Almost all advisors anticipate shift to fee-based compensation

By Andrew Rickard | May 27 2016 01:07PM

In a recent survey conducted by Vanguard Investments, nearly all of the Canadian advisors who participated said they expect to see a shift to a fee-based practice and compensation model.

Vanguard released its Global Advisor Trends Report on May 25, and it reveals that 98% of the respondents expect the industry to shift from commission to fee-based remuneration in the coming years: 83% of them believe this will be better for their practice and 76% think it will be better for their clients.

Regulatory issues

The survey also found that more than a quarter of Canadian advisors feel their jobs have become more difficult over time, and most of them blame regulatory issues. Asked about the negative effects that the new Client Relationship Model (CRM) reforms may have, advisors said that decreased profitability and reduced total compensation were their top worries.

While the regulatory burden was a concern for many advisors (26%), the single biggest challenge was finding new clients (cited by 31%), followed by managing client expectations and increasing demands (cited by 23%). However, advisors remain generally optimistic:  55% expect their total number of clients will increase over the next two to three years and 88% believe their total amount of assets managed will increase.

"The business model is changing"

"Financial advisors play a fundamental role in providing Canadians with valuable financial advice.  But their business model is changing with many advisors shifting towards fee-based business models driven in part by the implementation of Client Relationship Model reforms," said Jason McIntyre, head of distribution for Vanguard Investments Canada. "Advisors see this as a positive development that can lead to greater client trust, fee transparency and an opportunity to communicate value."

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