Independents should focus on niche markets

Some people strive for change and others have change thrust upon them.

And so it is in the financial planning business. The financial services industry has become so complex that certified financial planner Bradley Roulston, who runs Healthcare Financial Group, a successful niche market financial services business with offices in Toronto and Vancouver, says boldly, “The one-stop financial planner is dead.”

“You can’t just put a sign in front of your house anymore,” says Roulston, who is also a licensed broker. “You can’t just say, ‘I will be your accountant, I can talk about RRSPs, and estate planning and advise you on investments,’ ” says Roulston.

“You have to focus on what you’re good at and outsource what you can,” he adds.

Many financial planners have other professionals on board or have a network of ‘go to’ professionals to help clients in special situations. “At a certain point, every advisor is going to need to have outside resources, whether it’s a lawyer or an accountant,” says Dan Richards, founder and CEO of Clientinsights in Toronto. “There are things that require professional accreditation that a typical advisor doesn’t have.”

The Financial Planning Standards Council (FPSC) says of its 18,000 members 39% describe themselves as career financial planners. They may be working alone or in small businesses. Most of the rest are employed in the verdant financial fields of the Canadian banks (19%), or in the securities, mutual fund or insurance business (31%).

Planners usually have multiple designations. They may also be accountants, or serve as financial advisers and hold an FMA (Financial Management Advisor) or a CIM designation (Canadian Investment Manager). Seventy-five percent of the CFPs in Canada have at least 11 years experience in the industry. As for compensation, 41% work on commission, another 14% on fee and commission and only 8% are salaried, according to the FPSC.

From an AUM perspective, most Canadian consumers of financial services continue to see the Canadian banks and associated brokerage firms as a beacon in the night.

Like the other banks, RBC has been moving on the ultra-wealthy, once fertile ground for independents specializing in high-net-worth clients. “From the wealth management perspective we’ve expanded services for high-net-worth individuals, and there are financial planning and estate planning experts at RBC,” says Marilyn Trentos, who has been an investment advisor with RBC for 25 years.

“I have people who are financial planners, and estate planners with law degrees that have practiced family law for years that I can bring in as consultants. I just don’t think one financial professional could have all those talents combined. It would be a rare individual who would have all the needed information,” she adds.

The financial services industry in Canada managed to sustain client confidence during the meltdown of 2008, but planners, advisors and financial professionals at the big institutions in the U.S. are having a difference experience. “There has been growth in the U.S. in the number of independent financial advisors, and they are gaining market share at the expense of bank-owned brokerages,” Richards explains.

“There’s some further research that suggests people at bank-owned firms in the U.S. see the brand of the firm they work with as a drag on their success rather than as an asset. However, it’s obviously very different in the Canadian context,” he adds.

The perceived need in Canada for the security of the big banks is “delusional,” according to Jason Pereira, a financial consultant at Bennett March IPC Investment Counsel.

“When an investor is referred to [us] and sees we are using major institutions and managers that are sound, the concern goes away. Basically we are business owners—we are not paying for massive marketing campaigns like the big firms, so we manage our own costs and make ourselves as profitable as we can. And we can build a lasting relationship with clients that makes them feel secure,” he says.

But given the chance, the big guns will happily eat an independent’s lunch, according to Roulston. To make it work, independents need to be cyber-connected.

“The newsletter isn’t relevant anymore,” says Roulston, who uses Twitter, Facebook and LinkedIn to communicate with his client list of physiotherapists, doctors, naturopaths and other health care professionals.

“Sure, a lot people have their money with the banks,” says Roulston. “If someone has a lot of money, good for them. They’ve made it. They don’t need my help. I would rather work with the small clinic owner or a physiotherapist or chiropractor. They’re young, dynamic and just getting going. Those are the kinds of people I want to work with and am working with.”