There’s an app for that

A stronger regulatory framework helped Canada avoid the worst of the 2008 financial crisis and that fact has emboldened those regulators into believing their all-out saviours, Chuck Grace, a principal at Fusion Consulting in London, Ont. told this year’s Distributors’ Summit.

That belief led to a “relentless barrage of regulatory changes” at the global, provincial and federal levels.

“A classic paradigm of effective implementation is, ‘What is it?’ ‘Why do I need to do it?’ And, ‘How should it be implemented?’ But some firms skip right to the how in the scramble to implement a change,” says Grace. “This creates complexity, prescribed advice and puts a damper on creativity at a time when creative solutions are desperately needed.”

Canada’s immigrant population adds challenges because how they acquired their wealth and what they want to do with it may not be the same as the Canadian norm. (For example, if their wealth was smuggled out in gold bars in a suitcase, future economic uncertainties could cause them to want to revert to keeping their wealth in gold bars.)

Social media and the Internet add another layer of complexity. Investors can Google an investment, and then poll friends on Facebook or Twitter to ask if they’d buy it. If the poll is positive, they can immediately make the trade with an app on their smartphones.

This speed of market and data access means clients are no longer willing to wait two weeks for a portfolio review, because a bit of Internet searching will give them a strong understanding of their whole portfolio’s performance in a matter of minutes.

And while compensation paradigms have changed little since the 1980s, the costs of technology and expanding compliance requirements have soared. This leaves advisors struggling to meet those increased financial demands, when compensation arrangements haven’t kept pace.

Distribution channels need to recognize that a one-size-fits-all prescribed solution will no longer work. They need to become stronger enablers because advisors can’t work alone. For instance, simply being able to access product information during client meetings would greatly benefit advisors.

“There are approximately 2,600 investment products currently, with five-to-six different load structures, and that does not include the hybrids. It’s not reasonable to expect an advisor to keep up,” says Grace.

“Having just-in-time information about a product and whether it would fit in a client’s portfolio will become a necessity because social media can hammer a reputation in an instant if an advisor gets it wrong.”

Advisors can thrive in this new paradigm if they are willing to change their business models. Google, Facebook and Twitter are good at giving little snippets of advice—but they don’t provide clients with complete pictures of their finances.

So, while technology has been a curse in that it makes clients believe they know more than they do, it’s a blessing because it allows advisors to illustrate difficult concepts faster and more dynamically.

They also need to be tapped into all information channels simultaneously to keep in touch. Knowing the various sources of information clients bring to their conversations will make advisors more patient communicators and help them cut through the chatter to simplify the information.

“If an advisor can do that, you’ll never be bored and you’ll be very successful,” says Grace. “Know your craft and be the most professional you can be.”

Lisa MacColl is an Ontario-based financial writer.