No financial advisor wants to spend more of their time on back office- and compliance-related requirements when there are clients to see and relationships to develop. Yet, many independent advisors are finding that they’re spending more and more of their time on these administrative responsibilities – and that’s not good for business.
“The independent advisor is an extraordinary source of wealth-management advice for the average Canadian, [but] they have a number of pain points that aren’t [being] addressed at this point,” says Paul Morford, chief executive officer at Agora Dealer Services Holding Corp., which owns a carrying dealer, Agora Dealer Services Corp., that launched a new cloud-based platform in April to cater to independent mutual fund dealers and advisors. “There are mounting compliance issues, mounting administrative issues and lagging technology.”
To make matters even more challenging, independent advisors are struggling to position themselves within a rapidly evolving industry, says Susan Allemang, director, policy and regulatory affairs, at the Independent Financial Brokers of Canada.
“Independent advisors face a lot of competitive forces that are coming from robo-advisors, the banks and the very large, integrated [wealth-management] firms,” she says. “It’s a difficult situation because there is a lot of pressure on the independent channel.”
To stay compliant and competitive, independent advisors and their dealers rely on carrying dealers to provide the necessary support for back-office functions. The right carrying dealer can provide a functionally rich platform that supports the investment needs of a diverse client base as well as put independent advisors on a more even footing with their competitors at the largest players in the industry, says Donald King, senior vice-president of distribution at B2B Bank Financial Services Inc., which provides carrying dealer services to the mutual fund channel.
“Our platform allows [independent advisors] to portray professionalism – look, feel, functionality, everything that the big players have – even if it’s a small mom and pop shop,” Mr. King says. “It levels the playing field from a competitive standpoint.”
That’s because a carrying dealer can help independent dealers leverage new technology – something smaller firms may not have the resources to develop and implement on their own, says Matthew Latimer, executive director of the Federation of Mutual Fund Dealers (FMFD).
“With technology, [independent advisors] will hopefully and ideally be able to spend less time on compliance and paperwork and more time demonstrating their value by providing advice to Canadians,” says Mr. Latimer, who especially likes Agora’s introduction of time-saving electronic on-boarding and e-signatures.
But beyond loosening administrative choke points for firms and their advisors, Mr. Morford sees the potential for carrying dealers to address much bigger systemic technology challenges facing the industry at large.
“Right now, if there’s a new piece of technology that would be useful to assist advisors to do a better job for clients in one way or another, it’s really hard to bring that piece of technology into the space,” he explains. “They have to go out to all these different dealers, they have to find a way to sell it to the dealers – [and] dealers don’t have a way to necessarily attach it into a workflow process. So, it’s very, very fragmented.”
Agora’s goal is to make it easier to integrate new technology and distribute it quickly to all the independent dealers, Mr. Morford says: “We see ourselves as not just dealing with issues at an advisor-workflow level, but assisting all the stakeholders that are in the space, from fund companies to software providers to anybody who has compliance pieces coming in.”
For Mr. Latimer, whose association represents the interests of mutual fund dealers both big and small, greater competition in the carrying dealer space from new entrants that are providing technology-based solutions has the potential to encourage all carrying dealers to up their game. And that will be beneficial for all of the FMFD’s members.
“Anything that can be done to free up capital for the dealers – and small dealers, in particular – to address the pace of regulatory change, the pace of changes in the market and to support their business’s viability, as well as advisors’ businesses, is key,” he says.
Similarly, Ms. Allemang points out that “anything that frees [independent advisors] to do what they’re there to do, which is to serve their clients, is welcome. … Regulation doesn’t come without cost.”
But solutions are not easy to come by or develop. In fact, Mr. Morford quips that developing Agora’s platform was “ridiculously hard to do” – but each step forward is a win for independent advisors.
And innovation tends to spark more innovation, as Mr. Morford acknowledges: “Somewhere down the road, more people will be doing this kind of thing because of the efficiencies it creates.”