The fees are coming and the fun is gone

By Andrew Rickard | November 15 2016 01:30PM

Photo: Freepik

A survey has found that almost all Canadian financial advisors expect a shift away from commissions and towards fee-based remuneration. Many respondents also said their professional lives have become more difficult.

Ipsos recently surveyed 906 financial advisors from around the world, including 164 advisors in Canada, on behalf of The Vanguard Group. The survey uncovered a "near-universal feeling" that the industry is on the cusp of seismic changes, mostly due to new regulations. This feeling was accompanied by a widespread belief that the financial advisor’s role has become more difficult over the years.

4% of respondents earned all of their income through fees

While only 4% of Canadian survey respondents earned all of their income through fees, fee-based remuneration accounted for 55% of their aggregate practice. Vanguard suggests this amount is likely to increase, noting that 98% of Canadian advisors are expecting a shift toward fee-based practices.

This may also mean a shift away from the middle market, with 44% of Canadian respondents planning to either reduce the number of clients they serve, or keep it the same. "The cost of compliance and greater scrutiny on fees will make only higher net-worth clients profitable, advisors predict, pushing lower-asset clients toward automated advice," reads the report.

Participants expect a shake-out in the next three to five years

Advisors were also asked about how their professional experience had changed over their careers: on a scale of 1 to 10, with 10 being “much more difficult”, the aggregate score in Canada was a 6.6. Vanguard points out that more than twice as many Canadian advisors rated their experience from 8 to 10 compared to those who rated it 0 to 4.

The report revealed that survey participants expect a shake-out in the next three to five years, with older advisors leaving under the weight of additional regulatory compliance. “Spending so much time fighting with the computer and dealing with the paperwork is taking the fun out of the job,” said one Canadian advisor.