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June 2020 DEALERS’ REPORT CARD INVESTMENT EXECUTIVE Advisors rated their regulatory support much higher this year
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How we did it
The 2020 Dealers’ Report Card research team consisted of Emily Fox, James Gaughan, Surina Nath and Swikar Oli. Between February 18 and April 3, they interviewed 427 advisors from 11 firms, asking for performance and importance ratings for up to 31 categories (some categories did not apply to multiple firms). On a scale of zero to 10 — with zero meaning “very poor”
or “unimportant” and 10 meaning “excellent” or “critically important” — performance
ratings were based on a firm’s performance while importance ratings were based on how crucial a category is to an advisor’s business. Participating advisors were registered to sell securities and/or mutual funds; must have worked with their dealer for at least one year, and have derived at least 50% of their business from investments products.
A firm’s “IE rating” is calculated based on the performance average of all categories rated by advisors surveyed. For 2020, “overall rating by advisor,” where respondents would offer a single rating from zero to 10 for their firm, was replaced with Net Promoter Score (NPS) — a tool that gauges loyalty on a -100
to 100 scale. An NPS over zero is considered good, over 50 is considered excellent and over
70 is considered exceptional. A score below zero indicates the presence of more detractors (people who wouldn’t recommend the firm).
Due largely to the impact of the Covid-19 crisis, Investment Executive was unable
to attain sufficient survey samples for Montreal-based Peak Financial Group and Markham, Ont.-based Worldsource Wealth Management Inc. Their qualitative results are discussed on page 33.
As in past years, the main chart includes
a breakdown of the total number of advisors surveyed for each firm. The target was 50 for large, national mutual fund and full-service dealers, 40 for independents Portfolio Strat- egies Corp. (based in Calgary) and Sterling Mutuals Inc. (based in Windsor, Ont.), and
30 for smaller independent Carte Wealth Management Inc. (based in Mississauga, Ont.). In our coverage, we don’t mention
the locations of advisors with these three independents to preserve anonymity.
Advisors were asked two supplementary questions, one about responsible investing discussions with clients and another about the Canadian Securities Administrators’ client-focused reforms.
CONTINUED FROM PAGE 27
Strategies advisor.
Yet, the independent dealer
was rated above-average and it improved in both the ethics and product freedom categories year-over-year.
“I was pressured at the place I was before. I know that [CEO] Mark Kent always puts the client first,” says another Portfolio Strategies advisor.
“We do not promote deferred sales charges [DSC] as a firm; it is a very small part [7%–8%] of our revenue,” says Kent, adding that most of the dealer’s advisors switched to front-end-load funds and fee-based accounts many years ago. Still, he says, “The DSC issue is not automatically a con- flict of interest,” depending on a client’s needs and what’s best for them individually.
Among the firms rated below-average in the eth- ics category were Lévis, Que.- based Desjardins Financial Security Independent Network (DFSIN; rated 8.6) and Manulife Securities (rated 9.0). IG Wealth, meanwhile, was nearly two points below average in the prod- uct freedom category (rated 7.4).
Some Manulife advisors sug- gested that the quality of new hires isn’t consistent and that they’re not sure whether the firm would support them if a compli- ance issue arose. Further, says one Manulife advisor in Atlantic Canada, “They cut out DSC on mutual funds with no notice, but they allow their own seg[regated] funds to be sold with DSC, and that’s wrong.”
Rick Annaert, president and CEO, Manulife Securities, says the dealer banned DSC funds in June of last year, which “wasn’t well-received [by] those using DSC.” By 2019, only 4% of all sales had used DSC, so the com- pany stopped allowing them
“for all product types in dealer accounts” and gave advisors “a few weeks’ notice” — which had been preceded by years of dis- cussion, he says.
Annaert concedes that advis- ors working with Manulife’s managing general agency can sell DSC segregated funds, which fall outside of securities regulation.
At IG Wealth, advisors were vocal about restrictions placed on their product shelf. “It’s a con- stant battle over third-party ver- sus packaged products here. We need more selection,” says one IG Wealth advisor in Ontario. Others mentioned the reins were loosening.
