Industry panelists gathered at the 2023 Annual Leadership Conference hosted by the Investment Funds Institute of Canada (IFIC) say advisors are increasingly becoming therapists and could in the future become real-time providers of financial decision support to clients. Advisor prioritization and inclusion for smaller investors in that equation were also discussed.
“Around 25 years ago, an advisor’s role was really to help clients have access to the markets. We gave advice, but it was really only on a handful of topics, and it was mostly related to investments,” says Karen McNally, vice president and head of investment solutions with RBC Global Asset Management.
Today, comparatively speaking, the advisor’s task is notably more involved: Helping clients to choose appropriate accounts and understand their mechanics and knowing whether or not clients should take Canada Pension Plan (CPP) payments and draw down assets without triggering Old Age Security (OAS) claw backs were two examples. Business owners also routinely seek help from their advisors with succession planning and advanced tax strategies are necessary to help clients keep cottages in the family.
“The process gets to a point where you really want to make sure you actually choose your clients,” says Jonathan Durocher, president of National Bank Financial Wealth Management of the know-your-client process and other related facets. As investors become more informed too, the experts add, expectations also change.
Preferences can’t be generalized by generation, either. McNally points out that three different Gen Z clients can think about investing in wildly different ways. Across the board, however, generations of clients do appear to want an omni-channel experience. “I think we need to get a lot better at being comfortable in that digital world (podcasts, YouTube and TikTok) because they expect it. And we need to be able to change really quickly because the pace that they’re changing at is really, really fast,” she says.
Developing talent was brought forth as one solution to the communication gap which might exist between prospective clients and older advisors.
“Every generation is going to have their own perspective. I think the best way to actually do a good job is to ensure that we have a different generation of advisors that are able to cater to that reality. That’s what we’ve been doing with a good amount of success,” Durocher says.
Riley Etheridge Jr., president of North American wealth management client group with Capital Group says he is also encouraged by programs in the United States, where he says the average advisor is even older than in Canada. “I’m super excited to see the university programs that are growing around financial planning in places like Texas Tech and the University of Georgia and Kansas State University. There are 200 to 300 students in those programs that are going to graduate with the academic requirement to be certified financial planners. They’ll give advice to our kids.”
Returning to the problem where advisors need to make tradeoffs about the clients they serve, a trend which puts smaller balance-holding clients at risk of being left behind, Durocher points out that technology can help.
“There is that risk for smaller balances out there. It’s up to us as an industry to pick them up and not leave them behind. It’s something I think we’ve got to keep pushing for as an industry – to be better there,” he adds.
Financial planning tools developed for larger clients are now being used to serve smaller investors, as well. “We are in the middle of a big digital transformation. And really, the goal is that advisors become more productive, that they’re spending more time with their clients,” says Brittany Bascom, head of platform and product with Manulife Securities, who adds that compliance supervision also becomes easier with this investment in technology.
“What I’m noticing with advisors, when it comes to the regulation, those who are embracing it, they’re winning,” says Bascom. “They’re building better relationships. Those advisor books are growing.”
Going forward, McNally says one of the relatively near-term challenges advisors will face is the prospect of bringing clients back to the discipline of long-term investing.
“I think a lot of long-term investors have become short term investors recently,” she says. “I think it’s become much harder for advisors to have the conversation about staying invested long-term when GIC rates are getting five per cent or higher. It’s been a lot easier to sit back and sell that GIC.”
She says shifting this conversation has become a priority for the firm.
“I think over the next couple of years, especially as rates start to come back down, we’re going to have to restart those conversations with investors about thinking about their medium-term goals and long-term goals and moving them out of cash,” she adds. “History shows that investors are not very good at timing that and getting back in at the right time. I think that’s one of the things that we’re going to be spending time on in the next few years.”
