THE ADVISOR WORKS STORY

Advisor Works has its roots in a research project, performed by Friday Research Group, that investigated Canadian financial advisor reaction to regulatory changes to National Instrument NI31-103 being brought about by the Canadian Securities Administrator (CSA) over the period July 15, 2013 to July 15, 2016.  In particular, the research project was focused on the implications of the new requirement that by July 15, 2016 all dealers will have to fully disclose, at least once every 12 months, the exact amount that the dealer and financial advisor have received in compensation.  We called this challenge “Disclosure 2016”.

The methodology we used was fairly classic.  First, we started with an environmental scan of what was occurring in other jurisdictions where similar legislation has been enacted.  In particular, this would entail research in the U.K. and Australian markets where similar changes had become mandatory on January 1st, 2013, and July 1st, 2013 respectively.

Second, we interviewed over 30 Canadian financial advisors to get feedback on how much of a threat they saw with Disclosure 2016, and what they intended to do about it. 

Third, as part of the interviews, we tested out a few solutions that we had developed.

Initially, we expected that Disclosure 2016 would be perceived as a significant threat to advisors, as it would make total dealer/advisor compensation explicit, and may create “sticker shock” for some clients.  What we found, however, was that different types of advisors, with different types of charging models (DSC vs. Front End vs. Fee Based) perceived different levels of concern.  Generally, fee based advisors generally perceived less concern, as they were already disclosing fees.  On the other hand, the DSC oriented advisor saw more of a concern, as their commissions have never been made explicit.  We began to see that different types of advisors, with different charging models, at different levels of assets under administration, would call for different solutions.                     

In time, we expected that we would be able to identify solutions for Disclosure 2016 that would work for Canadian financial advisors, and that there was likely a business opportunity that we would be able to address to assist those Financial advisors to implement those solutions.

What happened, however, was unexpected.

As we continued to conduct in-depth interviews with over 30 advisors, we began to discover other issues that were important to advisors.  And it became obvious that some advisors were much more successful than others, and that there were advisor needs that were as important, if not more important than the issues surrounding Disclosure 2016.

Now, before we get to the unexpected part, we did finish the tasks we had originally set out to complete.  We collected information on each of 30+-plus Canadian financial advisors we interviewed:  the size of their book, how long they’ve been in the industry, what type of charging model they use (DSC vs. FE 0% vs. fee based), etc.  We obtained the Advisors’ thoughts on the Disclosure 2016 issue, and what, if anything, they intended to do about it.  And we identified some patterns.  And we also tested out a few solutions that we developed.  All of this is available to you for free in our FREE REPORT entitled “The Impact of Regulatory Changes to NI 31-103”.

REASON FOR BEING

The unexpected result was the discovery of a recurring theme:  almost every Advisor felt that they should be doing more from a marketing or practice development perspective, but the vast majority weren’t doing it.  Even those that had a good handle on their response to Disclosure 2016 felt that they needed to take their existing marketing efforts to the next level.  Most advisors expressing such concerns had relatively mature practices where they had settled into a routine of meeting and servicing their existing clients, with occasional fire-fighting when client issues erupted or market turbulence made clients nervous.  Further, it seemed that after the financial crisis and relatively flat returns since, advisors are tired and a little gun-shy.  In short, the motivation to do prospecting and client activities had waned, and it appeared that serving existing clients had expanded to fill the time available.  Further, most advisors didn’t know exactly what to do, even if they were prepared to invest the time and resources.

Another issue that bubbled up was that to move to the next level required some sophisticated marketing knowledge.  For the small to medium sized advisor, this meant considering the hiring of a marketing assistant, typically at a significant cost.  Furthermore, most advisors have moved from a DSC model to a FE 0% or fee based model, which spreads revenue out over several years, rather than “front-loading” the income.  Given this income pattern, the cost of hiring a marketing specialist creates an up-front cash flow deficit for the advisor. Thus, the advisor really needs to bring on a marketing specialist, but hesitates to make the hire at $50,000 or more.  The challenge is taking on the large fixed cost “step”.  Advisor Works can ease the burden by converting this large fixed cost into a variable cost. 

This led us to a new paradigm:  we could still help advisors with Disclosure 2016, but there was a much bigger opportunity – advisors were hungry to find ways of breaking the pattern of inertia they had fallen victim to, but they weren’t sure how to proceed.  Furthermore, existing clients and their meetings and service issues were taking up most if not all of the advisor’s attention.

This brought us to a new concept for the offering we’d take to Canadian financial advisors that appears to solve multiple challenges.  We’ve branded it the “Do It For Me” solution.  As the name implies, “Do It For Me” means that the advisor need only decide on what marketing program or practice development issue he or she would like to execute, and then have Advisor Works “Do It For Me”.  This solution has multiple benefits for the advisor:

• The advisor remains focused on his or her main competency:  meeting with clients, dealing with client issues and strengthening the client relationship;
• Execution of the marketing and/or practice development initiatives is performed by Advisor Works, an organization that has the experience and know-how of executing many of these programs;
• The advisor does not have to hire a marketing/practice development assistant at a large fixed cost; instead, Advisor Works executes the program or initiative at a much lower and variable cost to the advisor;
• Once the marketing or practice development program is selected, the advisor can rest assured that program will be implemented – a joint accountability of Advisor Works being accountable to the advisor and the advisor (and staff) being accountable to Advisor Works ensures that execution will take place.

As we continued to interview Advisors, we tested out this concept and we knew we had a winner.  Interestingly, one of the benefits the financial advisors saw in this model was the accountability that they would have to an outside group of professionals as we took the lead role in executing the marketing program.  Many advisors saw this process as being able to break the pattern of inertia that had developed.