“We believe in managed solu- tions for our clients, with differ- ent sub-advisors from around the world,” says Brent Allen, senior vice president, distribu- tionoperations,atIGWealth.He notes that the firm uses external sub-advisors almost exclusively and that it’s in the final stages of a five-year transformation plan that began in 2015. (See story on page 32.)
Across all dealers, advis- ors rated “support for dealing with changes in the regulatory environment” significantly higher year-over-year for performance (8.9, up from 8.4). The category was rated 9.4 for importance, up from 9.1, but the resulting satis- faction gap (the amount by which the importance of a category exceeds its performance) shrank by 0.2 compared with a year ago.
Carte Wealth also was a leader in this regulatory cat- egory, rated a 9.8, followed by Assante at 9.4. Carte Wealth’s advisors said the dealer hosts monthly regulatory meetings and “pushes a lot of compli- ance,” while Assante’s advisors said that, despite the “chaotic” rate of regulatory change, the firm is proactive.
TOP PERFORMERS
There was a three-way tie for top- rated firm between Assante, Carte Wealth and Windsor, Ont.-based Sterling Mutuals Inc. All had IE ratings of 8.9, and also were the top three firms a year ago.
However, Assante was the only firm to see a significant increase in its rating (up from 8.3) and it had the highest Net Promoter Score (86.0), indicat- ing exceptional advisor loyalty (a measure used for the first time this year). While Carte Wealth and Sterling did improve significantly in a handful of cat- egories combined, with better technology being a common denominator, Assante improved significantly in 15 categories vs two last year.
“[There’s] true independence
in the products offered. I also enjoy the professionalism. We’ve always been taught to change before you have to,” says an Assante advisor in Ontario.
“Over the last three to four years, [there’s been a] shift toward including advisors in decision-making. [The firm has] stepped up its game on improv- ing technology,” says another Assante advisor in Atlantic Canada.
“With the backing of [Toronto-based] CI Financial [Corp.], we continue to invest in [technology] tools and capabil- ities to support growth in the high-net-worth segment, meet the planning needs of clients [and] strengthen our brand,” says Sean Etherington, president of Assante Wealth Management. (See story on page 32.)
At Carte Wealth and Sterling, advisors expressed satisfac- tion with their independence, technology, mentorship oppor- tunities, and management’s accessibility. Further, one Carte advisor says, “The reason I joined was their focus on women; [it’s a] very diverse workplace.”
Executives at both dealers discussed their focus on tech- nology, while noting that face- to-face interactions remain important. To help promote firm culture and camaraderie among independent advisors, Sterling Mutuals CEO Nelson Cheng says, “We have assigned all advisors to one of three teams. The advisors get to know each other and that improves communication.”
The firm with the lowest IE rating (7.4, up from 7.2) also was the same as a year ago: DFSIN. Yet the dealer saw significant improvement in five categories
and no significant year-over-year declines, compared with 15 sig- nificant category rating drops in 2019. Some DFSIN advisors said they wanted more support for English-speaking advisors and that the firm’s strategy could be clearer.
Another in Ontario was more optimistic, saying, “Desjardins is in the middle of a major change, which I think [is] going to be for the better.”
“Across Desjardins, the pur- pose is to provide financial ser- vices to clients. So how can we make sure that the advisor is [doing] what makes sense for the client?” says Denis Dubois, president and COO, Desjardins Financial Security, who took over from Gregory Crispin in October 2019. Dubois says the dealer is boosting technology and lever- aging data analytics.
Looking ahead, the ability of dealers to help advisors com- municate their value and deal with fluctuating client needs will be paramount. For example, when asked about responsible investment discussions (which 56.1% of advisors overall said they start with clients), one Portfolio Strategies advisor says, “[Those discussions] do come up more and more, [but] I think that might disappear after the virus thing; people just want to get back to where they were before.”
Kirk Purai, president and CEO of Carte Wealth, says firms can also hire business develop- ment coaches. “[They pro- vide] sessions for our branches and independent advisors, teaching how to manage your practice and adapt to the tech- nology. It’s the unknown we find resistance on.” IE
Dealers’ ability to help advisors communicate their value and deal with fluctuating client needs will be paramount
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