After a difficult year battling the economic crisis, deposit-taking institutions are seeing performance ratings take a turn for the worse in this year’s Report Card on Banks and Credit Unions.
In 2008, the banks and credit unions fared well despite the market turmoil and credit crisis, but advisor satisfaction levels have dropped this year. There are numerous gaps between how advisors rated categories in terms of importance and how well they say their firms have performed in these areas.
Although firms’ ethics, stability and delivery on promises, along with freedom in product choices, topped the charts in the importance ratings yet again, overall performance ratings plummeted by more than half a point in four key categories — including firm’s corporate culture and delivery on promises — with advi-sors feeling as if they are barely hanging on during this difficult period.
“This is a transitional time,” says an advisor in Ontario with Montreal-based National Bank of Canada. “We’re in a lot of chaos, and I’m pretty sure I know how things are going at the other banks.”
One of the advisors’ biggest complaints was how firms have set unattainable goals during today’s downtrodden markets — and their inflexibility in readjusting these targets. (See story on page 22.)
“They need to lighten up their expectations during these bad markets and be less aggressive,” says an advisor in Manitoba with Toronto-based Bank of Nova Scotia.
Adds an advisor in Ontario with Toronto-based TD Canada Trust: “They need to be more realistic about what financial advisors can do and the goals we can reach.”
Additionally, advisors have felt the pressure of hanging on to clients while trying to reach their sales targets. Advisors spoke about bonus structures that left them empty-handed and of commission sales dropping below what they expected.
“They need to think about us more as people than as numbers,” says an advisor in Atlantic Canada with Toronto-based Canadian Imperial Bank of Commerce. “They still wanted the same sales this year and didn’t consider the economy or markets. I am just trying to keep my clients from bailing, and I don’t think [the bank] understands that.”
As a result, the total compensation category showed one of the biggest gaps between importance and performance ratings. The overall importance average was 8.9, while the overall performance rating was 7.6.
There was also much dissatisfaction with support for developing a financial plan for clients. The gap between the two ratings was 0.7 of a point, as advisors rated it at 8.5 in importance and 7.8 in performance.
As well, the average percentage of clients with financial plans has dropped to 41.7% from 44.8% in 2008 — and a number of firms have seen a decline in these numbers.
For instance, advisors with Toronto-based Bank of Montreal say that 40.8% of their clients have financial plans, which pales in comparison with the 59.3% who had one last year. And Scotiabank advisors report that 44% of their clients now have a financial plan, down from 52% last year.
Conversely, both TD and Van-couver-based Vancouver City Savings Credit Union have put an emphasis on promoting the value of financial planning. As a result, Vancity advisors report that the percentage of clients with financial plans has increased to 30% this year from 14.9%, while advisors at TD report a substantial rise in such clients to 78.2% from 45.9%.
“For us, financial planning is huge,” says Michael Atkinson, director of investment solutions with Vancity. “In our conversations with [investment] specialists, and what we try to reinforce, is that the products you sell aren’t really what is going to differentiate us. It’s more important to make sure we have a good asset-allocation plan and that we are adding value with financial planners.” (See story on page 24.)
Investment Executive researchers Matthew LaForge, Sarah Phillips and Ashley Spegel spoke with 246 advisors at six banks and two credit unions, collecting importance and performance ratings for 25 categories. Advisors were asked to rate both headings on a scale of zero to 10, with zero meaning “unimportant” or “poor”; and 10 meaning “critically important” or “excellent.”
Individual ratings were then averaged for each category, for both the firms individually and the Report Card. The “IE rating” shows the average of all categories for each firm, excluding the “overall rating by advisors” (how advi-sors rated their firms out of 10).
@page_break@The bank and credit union advisors in IE‘s survey have mutual fund licences and provide financial advice to clients on investment issues. They include advisors with titles such as financial planner, personal banker and investment specialist, among others.
This year’s survey, the Report Card on Banks and Credit Unions, was formerly known as the Account Managers’ Report Card. The name change reflects the additional positions and responsibilities that have been added at the branch level.
New to the Report Card this year is Edmonton-based Servus Credit Union, which had merged with Community Savings Credit Union and Common Wealth Credit Union early in 2008 to create the third-largest financial co-operative in Canada. The merged credit union has 400,000 members in 92 branches in 63 Alberta communities and employs 1,925 people.
Although there may still be a small amount of uncertainty as Servus continues to work through the many tasks a merger brings, its advisors are optimistic. “The strategic focus is changing as we speak,” says an advisor. “It is much better now that we are with Servus.”
Adds a colleague: “At the beginning, it wasn’t good. But since April, they have really started to step it up, in terms of what they said they were going to do.”
During a time when clients may be shopping around for advisors, obtaining licences and designations seem to be on the rise in an effort to assure clients that advi-sors are covering all the bases. For instance, the percentage of advisors with the certified financial planner designation increased to 43.5% from 37.5% last year, while those with the Canadian investment manager designation jumped to 8.1% from 3.8%.
Many firms require advisors to earn a financial planning designation and will cover the associated costs. At Toronto-based Royal Bank of Canada, there are 1,900 advisors who were required to earn such a designation and who have been given targets for the number of financial plans they must set up for clients.
Says Michael Walker, vice president and head of branch investments at RBC: “We believe financial planning is core to the overall advisor/client relationship.” IE