The findings from JD Power’s recent investor satisfaction survey were not exactly a ringing endorsement for Canadian advisors. Surveying more than 5,000 Canadians, the study asked investors if advisors helped them set goals that reflect their risk tolerance, implemented strategies to achieve those goals and monitored their progress.
The survey found that: “Only slightly more than half (54%) of investors indicate their advisor helped set goals and discussed risk… Barely one-third (34%) say their advisor effectively delivered on all three stages." In addition, only 27% of investors say they completely understand the fees they pay, down from the 2012 figure of 30%.
But while the results may not read well for advisors, how do industry insiders interpret the findings? “I found the results to be interesting but not completely surprising,” says James Porter, an executive vice-president with Cidel Asset Management. “Advisors should really be following a four step process with their clients: getting to know their short and long-term objectives, designing and implementing a strategy, and then monitoring and managing.”
Porter views the implementation phase as an opportunity for advisors to revisit the risk discussion with the client, just to ensure they understand their risk exposures and the structure of their strategy. “We find it helpful to walk through scenarios with clients in order to give them the best possible understanding,” he says.
Although he sees many advisors doing good work for their clients, Porter does believe that certain Canadian advisors need to do more. “Having a more honed process and knowing what specific questions to ask each client will help advisors achieve that. Those questions aren’t just a list from a book: every client and every situation is different,” Porter says. “Advisors should be prepared to probe with their questions, perhaps a little more deeply than clients may be comfortable with.”
Porter has noticed that clients who are prepared to have frank and open discussions with their advisors often achieve better results. “It’s a two sided conversation, and Canadian clients tend to not be very outgoing or open,” he says. “It’s all very well for an investor to say their advisor hasn’t done a very good job, but sometimes the client needs open up.”
Advisors need to be more curious about their clients and develop conscientious strategies that help to keep clients engaged. “Advisors may have to break through that comfort zone, because often money and long-term objectives are topics that people don’t want to talk about,” Porter says. “But making those discussions happen really helps the advisor get a better understanding of what the client wants to achieve.”