One in five Canadian investors plans to switch wealth providers: survey

One in five Canadian investors plans to switch wealth management firms in the next three years, according to a new study published by Ernst & Young LLP on Monday.

Of the 21% of 500 Canadian investors surveyed in the EY Global Wealth Research Report 2021 who indicated they planned to switch or move money to a new firm, 26% gave investment performance as the primary reason while another 26% said changes brought about by the Covid-19 pandemic was their top reason. Others cited diversification (15%), cost (10%), consolidation (10%) and products (6%).

The survey found that clients looking to transfer to another wealth provider will typically move 32% of their investable wealth portfolio. About half of surveyed investors, and 76% of baby boomer investors surveyed, indicated they preferred to use a single-source financial services provider.

“Perceptions around value for wealth management products and services are rapidly changing,” said David Hurd, EY Canada’s national wealth and asset management leader, in a release announcing the study. “Firms will need to show the best kind of value for the right user to retain their existing clients, and attract those on the move from their competitors.”

While only 4% gave a firm’s digital capabilities as the reason they want to switch, one quarter of Canadian investors want to see a digital component in their existing provider’s service offerings.

Canadian investors, particularly older clients, still value personal relationships, the survey found. A majority (56%) of Canadian boomer investors indicated a preference for an advisor-led relationship with their firm, while 28% preferred a hybrid advisor-digital relationship and 16% preferred a digital platform-led relationship. Among millennials, 35% preferred an advisor-led relationship, 42% preferred a hybrid approach, and 40% preferred a digital platform-led relationship.

“As the pandemic ultimately recedes, that personal connection will likely take different shapes, as some clients will want in-person meetings back on the books, while others will appreciate the convenience of a video call,” Hurd indicated. “Wealth firms should prioritize improvements to hybrid models that offer both, and the development of flexible, seamless interactions to differentiate themselves in a competitive market where investors want options.”

Nearly three-quarters (73%) of Canadians indicated they have environmental, social and governance (ESG) priorities, primarily focused on the environment, but around half said their advisors don’t understand those concerns.

A study released last month by J.D. Power & Associates found that fewer than one-quarter of investors under 40 see a clear commitment to ethical investing from their firm, while almost half have doubts about their firm’s commitment to ESG investing.

“Investors in Canada — especially younger ones — increasingly want their investments to align with not only their financial goals but also their values,” said Mike Foy, senior director and head of wealth intelligence at J.D. Power, in a release. “Wealth management firms and advisors have a critical role to play in helping them do this, and they can’t afford to wait for clients to ask them about it.”

Rudy Mezzetta

Rudy is a senior reporter for Advisor.ca and its sister publication, Investment Executive. He has been reporting on tax, estate planning, industry news and more since 2005. Reach him at rudy@newcom.ca.