Accelerating Trend for Change

Investors are increasingly reviewing their financial advisors/ asset managers/ wealth management providers with a view to making changes. This trend is likely to accelerate.

Why? Two reasons dominate.

  • Investors are now in a position to assess the value they are receiving for their money 
    Regulators have finally forced financial services companies to provide greater transparency to clients regarding the fees they are charging. Value for money, or lack thereof, is expected to accelerate the trend of investors changing their financial service products and providers.
  • So much money has been idling in legacy money management arrangements  
    Greater transparency leads to greater awareness. Better understanding of the financial service industry’s plethora of business models and product and service offerings, is expected to intensify investors’ sense that their existing arrangements may be subpar. A trend expected to intensify is one of investors feeling that their money is being managed by the wrong company or affiliate of a conglomerate, with the wrong portfolio manager, in the wrong products, paying the wrong fees, interfacing with the wrong representative who has the wrong incentives, etc. etc.

Areas of Growing Investor Interest

  • Growth

- Investing for capital growth not just wealth preservation

  • Active (or passive)

- Gravitation to two ends of the spectrum: active investing with fees commensurate with services rendered, and passive automated investing at commoditized low fees

- Greater interest in active asset allocation not a static mix

  • International and alternatives

- Increasing international holdings and alternative investments, where pertinent expertise would be beneficial 


 Investors are increasingly looking beyond the traditional Canadian manager


Confusing Myriad of Status Quo Under Big Banners

  • "Growth" through acquisitions

Canadian financial institutions have historically favoured growth in their money management businesses through acquisitions. Buying up companies to gain assets is faster and easier than the burden of hard work and the time commitment to organically grow assets under management. The result has been a concentrated marketplace, with less than a dozen financial institutions holding sway over more than 80% of the investable assets of Canadians.

  • Myriad of legacy business models

Interestingly, the success of the large financial institutions in streamlining their accumulation of these highly fragmented money management businesses may be considered mixed. The current status quo is a myriad of legacy business models existing under a few big roofs. Some of these models are outmoded, and encumbered by the new owners adding layers of upper level management and regulatory burden to mitigate some of the conflict of interest risks.

  • Myriad of job functions and titles

A consequence is that under a big financial institution brand name there is typically a confusing myriad of job functions and titles, which in a big bank for example, may include but not be limited to: financial advisors, brokers, investment dealers, personal banking representatives, financial planners, branch managers, investment counsellors, fund distributors, mutual fund agents, financial consultants, mutual fund sales, financial services representatives. This has not escaped the attention of regulators.

  • Woeful financial awareness and education

It is not befitting that a generally well-educated Canadian populace is so woefully under-educated in financial matters. It diminishes the wealth of investors and redistributes it to varying degrees to the management and shareholders of financial institutions. Arguably, such an arrangement may also be constraining the provision of objective financial advice.

For the most part, Canadian investors are not very knowledgeable about the money management business models that are in operation and what they may mean for the provision of the products and services they buy. Furthermore, Canadians do not appear well informed about the small number of independent asset managers in Canada that offer active global investment advisory services and alternative strategies that may be very well suited to their needs.

Many Canadians seem to imagine that there is some hassle involved in changing managers. Compounding matters, with financial advisors loathe to see clients leave, it may sound like moving assets away is an arduous task. The reality is typically different, with far less time and energy required than one may be led to believe. This is a little bit of time and energy which may prove very well spent.