Canada’s Independent Financial Advisors & The Client Relationship

Financial advisors have been in the spotlight over the last few years, as mutual fund fees are scrutinized and robo-advisors look to establish a foothold in Canada. At Environics Research, our decades of experience listening to advisors uniquely positions us to understand industry trends. Despite a changing landscape, our research reveals how independent advisors are re-focusing their practices to overcome industry challenges and better serve Canadians.


An increasing focus on building relationships

Financial advisors are traditionally sought to help Canadians invest and protect their financial assets. They are the experts in helping clients develop custom portfolios that meet investment goals – including maximizing returns and balancing risks. While this continues to be a major component of the job, our research indicates that advisors are moving away from focusing their time on portfolio management to concentrate instead on individual client needs. Nearly 60 percent of independent financial advisors now say they prefer to spend their time building relationships. In contrast, only 13 percent say their top preference is portfolio-building.

Advisors often tell us that their business is built on relationships with clients. Recently, one passionately explained to us, “It’s all about the people! If I can’t make a difference, then what am I doing?!” Such partnerships are the foundation of mutual success. Many say they love spending time getting to know people, establishing a trusting connection and working with clients to reach their goals, like saving for retirement. Some report having worked with their clients for so long that they’re now helping clients’ children or even grandchildren.

Advisors are re-evaluating their value proposition and building more holistic practices; offering more products and services to their clients such as tax advice and lifestyle planning. In focus groups, we hear that some look to establish themselves as their client’s go-to person. If a client is looking for a realtor or a lawyer, they provide a reference. This focus on clients positively impacts Canadian investors and the wider financial service industry.

It’s all about the people! If I can’t make a difference, then what am I doing?!

Applying more pressure on mutual fund companies

Advisors’ loyalty to their clients allows them to be advocates and demand higher quality standards, tighter cost control measures and a more investor-centric approach. At the same time, advisors are striving to reduce complexity within their practice by working with fewer financial service providers. Since 2008, there has been a 20-percent decrease in the average number of mutual fund companies used each year. The choice to reduce business or stop selling a company is often attributed to the products no longer being a good fit for a client or because of lack of support received from a provider. Advisors will continue to demand more and look to the companies they work with to support a client-centric focus going forward.

As advisors continue to consolidate the number of companies they support, expectations are rising. Companies have seen this challenge, and some are responding by improving their products and service offerings. Since 2008, our annual Advisor Perception Study, currently in its 24th year, has revealed a 125-percent increase in the overall mutual fund company rating. As industry practices change, we’re seeing a wide range of new opportunities for financial service providers to partner with advisors. Companies need to assess what add-on tools, products, services or resources will be of value, and can work with advisors to do so. The resulting proactive offerings will help advisors be prepared and can also lead to higher overall levels of satisfaction and, ultimately, higher sales for providers.

Independent advisors are evolving the definition and expectations of what it means to be a financial advisor in Canada. Establishing solid relationships and providing diverse solutions to meet clients’ goals throughout their entire financial journey is now more important than ever. They have already raised expectations when it comes to lower fees and offering products that meet client’s needs; and will continue to demand more from financial services providers, such as offering more value-add products, tools and services. This client-focused trend will have important and positive long-term effects on the industry, including encouraging mutual fund and insurance companies to continually to improve the quality and diversity of their offerings; a clear windfall for the Canadian investor.

Environics Financial Services team conducts research with Canadian investors, financial advisors and the financial services industry.

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