The COVID-19 crisis is inspiring more financial advisors to consider going it alone, empowered by new wealth management technologies and a desire to run their own shops.
The interest comes as advisors discover that managing client relationships from home works well and are questioning their current ties to traditional firms.
As a result, wealth management technology firms are reporting a surge in inbound calls in recent weeks from prospective clients looking for information on how they can support independent advisors.
“For the first time, a lot of advisors had to work from home and are realizing that, ‘Wait a second, maybe I don’t need a giant office. What else don’t I need?’ They’re also realizing that the client doesn’t care if they have that big office in downtown Toronto,” says Jason Pereira, partner and senior financial consultant at Woodgate Financial Inc., a financial planning firm under the IPC Securities Corp. umbrella.
“Crises focus people on what really matters and, in this case, it’s client relationships. There’s no relationship with the institution, it’s with the advisors, given that we’re the ones holding their hands through this [situation]. It’s also up to us to maintain it,” he adds.
New wealth management technology is also empowering advisors to pursue independence – particularly turnkey asset management programs (TAMP), independent technology platforms that allow advisors to outsource activities such as account setup and documentation as well as discretionary portfolio management. The platforms provide advisors with the technology and tools to become an independent investment counsellor portfolio manager (ICPM).
TAMP technology is behind the fast-growing registered investment advisor (RIA) business model in the U.S., which enables advisors to operate independently of large brokerage firms and provide a legal fiduciary obligation to clients. Canada has been slowly building a TAMP ecosystem, but the pace is expected to increase following the pandemic.
“You have this underlying trend that’s in the early innings. Happening at the same time, this crisis is causing them to reassess the value proposition of the institutions they’re working with, and the cost,” Mr. Pereira says.
Toronto-based Purpose Advisor Solutions, which recently launched a TAMP business in Canada, says the past couple of months “has been our busiest from an advisor-interest perspective,” says Jeff Gans, the firm’s chief executive officer.
The pandemic has increased a desire among advisors to have greater control the client experience, he says. “Some firms have struggled with technology and remote working that has further challenged that thinking.”
Purpose Advisor Solutions enables financial planners, accounting firms and other financial professionals to provide outsourced investment management to their clients. (The firm provides the technology back end while investment-management services are run through its registered entity, Harness Investment Management Inc.)
He says advisors are starting to ask questions about what they want from their business, and are contacting Purpose Advisor Solutions to learn more about what the firm can offer.
“Historically, I believe that firms have thought of advisors as salespeople. Advisors are starting to say, ‘I’m not a salesperson, I’m a business owner and I want to think about my business and delivering the client experience that I want,’” he says.
Advisors are also feeling empowered by the success of the RIA model in the U.S., Mr. Gans adds.
Fotios Saratsiotis, president of Pascal Financial, a Toronto-based artificial-intelligence-powered wealth management platform, says he’s also hearing from advisors frustrated by the technology at their current firms. Many are interested in using new and different technology platforms to work better with clients.
“A lot of them have been sitting on the sidelines,” he says. “COVID-19 is pushing them over the edge to move faster.”
Mr. Saratsiotis says wealth management technology can give advisors more time and bandwidth to deal with more clients with various levels of investible assets.
Stefanie Keller, CEO and certified financial planner at Stellar Wealth & Tax Solutions in Winnipeg, believes independent advisors like her are more nimble and can often adopt technology quicker than some larger organizations.
The pandemic has also shown some advisors they can work independently in a virtual type of environment, she says.
“[Advisors] recognize that … the big arms around you that people really valued in the past maybe weren’t as necessary or important as they had been previously,” she says. “They realized they had the ability to work in different ways, more efficiently.”
Ms. Keller believes independents can also provide more efficiency for clients and more choices of products and solutions, including different services that many institutions can’t provide, such as life coaching, which her firm offers.
“You get to build it how you want to,” she says.
Mr. Gans says a shift toward more independent advisors in Canada will be good for investors and the industry, overall, believing it will spur more innovation and better client experiences.
“There’s a ton of innovation ready to be unleashed in Canada,” he says. “When advisors can go out and set up their own vision .. that’s where you’re going to get some really unique experiences. When advisors go out and act like business owners, they do some really interesting things. They really focus on their target client segment. … The Canadian market is going to benefit from that innovation.”