Change and Opportunity Ahead for Canada's Financial Advice Industry: Vanguard Global Advisor Trends Report

  • One-third of advisors predict increased use of lower-cost investments
  • Majority of advisors anticipate a shift to fee-based advice and believe this is better for clients and their business
  • Financial advisors believe their job has become more difficult but many expect an increase in assets and clients

TORONTO, May 25, 2016 /CNW/ - Canadian financial advisors see regulatory changes (66%) and increased use of technology (51%) as two of the biggest future trends in their business, along with a shift to a fee-based practice and compensation model (58%) - trends that may benefit both individual investors and advisors, according to Vanguard's Global Advisor Trends research report, released today.

"Financial advisors in Canada are dealing with the impact of an industry on the cusp of significant change due to a combination of changing client expectations, regulatory reform and technological advances," said Atul Tiwari, managing director for Vanguard Investments Canada Inc. "With change, comes greater opportunity to adapt to a new landscape and educate Canadians with disciplined advice and coaching, along with adding value through low cost, high quality investment options."

Regulatory changes and new client acquisition are the top challenges for advisors in Canada 

Over one-in-four advisors believe their job has become more difficult over time, mainly due to regulatory issues. Among the top challenges financial advisors face, regulatory concerns ranked near the top of the list with over one quarter of advisors (26%) concerned with keeping up with regulatory changes and 20% challenged by the impact of regulations on investment selections. The top challenge for advisors was new client acquisition (31%) along with managing client expectations and increasing demands (23%).

Advisors expect growth in clients and assets and an increased use of lower cost investments

Financial advisors were generally optimistic about the future, with more than half (55%) expecting their total number of clients to increase over the next two to three years, with a large majority (88%) believing their total amount of assets managed will increase. In addition, one-third (34%) of advisors list the increased use of lower cost investment vehicles as a key trend impacting their business.

Impact of regulation in Canada

When asked about the impact of regulatory changes in Canada, including the implementation of Client Relationship Model reforms (CRM), advisors listed greater client communication, demonstration of value and increased trust as some of the positive benefits. Among the negatives, advisors listed decreased profitability and reduced total compensation as their top worries in adapting to the new regulations. 

Shift to fee-based advice

Advisors see the industry moving from commission-based business models emphasizing investment selection and specific products to a more holistic fee-based approach that incorporates wealth management best practice.

The overwhelming majority of respondents see a shift towards fee-based practices (98%) with 83% believing it is better for their practice while three-quarters of advisors (76%) feeling that fee-based advice is better for their clients.

"Financial advisors play a fundamental role in providing Canadians with valuable financial advice.  But their business model is changing with many advisors shifting towards fee-based business models driven in part by the implementation of Client Relationship Model reforms," said Jason McIntyre, head of distribution for Vanguard Investments Canada Inc. "Advisors see this as a positive development that can lead to greater client trust, fee transparency and an opportunity to communicate value."

To read Vanguard's Global Advisor Trends Report, click on the following link: https://www.vanguardcanada.ca/documents/global-advisor-trends-en.pdf

Vanguard's Global Advisor Trends Report Infographic: https://www.vanguardcanada.ca/documents/global-advisor-trends-infographic.pdf

About Vanguard

Vanguard Investments Canada Inc. is a wholly owned indirect subsidiary of The Vanguard Group, Inc. and manages more than CAD $7 billion in assets. The Vanguard Group, Inc. is one of the world's largest investment management companies and a leading provider of company-sponsored retirement plan services. Vanguard manages more than USD$3 trillion in global assets, including nearly USD$500 billion in global ETF assets. Vanguard has offices in the United States, Canada, Europe, Australia and Asia. The firm offers more than 315 funds, including ETFs, to its more than 20 million investors worldwide.

Vanguard operates under a unique operating structure. Unlike firms that are publicly held or owned by a small group of individuals, The Vanguard Group, Inc. is owned by Vanguard's U.S.-domiciled funds and ETFs. Those funds, in turn, are owned by Vanguard clients. This unique mutual structure aligns Vanguard interests with those of its investors and drives the culture, philosophy, and policies throughout the Vanguard organization worldwide. As a result, Canadian investors benefit from Vanguard's stability and experience, low-cost investing, and client focus. For more information, please visit vanguardcanada.ca.

About the Vanguard Global Advisor Trends Survey

The Vanguard Global Advisor Trends Survey was conducted by Ipsos, a leading global research firm. The research was conducted in two parts in 2015 with qualitative interviews conducted by phone and answers to larger quantitative survey questions collected online. Ipsos surveyed 906 financial advisors around the world, including 164 in Canada on behalf of The Vanguard Group, Inc., and Vanguard Investments Canada Inc. Qualitative interviews were conducted from February 3-26, 2015. Online quantitative surveys were conducted from July 16 to September 1, 2015. These survey findings may not be representative of the overall industry. All survey information is as of the date indicated. If surveyed again, respondents may answer differently. Vanguard Investments Canada Inc. has not taken any additional steps to update, verify or interpret survey information. This material contains only selected highlights of the survey and is not the complete survey.

 

SOURCE Vanguard Canada



For further information: Matt Gierasimczuk, Vanguard Canada Public Relations, Phone: 416-263-7087, matthew_gierasimczuk@vanguard.com


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