Financial advisors rely upon their dealer firms to provide a solid foundation of key services and support on which to grow advisors' businesses. However, the results of Investment Executive's 2017 Dealers' Report Card suggest that advisors believe there are a few cracks in that foundation as firms are struggling to deliver or meet advisors' expectations in these key areas.
That advisors believe their firms have some work to do in filling in those cracks is evident from the ratings in this year's main table. More specifically, 60 of the ratings that advisors gave their firms for this year's Report Card were lower by half a point or more, whereas only 18 ratings were up by the same margin. (See Dealers' Report Card 2017 main chart.)
Furthermore, the percentage of advisors overall who would recommend their firm to another advisor is down to 91.8% from 95.6% in 2016. Advisors at some of the larger dealers were less likely to recommend their firm because they feel a little lost in the shuffle. As well, firms that have made substantial changes that affect advisors' businesses often failed to receive a recommendation.
For example, Toronto-based HollisWealth Inc. is in the midst of being sold by Toronto-based Bank of Nova Scotia to Quebec City-based Industrial Alliance Insurance and Financial Services Inc. in a deal expected to close in the third quarter of this year. Only 80.4% of HollisWealth advisors surveyed said they would recommend their firm to another advisor, down from 94% in 2016; many advisors cited the sale as the reason they wouldn't recommend their firm.
As well, only 78% of advisors with Oakville, Ont.-based Manulife Securities said they would recommend their firm this year vs the 89.6% who said they would do so in 2016. This drop is due, in large part, to the dealer's bureaucracy and the recent cuts to advisors' payout grids.
Says a Manulife advisor in Ontario: "In terms of compensation, there are other firms that do it better."
Advisors also feel a little unsteady about their overall businesses at the moment, given the decline in the average book of business during the past year to $36.6 million from $39 million in 2016. The makeup of those books also changed during this time. Case in point: advisors reported that mutual funds made up 69.3% of their books this year, down from 73.1% in 2016. Insurance products and ETFs, on the other hand, comprised a slightly larger slice of advisors' businesses this year vs 2016.
The products advisors have access to and include in their clients' portfolios are, and always have been, important to the advisors surveyed for the Dealers' Report Card. In fact, the "freedom to make objective product choices" category is consistently among the top three most important areas to advisors - and 2017 was no exception.
By and large, advisors appreciate the product choices they have, even if that means working within a specific compliance framework. However, that doesn't mean the product shelf can't be tweaked. In some cases, advisors said they would like to see a more streamlined offering, with fewer mutual funds on the shelf. Still other advisors would like access to the growing ETF market. (Read: Advisors pleased with products)
"The only thing we truly miss is not having an ETF offering," says an advisor in British Columbia with Lévis, Que.-based Desjardins Financial Security Independent Network.
Although some advisors may welcome modifications to their product shelves, they're less enthusiastic about constant regulatory changes. In fact, advisors are turning to third-party sources, such as mutual fund companies, to stay informed and receive support in dealing with the endless regulatory changes as their firms struggle to implement new compliance measures to keep up with all the new regulatory initiatives. (Read: The struggle to keep up)
Furthermore, many advisors reported frustration with their executives, whom advisors believe are far too complacent about the many proposed changes coming from the regulators. In fact, several advisors want management to stand up to the regulators.
"I find the firm a bit spineless in this area," says an advisor in Ontario with Windsor, Ont.-based Sterling Mutuals Inc. "[My firm] reacts to [Mutual Fund Dealers Association of Canada] policies and directives instead of being proactive and saying, 'This is how we would like to do business and here is how advisors can improve others' lives'."
Survey participants also had higher expectations of their leadership pertaining to management responding to advisors' suggestions and concerns. In fact, all but one firm's rating declined in the "firm's receptiveness to advisor feedback" category this year. (Read: Having a voice matters to advisors)
In general, advisors appreciate having established channels to communicate with their firm's executives, whether directly or by having a seat on an advisory council, but still are frustrated when they fail to see results from their feedback.
"You have to work within [the firm's] standard systems," says an advisor in Ontario with Toronto-based Assante Wealth Management (Canada) Ltd. "I have voiced input in the past, but it wasn't acted upon."
As well, advisors sometimes are uncertain of their back-office support. For example, advisors with Winnipeg-based Investors Group Inc. rated their firm significantly lower in the "back office and administrative support" category because there are errors being made among back-office staff and a significant backlog has built up as the firm adjusts to a new platform.
"There have been backlogs and increased inaccuracies in the back office, which causes problem with clients," says an Investors Group advisor in Ontario.
One area in which most firms are getting things right, according to advisors, is in the treatment of smaller client accounts. This year, survey participants were asked in a supplementary question if their firms encourage advisors to drop the smallest clients from their books of business. The overwhelming majority, 87%, of survey participants who answered said there was no such encouragement and that the firm supports advisors' decision to work with clients of all account sizes.
"I'm the perfect example of that," says an advisor in Quebec with Montreal-based Peak Financial Group. "I have a lot of small clients and [the firm has] been amenable to me [working with them] for 16 years."
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