Banks to push advantage in advisor recruitment

Banks to push advantage in advisor recruitment

Banks to push advantage in advisor recruitment

Second in a series on what the Big-Six banks’ aggressive expansion into the wealth management segment will mean for the industry.

Canada’s Big Six chartered banks all posted double-digit growth in their wealth management operations, with growth in the wealth segment outpacing that of their other business lines. As they expand aggressively, they are likely to push their advantage in scooping up young advisors; that may mean independents will have to come up with new ways to recruit.

“It’s difficult for me as an independent to attract young advisors to the industry simply because the financial institutions provide a decent salary and benefits to basically deal with their deposit holders,” said John Kason an advisor with Global Securities in Prince George, BC. “But they have a great training model and do a good job, so it’s who I steal advisors from.”

One of the lingering issues in the advisory segment has been that the profile of the average advisor has been greying. According to Advocis, an industry association, the average age of an advisor in Canada is 58. Given their scale, training programs and a compensation model that many new entrants find favorable, the banks have advantages in recruitment and can bring in new talent to grow their businesses.

Daniel Popescu, advisor and president of Harbourfront Wealth Management in Vancouver, said bringing new advisors in to non-bank channels will be a key challenge for non-bank operators as banks are able to bring in young bodies whom do not yet have a client base.

“They have economies of scale, one of the biggest costs in the industry is real estate, if you have 20,000 square feet and plunk a few bodies there, if these producers are producing $200,000 to $300,000 – which is considered low – then it’s profitable,” he said. “With the 50/50 split [on income in the bank channel], they can be paying guys who are doing little revenue, but it can be very profitable.”

Marc Lamontagne of Ryan Lamontagne in Ottawa says that his firm has responded by adopting the banks’ salary-based compensation model for junior advisors.

“In the independent channel not a lot of companies offer a salary; you come in get a desk and a phone and you have to go out and get clients. You’re basically self-employed; going that way you can make more money than you would at the banks, but in the earlier years you’re going to starve,” said Lamontagne.

“One of the things we’ve done to get around that that a couple of years ago we did start hiring a couple of associates on salary,” said Lamontagne, “but the idea is after a certain period of time you will then go into what is an ‘override’ a certain proportion of your salary will go to the company but you will essentially be self-employed.”

Wealth and advisory services are key performers for Canada’s banks, with growth in the segment outpacing that of their other businesses. In the wealth segment, BMO’s earnings doubled in the third quarter, RBC’s jumped 51%, CIBC’s rose 34%, National Bank saw a 33% gain and Scotia’s were up 18%. TD’s earnings for the segment slipped, but this was due to the bank’s reporting a combined “wealth and insurance” segment. With insurance stripped out, TD too saw double digit growth.

Related:
Big Six growth in wealth management points to more consolidation

 

2 Comments
  • Mike Travers 2013-09-09 9:11:53 AM
    Being 20 years younger than the average mentioned, I would be considered a younger advisor participating in the independent channel. One massive issue I’ve discussed with my industry contacts is the lack of support dealers provide in helping younger advisors team up with senior advisors, who might be approaching retirement. This is partly the nature of the independent environment, where we tend to work separately from one another and don’t want too much interference from the dealer, but I feel all parties involved would benefit from such collaboration.

    Senior advisors would likely have greater success in transitioning their book by linking with a junior advisor, thus maximizing value. Instead of a quick sale, the two advisors would team up and work together over a 2 to 5yr period. In speaking with some senior advisors that have had the foresight to develop such a relationship, they often mention how their revenues have increased as another hand in the office frees them to work on more profitable opportunities. It’s a great way to inject new blood into the practice.

    Junior advisors in the independent channel also benefit by teaming up with a senior advisor by tapping into a revenue source while they are developing and building their own book. Most advisors that have battled in the trenches know it’s tough in the beginning so having some support ensures survival in a tough industry. Beyond that, junior advisors would also benefit by learning from the senior, in an apprentice sort of manner. Working as an independent requires a well-rounded individual given all the hats one has to wear in order to run a practice, something that can be developed while working with a senior advisor.

    Lastly, dealers would increase the likelihood of retaining books of business by fostering succession planning between their senior and junior advisors. In having a program in place that groups seniors and juniors, they’re also more likely to attract new blood in the industry.

    It’s my opinion that the independent space is the best place to be in the industry but there’s a massive dropout rate that can partially be addressed with the help of dealers. Of course, participation by senior advisors is also crucial. With a large group of advisors retiring in the near future, whether by choice or through forced retirement, buying into their own succession planning will not only help their own success but also help strengthen the channel they’ve enjoyed operating in.
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  • Sheryl Harras 2013-09-09 10:22:05 AM
    I agree completely with Mike. I do want to add that I think the amount of support an advisor receives depends on the MGA each advisor is with, as well as the advisors ability to ask for what they want and need.

    I have biweekly calls with a veteran advisor with my MGA. They also offer training sessions where I can network with other advisors and potentially find that senior advisor looking for someone to mentor and start his or her succession plan.

    I am quite hopeful that I will find a senior advisor who sees my great work ethic and my care for clients and want me to care for their clients when they retire.
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