Financial advisors surveyed for Investment Executive’s 2010 Report Card series are clawing their way back after almost two years of turbulent markets. And although the bull market still has not quite reared its head, advisors are much more optimistic about their industry and the tepid recovery that is underway.
“We all worked together to see what we could do to keep our chins up,” says an advisor in British Columbia with Vancouver-based Odlum Brown Ltd., “and we were constantly talking with clients, which helped us during difficult times.”
The most telling fact of this economic recovery is that advisors in most channels of the financial services industry have seen a rebound over the past year, in terms of assets under management — although they have yet to recover fully from the damage that had been inflicted on their businesses over the past couple of years. Interestingly, though, the rebound has not been uniform throughout the various sales forces.
Advisors in the brokerage channel saw the biggest year-over-year increase — an average of $7.2 million per book — although they also took the biggest hit during the downturn. In the dealer channel, advisors saw their books go up by an average of $1.3 million.
Advisors at banks and credit unions, however, experienced the opposite, with book values dropping in size as clients have started to move money out of cash accounts and back into investments.
The insurance channel stood alone, once again. It was the least hit during the economic downturn and, therefore, had less ground to recover. Overall, insurance advisors saw a slight increase of $700,000 in average book size over the past year. Says an insurance advisor in Ontario with Winnipeg-based Great-West Life Assurance Co.: “My business didn’t suffer during the downturn because we didn’t put any clients into any investment that would harm them.”
IE researchers Fiona Collie, Anna Olejarczyk and Dinah Zeldin spent the months of January through June gauging the moods of 1,808 advisors at 45 firms. The results were published in a series of four special reports: the Brokerage Report Card, the Dealers’ Report Card, the Report Card on Banks and Credit Unions and the Insurance Advisors’ Report Card.
Those advisors surveyed were chosen at random and their participation was voluntary — and anonymous. They were asked to rate their firms’ performance in various categories, as well as how important those categories were to their businesses, all on a scale of zero to 10 — zero meaning “poor” or “unimportant”; 10 meaning “excellent” or “critically important.” The average performance and importance scores were then calculated for each category, both firm- and Report Card-wide.
Despite increasing book values, some firms continued to struggle coming out of the downturn. In the Dealers’ Report Card, Toronto-based Assante Wealth Management (Canada) Ltd. saw its IE rating, which is the average of all the categories that applied to the firm, fall to 7.1 from 7.9 last year. Meanwhile, in the Brokerage Report Card, Toronto-based TD Waterhouse Private Investment Advice saw significant drops — of half a point or more — in nine categories, with the “firm’s corporate culture” rating plunging to 7.7 from 8.5 last year.
“I think our corporate culture stinks,” says a TD Waterhouse advisor in Quebec, who would recommend his firm to another advisor — but with some reluctance. “There is too much bureaucracy.”
In the Report Card on Banks and Credit Unions, Edmonton-based Servus Credit Union saw dips of half a point or more in 13 advisor-rated categories. Servus advisors continue to struggle with the aftermath of the 2008 merger of Servus, Community Savings and Common Wealth Credit Union, which resulted in the creation of the third-largest financial co-operative in Canada. Servus advi-sors spoke of issues in corporate culture, “firm’s delivery of promises,” “technology tools and advisor desktop” and “firm’s stability.”
Servus executives are well aware of their advisors’ complaints. The credit union has launched a new business model that management hopes will resolve some of the recent issues. Executives say the leadership of Garth Warner, president and CEO — who was appointed after the merger and is a 30-year veteran with Servus — will brighten things up in the future.
@page_break@“With the merger, we had some initial hiccups,” says Ken Robinson, Servus’s assistant vice president, wealth management. “But we believe we are over those and our new CEO has made a strong impact. He has done an excellent job of putting his imprint on the employees and giving them reassurance that we are here in the same way we always were.”
On the flip side, there have been many firms that have managed to pull through quite strongly this year. In fact, Toronto-based Richardson GMP Ltd. and Royal Bank of Canada, Mississauga, Ont.-based IDC Financial Ltd. and Winnipeg-based Investors Group Inc. were all rated highly within their respective Report Cards.
