After CRM2 should you join an independent firm?

Uncertainty is in the air in the aftermath of CRM2. Can advisors make it to their advantage?

After CRM2 should you join an independent firm?
With the big banks focusing on buying out all the major stock brokerage firms in recent years, independent firms have had to learn how to adapt in order to survive. And it’s this ability to adapt and be nimble that is enabling smaller firms to navigate the implementation of CRM2 with much less upheaval than the corporate giants. Advisors at independent firms are not feeling the same pinch that their peers at the big banks are soon to be experiencing.

“As a small firm, we have always had to be better in our services and product offerings than the big boys, many of whom got by just on their firm’s name,” explains Tony DeThomasis, President of DeThomas Financial Corp. “We have always kept our overheads very low, which has enabled us to provide one of the highest payouts in the industry.”

Until recently, there has been a common misconception that big bank advisory investments (and insurance and direct sellers) have been cost-free. Although, this belief is soon to be shattered. When investors start to ask what they’re getting for their fees there will be an intense scrutiny placed on the services and products that their advisor provides. But are the big banks, insurance firms and direct sellers able to be as flexible as smaller, independent dealerships?

 “Up until today, many clients thought they were not paying fees, so they stayed and did not shop around,” DeThomasis says. “Canadians still favour advice, but as they become aware that they’re paying a fee, they will want to know what products and services their adviser is offering, what are their credentials and are their fees are competitive. However, they will not only compare fees – but the quality of service delivered for those fees.”

Advisors based at independent firms, who are able to offer low cost investment options, financial planning, income tax and tax management, estate planning, insurance and retirement planning, are going to be in a much stronger position in the wake of CRM2.

Advisors at independent firms are also likely to have better job security, according to DeThomasis. All the big firms want their advisors to go after higher AUM books of business, which will place a strain on the advisor at a time when clients want to pay less. “The biggest impact will be on the advisors at big banks who have the most assets; they are the ones who are going to have their clients attacked the most,” DeThomasis says. “These firms need to lower costs and increase services, and one way of doing that is to eliminate the lower producing advisor. Another way is to pay them less, which will affect their income.”