Almost all Canadian financial advisors (98%) see a shift toward a fee-based rather than commission-based practice, according to a survey report from Vanguard Canada. In fact, among advisors who’ve made the transition, 86% said it had a positive impact on client trust, with a majority indicating it also had a positive impact on revenue growth (77%), asset growth (73%) and client satisfaction (72%).
“We are in the midst of a period of great change in the financial advice sector, driven partly by the second phase of the client relationship model [CRM2] reforms,” says Jason McIntyre, head of distribution for Vanguard Investments Canada Inc., in a release. “But this also presents an opportunity for advisors to discuss the value and benefit they provide to clients, including offering more relationship-oriented guidance rather than trying to outperform the market.”
Switching to fee-based is best practice, say advisors
When asked what defines a successful practice, advisors said client retention (31%) and increasing assets (27%) were the top two measures. The top best practice observed by financial advisors was shifting to a fee-based structure (64%). Most (83%) said a fee-based model was better for their practices, compared with commission-based.
Among financial advisors who’ve switched to a fee-based model, 39% are entirely fee-based, and 32% say they plan to be entirely fee-based over the next few years.
Only 4% of Canadian survey respondents were 100% fee-based, but fee-based accounted for 55% of Canadian respondents’ aggregate practice. In a 2013 Vanguard salary survey, the aggregate response was 17%.
The survey includes responses from more than 900 advisors in Canada, Australia, Hong Kong, the U.K. and the U.S.
Of the 164 Canadian advisors surveyed, 122 — about three-quarters — are part of bank-owned investment dealers, while 42 — about a quarter — are independent dealers affiliated with boutique firms.