Pershing’s Canadian debut stoked fears the trading heavyweight’s wide array of services will cause the advice channel to fragment, since advisors can now break away from traditional full-service brokerages.
Rather than change the Canadian financial services landscape, Pershing Canada’s CEO Frank LaSalla hopes to empower it.
“Because we are a global organization, we can identify services, solutions and products that we can redeploy to other parts of the world,” he says. The service provider is a subsidiary of BNY Mellon. “Not only does Canada get another viable solutions partner in the marketplace, but also [a company] that might bring another set of ideas, capabilities and products.”
Canadian advisors will be offered the same breadth of services and products available to U.S. clients. “We hope to be able to tap into the other 60 markets where Pershing is operating,” he adds.
LaSalla asserts his firm’s entry will raise the bar for everybody.
“FedEx and UPS made the U.S. Post Office better, so hopefully our entry into the market will help stir up more competition. It may prompt the market to think more globally [and] spur others to think about broadening their capabilities.”
Joel Clark, managing partner and portfolio manager at KJ Harrison, says Pershing’s entry is good news for clients. “You have a quality participant entering the market,” he says. “It could mean lower fees and better technology.”
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John O’Connell, chair and CEO of Davis Rea, appreciates that new entrants keep existing suppliers competitive, but doesn’t see advisors switching en masse.
“It’s going to be a tough slog for Pershing,” he says. “There’s a high degree of stickiness with your back-office providers. You don’t want to go around changing these things overnight.”
Plus, O’Connell likes the stability a bank custodian provides.
“Penson [an independent back-office service provider] was here, and a small number of our accounts were custodied with them. I was nervous about it.” He ended that relationship as a result, adding, “Our private clients value the certainty of a large Canadian bank providing back-office service.”
Clark and O’Connell agree the availability of a third-party back-office service provider isn’t necessarily the top consideration for restless advisors.
“I don’t think it will change the willingness of advisors to go out on their own,” Clark says, adding market pressures may push people toward established institutions.
O’Connell says many advisors considering independence don’t think about the expenses and duties they’ll have to shoulder aside from back-office, such as compliance, legal and marketing.
“Pershing’s probably hoping our market evolves into the RIA model in the U.S., and I think it will, but slowly,” says O’Connell. “Generally speaking, most Canadian investment advisors are less entrepreneurial.”