CEO says designation has slipped under the radar but can be a valuable pathway for MFDA advisors
The new Advising Representative - Client Relationship Manager (AR-CRM) category has slipped under the radar but offers MFDA advisors a potentially valuable career opportunity, according to one CEO.
Peter Kinkaide, who leads Edmonton-based Raintree Wealth Management, said the new registration category, which was announced by the CSA in June, is a win-win scenario for advisors and clients. However, he believes the benefits of the progression have not yet hit home.
Historically, the registration had two primary categories, Advising Representative (AR) and Associate Advising Representative (AAR), which featured barriers to entry, including experience, education and proficiency. Typically, MFDA advisors have found this challenging to attain.
The experience element, in particular, relates to KYC around security selection, meaning that to become a PM you usually had to work your way up inside a portfolio management firm or come from an IIROC, investment banking or foreign investment background.
However, the new AR-CRM category means advisors will be qualified to provide investment advice using model portfolios, albeit they will not be allowed to stock pick.
Kinkaide said: “We think that this a doorway for MFDA advisors to qualify as a portfolio manager with a small restriction, which is that AR-CRMs aren't allowed to do security selection when they get registered in that portfolio. They are restricted to using model portfolios but I think many MFDA advisor are already used to that.
“We think this is a pathway for MFDA advisors to heighten their professional standards and to become a fiduciary on behalf of their clients.”
Raintree also sees this an opportunity to propel its own growth. It believes its back office technology can provide AR-CRMs with a robust service, enabling partnerships with more advisors.
“I don’t see MFDA advisors singing this from the mountain tops,” Kinkaide added. “In fact, I don’t really see anyone doing it. What we are trying to do at Raintree is be innovative and we see this as an innovative way for advisors to become PMs.”
The big-picture view is that this highlights the growing industry divide between the financial advisor and investment manager, with the AR-CRM almost a hybrid of the two. Kinkaide believes this could solve the rebalancing problem that many MFDA advisors face.
He explained: “Historically, for an MFDA advisor, it’s very difficult to rebalance client portfolios on a regular basis for two reasons. One is the education category – some say that too much active rebalancing isn’t necessarily the financial advisor’s role.
“More importantly, because the nature of the relationship is a client instruction one, it’s extremely demanding to go through the process because the client has to be involved; they have to sign papers and give their consent.
“What actually happens often is very little rebalancing goes on, which is as much a registration and process issue as it is an advisor intent or willingness issue. It’s arduous to do that rebalancing in the existing MFDA concept.”
He added: “We think [the AR-CRM] is a great progression and a win-win for the advisor, the client and, if we create a win-win relationship, it will be beneficial for Raintree as well.”