Says an advisor in Ontario with Investors Group: “The best thing about this firm is having the support of a large corporation that has a great reputation, and Investors Group has been around for 80 years now.”
And an advisor in Manitoba with RBC says it was the firm’s image that really helped keep its strength intact: “I believe that it was our brand that helped us during the recession.”
A strong public image and a well-known brand are essential to advisors during difficult times. But regardless of which channel they work in — and despite market conditions — advisors all place top importance to the same three things year-over-year: their firms’ ethics, their firms’ stability and their individual freedom to make objective product choices.
Similarly, the areas in which firms could most improve were the same throughout all four advisor Report Cards — “firm’s consumer advertising” and “firm’s marketing support for advisor’s practice.” These two categories were among the lowest in performance ratings across the board, indicating that regardless of advisors’ channel, they hold the same grudges. Asks an advisor in Ontario with Toronto-based BMO Nesbitt Burns Inc. : “When was the last time you saw a Nesbitt ad anywhere?”
Adds an Assante advisor in Ontario: “Ad-vertising of some sort is needed at the firm. You turn on a hockey game at night and you see 15 different bank commercials. You might see a fund company here and there, but nothing on Assante or the [financial planning] industry.”
In the insurance and deposit-taking channels, advertising holds much more value in advisors’ eyes, with importance ratings averaging 8.5 vs 5.7 in the dealer world.
Says an advisor in Ontario with Waterloo, Ont.-based Sun Life Financial (Canada) Inc.: “It is important to advertise because people are leery about financial services institutions after the downturn, and we need to get our name out there at this time.”
Advisors also place great value in having support services for retirement planning. For the first time, advisors were asked to rate their firms in two support categories: “support for helping clients accumulate assets for retirement” and “support for helping clients plan for post-retirement income.” These questions were added after several executives pointed out that these were areas of increased interest in the industry. They recommended we ask about these issues because helping clients gather assets for retirement and, more important, planning an income from those assets will become a much greater focus over the next decade as a glut of baby boomers begin retiring.
“The firm has really enhanced this [area] over the past couple of years,” says an advisor in Atlantic Canada with Winnipeg-based Wellington West Capital Inc. “They’ve brought in a different product line and different people to manage the products.”
Both new categories received high importance ratings from advisors, but it is the bank and credit union channel that places the highest value on retirement planning and post-retirement planning, with importance scores of 9.2 and 9.1, respectively.
RBC advisors rated their firm tops in both categories. The bank offers advisors a workshop entitled “Future by your design” that specifically addresses retirement transition and offers support and expertise for both pre- and post-retirement clients. Says Michael Walker, vice president and head of branch investments with RBC: “The program focuses on how we can help our clients around those decisions and how [they can] turn assets into a paycheque in retirement.” (For more on support for retirement planning, see page C10.)
Also added to this year’s surveys was a question on the “firm’s due-diligence process for new products” — a growing concern for advisors and their firms in light of recent scandals that had engulfed certain products during the market turbulence.
Says an advisor in Alberta with Calgary-based Portfolio Strategies Corp. : “The firm is very thorough when it comes to making sure that only quality products get through.”
Another trend that came to light during the research for this year’s Report Card series relates to the challenges that rural advisors have to face — especially when it comes to meeting lofty sales targets, access to ongoing training initiatives and marketing support. (For more on rural advisors, see page C9.)
Although the challenges varied depending on the channel, rural advisors were consis-tent in describing the disparities they experience. Says an advisor in Atlantic Canada with Nesbitt: “Advisors outside of Toronto do not get the same access [to training] because of cost restrictions.”
• Advisors’ Report Card: Advisors’ books rebounding after market slump
Pablo Fuchs, senior editor at Investment Executive, and Clare O’Hara, staff reporter, discuss results from the 2010 Advisors’ Report card, a compilation and analysis of all IE report cards this year. They spoke at the TMX Broadcast Centre. WATCH
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