A Time of Disruption and Change for Canadian Financial Advisors

On June 24, 2015 S&P Dow Jones Indices hosted an ETF Masterclass in Canada: ETFs as a Catalyst for Canadian Advisory Growth.  In advance, we believed that what would be top-of-mind for advisors was the use of ETFs for global diversification.  Our panels were also prepared to address proactively positioning their firm for regulatory change, such as the Client Relationship Model.  In reality, what was really top-of-mind for our attendees were advisor fees and robo-advice.

Fees came up as a response to Beth Hamilton-Keen’s comments during her presentation on “Putting Clients First…”  She voiced an opinion that Canadian mutual fund management expense ratios (MER) seem high compared with other countries and that  part of those fees are received as compensation by Canadian advisors and banks using those mutual funds.   During Q&A, some advisors vocally interpreted Beth’s comments to mean that they should cut their fees.  One advisor spoke of his right to defend his fees as long as he was delivering value to the client.

Clare O’Hara of the Globe and Mail asked her panel to share thoughts about robo-advice.  Panelist Mark Yamada, President and CEO of PŮR Investing offered remarks that are not completely reprintable here.   Certainly Mark believes robo-advice will disrupt some financial advisors.  Specifically, he said robo-advice will reduce the value of financial advisors that solely offer investment advice, similar to a robo-portfolio.  Instead, he expressed that advisors could either charge a lower fee for investment advice only or focus on more valuable areas of practice, such as planning or tax advice.  In Q&A, a few questions came up about the ability of robo-advisors to match the quality and timeliness of the advice services an advisor may provide to keep clients on track, particularly in down-markets.

What of ETFs?  Advisors I spoke with after our event were universal in their praise of comments made by panelist Raymond Kerzérho, Director of Research at PWL Capital.  Raymond described humbly and in clear and concise language how PWL Capital adopted ETFs.  He stated that PWL Capital uses all ETFs for their high net worth (HNW) clients, and the company has now grown in that practice to manage more than USD1 billion in HNW client assets with ETFs as their investment tool of choice.

Several advisors attending our event mentioned that there is still not enough high quality, simple-to-understand educational materials available on ETFs for their clients, or enough practical education for advisors to use.  In order to make this information easily accessible, we have published several new papers on index themes in Canada which can be found on spdji.com.

The posts on this blog are opinions, not advice. Please read our disclaimers.

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