Clients are more disillusioned with advisors in the East than West

Earlier in the summer, EY released the results of its most recent Global Wealth Report. Among the abundance of insights it offered into the world's wealth industry were some striking findings on the Canadian market.

“It's something we do every couple of years,” says Dave Inglis, Associate Partner, Wealth & Asset Management Consulting at EY Canada. “This was our first post-COVID edition of the survey.”

To make sure the Canadian data was meaningful, Inglis says, EY got close to 500 Canadian respondents to participate in the survey. That sample breaks down demographically into a roughly even split of millennials, Gen X, and Boomers, and splits further into a representative cross-section of mass affluent, high-net-worth, and very high-net-worth individuals.

“We looked at how their wealth is managed – is it a purely advisory relationship? Is it a discretionary relationship? Is it commission-only, or mixed? And of course, we wanted to have both men and women represented as well.”

An East-West split in clients’ switching plans

By the numbers, EY’s latest study found clients from Western Canada were less likely to want to engage a new wealth firm than those in Eastern Canada. As Inglis tells it, those respondents can be categorized into three flavours:

• clients moving some assets to a new provider, but not shutting down their existing relationship;
• clients simply adding a new provider to what they already have; and
• clients who want to end their existing relationship altogether.

“In the West, two thirds of those who said they were going to switch were moving a portion of their money, compared to 25% who were leaving entirely,” Inglis says. “In the Maritimes, the split was 50-50, so we were seeing a greater disillusionment with advisors on the East Coast than the West Coast.”

Digging into the reasons for switching, Inglis says they found West Coast clients were focused on market volatility and investment performance, while a third of switchers on the East were making the decision based on the makeup of their advisory teams.

“For me, it was surprising to see that behaviour on the East Coast,” he says. “When you look at the central regions of the country, they tend to be more loyal to advisors; there are some homegrown firms in Quebec like National and Desjardins that are quite popular, so clients there really support their own. In Ontario, it tends to be more material: Who’s going to get me the best performance? Who’ll help ensure I get the best outcomes?”

Diversification dynamic gives digital providers an edge

By 2025, EY says, a large proportion of Canadian investors expect to work with multiple providers, with 40% saying they’re willing to ramp up their use of digital service providers. To Inglis, that statistic is telling for a number of reasons.

“In years prior, we were seeing a higher proportion of clients wanting to consolidate their assets – markets were doing well, and they wanted to focus on a single advisor to give them one source of truth,” Inglis says. “With the market volatility today, we’re seeing people back away from that, and getting back to the old feeling that ‘we shouldn’t have all our eggs in one basket.’”

For advisors who have enjoyed exclusivity over their client’s assets, losing some wallet share to another provider could have a significant impact. Meanwhile, clients looking for a new provider want a convenient due diligence and onboarding experience, which means they’re more likely to seek digital firms over those with more traditional processes and systems.

“You have different types of advisors, and there are some old-school ones that positioned themselves to clients as investment pickers or saw themselves as gatekeepers of information. Digital providers have completely blown that out of the water with model portfolios,” Inglis says. “The advisors that are true coaches with expertise in cash flow budgeting and where to prioritize your spending and saving – those are the ones that are going to win out now.”

Canadians want virtual meetings, not digital engagement

The survey also found that 17% of respondents from Canada expressed a preference for digital engagement. However, over 40% also said they'd prefer virtual consultations at their advice channel.

“Clients in Canada, more so than a lot of other regions, still want to talk to a human being. When we talk about virtual consultations, that's using technology to work with a human advisor versus when we say digital, it's more a simple algorithmic-type advice channel,” Inglis says. “Instead of driving downtown, paying for parking, going into the office and sitting down for half an hour with an advisor, you can just crack open your laptop.”

One major finding was that almost half of Canadians feel their finances are more complex and they need more advice. Those respondents, Inglis says, don't feel they're getting enough service from algorithms, which can provide investment selections and monitor risk tolerance, but can't respond spontaneously to questions and provide a very limited range of advice.

“I don't need a human being to walk me through my monthly statement. I would like my advisor to have a portal where I can go see what my holdings are and look at any of their research notes,” Inglis says. “What I want is the ability to go to them and say ‘OK, I just got a bonus from my company. Should I pay down my mortgage? Should I put that towards my kids’ education? … That's where I want their advice.”

After a very long bull market, Canadian investors are now facing a period of volatility. For two thirds of respondents in the EY survey, it’s a call to action, either by going into safe havens or leaning in and buying – but not holding on for the long haul.

“A lot of advice revolves around staying in the course and sticking to a plan. But in the absence of that advice, Canadians are taking action and could be doing things that are detrimental to their financial health,” Inglis says. “There's a huge opportunity here for advisors to step in and be that guiding voice.”