Bank of Montreal is accelerating its plans to offer one-on-one investing advice to high-end clients who are increasingly managing their own financial portfolios through low-fee online trading accounts.
A boom in online trading by do-it-yourself retail investors is fuelling new demand for investment advice from customers who are trying to navigate the markets, says Joanna Rotenberg, global head of Bank of Montreal’s wealth management operation.
Under its new program, BMO is upgrading online trading accounts in its BMO adviceDirect platforms to offer clients with at least $500,000 in assets the opportunity to connect one on one with a dedicated investment adviser to help with their trading and investment decisions, as well complete customized financial plans.
Ms. Rotenberg said the COVID-19 pandemic has changed financial plans for every level of investor and has spurred demand for more sophisticated advice for clients who usually make their own investment decisions.
“Canadians are seeking advice now more than ever,” she said in an interview with The Globe. “One thing that has stayed constant [throughout the pandemic] is the fact that everybody’s circumstances are changing right now. Clients are asking: Do I have to delay my retirement? Should I buy a property? Should I change careers? Should I drop out of the work force? But clients don’t want to get advice all in the same way.”
Over the past several years, Canadian banks have been doubling down on their wealth management businesses, racing to introduce technology-driven services that appeal to younger, more digitally savvy investors. At the onset of COVID-19, retail banks moved even more quickly to enhance their advice services, pushing projects ahead by years in some cases, as many clients were left at home wondering what to do with their finances.
Now, with the rapid spike in clients signing up for online trading accounts, the opportunity to capture more business for wealth managers through technology is not only ripe, but “paramount” for establishing new client relationships that may languish in a self-directed investing service, says Josh Book, CEO and founder of Parameter Insights Inc., a market research and consultancy company.
“Innovations within the digital wealth advice space have automated or significantly streamlined many areas of the traditional wealth advice space, and the metamorphosis has not gone unnoticed by self-directed investors,” Mr. Book said.
“As [brokerages] continue to innovate in areas of advice delivery, it becomes increasingly difficult for investors to justify paying traditional advisory fees when comparable (or even elevated) services are available on-demand and at a discounted rate via digital channels,” he said.
Over the summer, BMO’s wealth division had a spike in demand for help, with advisers completing financial plans for clients five times more often than before COVID.
That demand is now trickling into the online brokerage space.
BMO adviceDirect allows investors to independently trade in stocks, bonds and exchange traded funds. But unlike the bank’s discount brokerage – BMO InvestorLine – which cannot provide advice because of regulatory rules, BMO adviceDirect is offering a “hand-holding” experience for DIY investors with at least $50,000 in investable assets.
For an annual cost of 0.75 per cent of total assets, accounts can be set up with alert buttons to indicate when a portfolio needs rebalancing, and a team of licensed portfolio managers is available by phone to answer questions.
The service is attracting clients who may not qualify for a full-service investment adviser – which typically requires about $1-million in investable assets, and can cost between 1 per cent to 2 per cent of assets.
But clients who have surpassed the half-million mark in their accounts are more frequently looking for help that goes beyond basic trading decisions, Ms. Rotenberg said, with the bank getting requests for more advanced financial planning advice that caters to specific goals, such as retirement or education savings,
BMO adviceDirect investors will automatically be enrolled in the “premium” service once they hit the $500,000 threshold, and will be connected to a licensed investment adviser at their request.
“This is going to be an area that sees a lot of growth in the year to come, as do-it yourself investors continue to be interested in taking active ownership over their money,” Ms. Rotenberg says. “But they are also looking for some more validation.”
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Clare O’Hara