Canada Ltd. will also transfer an advisor’s book to a successor or a spouse, despite the fact that clients contractually belong to the firm. But there is one drawback for PFSL advisors. “It is fairly difficult until you reach a certain [partial ownership] level at the company,” says a PFSL advisor in Ontario.

Still, advisors say that even a limited plan that allows them to monetize their books is better than no plan at all, which is what advi-sors at Vancouver-based Canaccord Capital Inc. and Mississauga-based Edward Jones must contend with. “There is no opportunity to sell your book,” says an Edward Jones advisor in Alberta. “The firm owns it, and is very protective of an attempt to move — it’s the worst aspect of the firm.”

@page_break@Canaccord is doing something about it, however. It is developing a plan that clarifies what happens when advisors sell their books. The goal is to make sure the sale is fair for both the buyer and the seller.

The other situation in which advisors like to have ownership of their books is if they decide to move firms. They want to be free to take their clients and go.

IPG stands by its policy in this situation, too, says Valenti: “Should they want to leave, we will assist them in any way we can. We request they give us a minimum of 30 days’ notice.”

Toronto-based mutual fund dealer Desjardins Financial Security Investments Inc. also allows its advisors to leave and take their books with them — without acknowledging that advisors own their books. “While no one can suggest that an advisor physically owns his or her business,” says Steve Cole, DFS’s regional vice president, “we give the advisor a full 60 days to move the business with him or her wherever the advisor wants to go, without obstruction on our part.” IE