John Boomsma explains how increased regulation and fee pressures have affected the quality of advice
To get an idea of how long John Boomsma’s journey through the financial services industry has been, just ask him how he got started — nearly 30 years ago, and a continent away.
“In 1989, I started my career in Rotterdam at ABN AMRO, a European Bank, where I advised institutional investors on optimizing their portfolios,” said Boomsma, a financial advisor at the Ameli branch of Raymond James in Toronto. “Eight years later, I moved to Luxembourg to work with private investors and family offices that used the country as their hub.
“It’s a great country, with a strong regulator and banks that dominated their respective markets; the setting was very institutional and focused on big business,” he said. “In my case, I wanted to build my own investment advisory business rather than work for the banks. However, European regulators tend to favour banks over independent firms, and my ambition proved out of reach.”
Looking to build his investment practice, Boomsma explored options both in the US and Canada. He decided to set up shop in Toronto in 2010 — a big step. “Once you get off that plane, there’s no one waiting for you,” he said. “That was daunting, but also opened the opportunity to build the business I had in mind.”
Today, Boomsma said, his business is well on track. The firm works with family offices, corporations, trust companies, and individual families looking for tailored investment solutions in Canada as well as the US. “As we’re licenced in both countries, it works well for clients with cross-border interests, as well as European investors looking to diversify and access North American markets out of Toronto.”
Given his international experience, Boomsma is in a good position to compare Canada and Europe in terms of regulatory changes. “Rules and policies tend to vary from country to country,” he said. “Elsewhere, we see regulatory tightening as well. For us it means an increasing workload to keep our clients and our business onside with ever-changing regulations. I understand why, but it does increase drag and takes time I’d prefer to spend on servicing clients.”
Another hotly debated factor that he’s concerned about is fee pressure. “There’s always discussion about fees — not just between clients and advisors, but also throughout the industry,” he said. “That’s good, because you can also talk about work done and value delivered; it should create clarity. Overall, I see wealth management as a highly efficient global market, with lots of participants and little pricing power.
“In my experience, fees do not differ so much from country to country,” he added. “Firms work within a narrow pricing range: price above that and you’ll lose clients, price below it and you’ll go out of business. Since fees and prices are pretty much given, the better question for clients to ask is: ‘what do I get in return?’ Here offerings will vary widely.”
Aside from considering fee prices, Boomsma believes that the industry should strive for transparency — but not at the expense of choice. “One of the current discussions in Canada is the potential elimination of embedded fees on mutual funds and other products — understandable, since clients may not always have a clear view on what they pay,” he said. “Here I think the regulator has done good work: they’ve ensured that any fees are to be disclosed at the time of sale, and that all costs are included in periodic reporting on account statements. This already puts clients in a good position to track costs and decide whether they get value for money, so I see little reason to get rid of embedded fees. I think it’s better to give clients and advisors flexibility rather than dictate how they want to work together.”
And while Boomsma recognizes that regulators simply want to protect investors, he knows that every additional process affects the quality of advice.
“At the end of the day, you run a business for all stakeholders. If there’s increasing weight from regulations, inefficiencies, targets, and so on, your overhead — and, as a result, your costs —will inevitably go up. Given that, I see only three ways to go: you can increase your minimum account size, reduce your service offering, or start offering house products.
“Unfortunately for clients, I think all of it means reduced access to quality advice, expertise and products,” he said. “Investing is a people business, so I think it’s always better to talk and find solutions together. Here I’d be pleased if the regulatory framework continuous to preserve diversity, competition, and access for all.”
Related stories:
Time for advisors to get serious on diversification
The challenges that really matter
“In 1989, I started my career in Rotterdam at ABN AMRO, a European Bank, where I advised institutional investors on optimizing their portfolios,” said Boomsma, a financial advisor at the Ameli branch of Raymond James in Toronto. “Eight years later, I moved to Luxembourg to work with private investors and family offices that used the country as their hub.
“It’s a great country, with a strong regulator and banks that dominated their respective markets; the setting was very institutional and focused on big business,” he said. “In my case, I wanted to build my own investment advisory business rather than work for the banks. However, European regulators tend to favour banks over independent firms, and my ambition proved out of reach.”
Looking to build his investment practice, Boomsma explored options both in the US and Canada. He decided to set up shop in Toronto in 2010 — a big step. “Once you get off that plane, there’s no one waiting for you,” he said. “That was daunting, but also opened the opportunity to build the business I had in mind.”
Today, Boomsma said, his business is well on track. The firm works with family offices, corporations, trust companies, and individual families looking for tailored investment solutions in Canada as well as the US. “As we’re licenced in both countries, it works well for clients with cross-border interests, as well as European investors looking to diversify and access North American markets out of Toronto.”
Given his international experience, Boomsma is in a good position to compare Canada and Europe in terms of regulatory changes. “Rules and policies tend to vary from country to country,” he said. “Elsewhere, we see regulatory tightening as well. For us it means an increasing workload to keep our clients and our business onside with ever-changing regulations. I understand why, but it does increase drag and takes time I’d prefer to spend on servicing clients.”
Another hotly debated factor that he’s concerned about is fee pressure. “There’s always discussion about fees — not just between clients and advisors, but also throughout the industry,” he said. “That’s good, because you can also talk about work done and value delivered; it should create clarity. Overall, I see wealth management as a highly efficient global market, with lots of participants and little pricing power.
“In my experience, fees do not differ so much from country to country,” he added. “Firms work within a narrow pricing range: price above that and you’ll lose clients, price below it and you’ll go out of business. Since fees and prices are pretty much given, the better question for clients to ask is: ‘what do I get in return?’ Here offerings will vary widely.”
Aside from considering fee prices, Boomsma believes that the industry should strive for transparency — but not at the expense of choice. “One of the current discussions in Canada is the potential elimination of embedded fees on mutual funds and other products — understandable, since clients may not always have a clear view on what they pay,” he said. “Here I think the regulator has done good work: they’ve ensured that any fees are to be disclosed at the time of sale, and that all costs are included in periodic reporting on account statements. This already puts clients in a good position to track costs and decide whether they get value for money, so I see little reason to get rid of embedded fees. I think it’s better to give clients and advisors flexibility rather than dictate how they want to work together.”
And while Boomsma recognizes that regulators simply want to protect investors, he knows that every additional process affects the quality of advice.
“At the end of the day, you run a business for all stakeholders. If there’s increasing weight from regulations, inefficiencies, targets, and so on, your overhead — and, as a result, your costs —will inevitably go up. Given that, I see only three ways to go: you can increase your minimum account size, reduce your service offering, or start offering house products.
“Unfortunately for clients, I think all of it means reduced access to quality advice, expertise and products,” he said. “Investing is a people business, so I think it’s always better to talk and find solutions together. Here I’d be pleased if the regulatory framework continuous to preserve diversity, competition, and access for all.”
Related stories:
Time for advisors to get serious on diversification
The challenges that really matter
