Although he doesn’t expect other US full-service providers to follow HSBC’s lead, the NBF advisor does suspect that many if not most are already running predominantly fee-based businesses. “I would [also] hasten to say that over the past few years most bank-owned investment dealers in Canada, for the first time, have seen most of their advisors become compensated more by fees than by commissions.”
Stephen Whipp, who operates an ethical investment advisory business in Victoria, agrees that the industry is moving away from commissions. He notes that his business is 75% fee-based, however he is concerned that elimination of commissions will drive lower- and medium-end investors into bank-only channels.
“My cynicism is that this is a play by the banks to gather more assets at a lower level. You can walk in any bank in Canada and if you are at a branch, not at their IIROC-level business, [the advisors] get salary and some form of bonus,” said Whipp.
“If [the banks] were thinking about capturing all of those investors with assets of under $200,000, and there is some significant coin there to be had in that segment, that could be more easily done [by banks] if we move into an environment where there is no commissions,” said Whipp.