Investing in the Advisor Community

Whether they are independent, bank-owned or ETFs, Canada’s fund companies generally invest wisely in relationships within the advice community. This is for good reason; people prefer do do business with people they know and with people they like. Credo has found that not all companies are created equally with respect to the investments they make in the advisor community to be known and liked. Some companies invest effectively in ways that get them a great “bang-for-the-buck.” Others, less so.

Invests a lot in the advisor community

Over the last five years, Credo surveyed more than 5,750 advisors with a consistent set of questions. One of those questions is this: “Consider supplier X. This company invested a lot in the advisor community. Agree or disagree?” Of course, Company X will be one of the companies they work with to some degree. By repeating this exercise with the numerous suppliers, and with so many advisors, Credo tracks the evolution of advisors’ perceptions of this dimension against all of the industry’s many suppliers. (More than 30,000 data points on this question alone give us considerable confidence in the research results.)

When we aggregate the results from all of the independent fund companies into a single index (the blue line in our graphical analysis,) we find that the independent fund companies — think of AGF, CI, Fidelity, Franklin Templeton, Invesco, Mackenzie, Sentry, Sprott and the likes — are seen by advisors as being committed to supporting the financial advice community to a significantly greater extent than both the bank-owned fund companies (the orange line in the graphic) and to the ETF manufacturers (represented by the green line in the graphic.)

What companies actually lead the Industry, you ask? CI Investments with Mackenzie and Fidelity not far behind.

Lagging the industry? Mawer. But, this is understandable. Not investing in the advisor community is a part of their strategy. Advisors tell that they are effectively saying, “investors buy our services on the merit of our results alone. We don’t really see a need to invest in the advice community.”

What constitutes “Investing in the Advisor Community?”

What does it mean to invest in the advisor community? It means different things to different people. Moreover, it means different things to different companies. To learn more, after we collect our data and rank the different industry participants, we ask advisors to explain what’s behind their responses.

Asked why he rated Fidelity so highly on this dimension, one advisor explained that he uses Fidelity because his wholesaler proactively calls him each year at the same time. The wholesaler invites him for a round of golf at the same annual tournament and, over the course of four hours together, they negotiate how Fidelity will fund a small cooperative marketing campaign. Same thing each year. (In another post, we’ll discuss the importance of being consistent!) The advisor went on to say that the monetary value of the golf and tournament exceeds the cost of the co-op marketing, after the bar tab is paid! But, the discussion of the co-op marketing is what came to mind initially for the advisor when investments in the advisor community were discussed.

Investment opportunities are sometimes seized, but they are also sometimes missed One advisor explained that, years ago, she attended a conference where she ran into the wholesaler from one of the companies whose product she was using “a little.” She went on to explain that she was really miffed by her interaction with the wholesaler because “he didn’t buy me a drink. I know it seems petty,” she went on, “but I’m his client. He needs to show the love.” It was three years later and she has moved on… but without offering that wholesaler’s company any support at all during those three years.

Another company was renowned for its investment in advisor education. Numerous advisors pointed straight to Mackenzie U — now a thing of the past, of course — as a stellar example of the type of investment in the advisor community that the independent fund companies have made over time.

As is seen in the graphic, the independent fund companies continue to build their strength gradually on this important dimension while advisors feel the bank-owned fundcos have effectively flat-lined on their investments in the advisor community over the last five years.

ETFs are in Tough!

It’s a matter of fact that the ETF manufacturers are newer to the “marketing through advisors” game than the independent fund companies. Inexperience isn’t behind the gap between them and the other industry competitors, however. (The fact of the matter is that the ETF manufacturers are populated with some of the best minds in Canadian personal finance.) It’s also a matter of fact that the ETF companies run on thinner margins than either the banks or the independents. The result is that they have fewer feet on the street to get the word out about their cause — fewer feet on the street building critical relationships. The scores shown in the associated graphic indicate clearly that advisors feels that the ETF companies aren’t investing in the advisor community to nearly the extent that the independent fundcos or banks are.

Still, the ETFs are growing rapidly; their low-cost advantage is a tide that is lifting all boats. Demand for ETFs continues to surge and it’s becoming ever more evident that the competitive winners among the ETFs will be those that have well-built products along side the strongest and largest support teams on the street.

Personal finance is a relationship-driven business. Despite any rising or falling tide, companies have to invest in relationships if they are going to benefit from those relationships. Financial advisors hold the keys to many of the relationships that control money in Canada and relationships are the glue that bind advisors with their suppliers. It’s a loyalty game. And when the performance tides turn, as we have seen in with numerous companies, relationships will be called upon to sustain brands.

If you’re interested in seeing the detailed results that show the evolution of individual, specific companies, feel free to contact Credo.