This is Globe Advisor’s weekly newsletter for professional financial advisors, published every Friday. If someone has forwarded this newsletter to you via e-mail, or you’re reading this on the web, you can register for Globe Advisor, then sign up for this newsletter and others on our newsletter sign-up page.
While it may come as no surprise that Canada’s financial services industry is significantly behind the U.S.’s in utilizing new technology, there are steps that can be taken to introduce solutions to boost productivity.
But first, key hurdles such as integration and aggregation of systems need to be addressed to facilitate the widespread use of new technology for advisors.
Globe Advisor editor Pablo Fuchs spoke with William Trout, director of wealth management at Javelin Strategy and Research, at the Canadian AdvisorTech Expo about the difference in the two markets and what’s holding Canadian advisors back from implementing technology in their practices.
What’s missing here in Canada that you’ve seen in the U.S.?
Integration is one defining element. A lot of the lack of connectivity or limited degree of integration that you have in Canada relates to the fundamental market structure, which is still very much an oligopoly. [You have] the Big Five banks, some other banks, some asset managers and a small but growing independent advisor segment.
In Canada, you’re still seeing advisors very much tied to manufacturing – the banks, in particular, some asset managers as well. There hasn’t been the need or impetus to integrate with third-party tools as in the States. And, as a result, the fintech ecosystem is a bit smaller. We see that changing, however. It’s still early days in Canada.
What needs to happen here to make systems talk to each other?
A lot of the fintech that we see or that has either been embedded in the banks or sort of gaining traction in the Canadian market, they’re grey beards by U.S. standards. They’ve been around a long time. Typically, early 2000s, which in a tech sense is ancient.
So, what we’re seeing now in Canada is the increasing emergence of API [application programming interface]-first type of organizations … where you’re able to access their services, data through APIs. That’s really compelling. It’s been the order of the day in the U.S. This API-first mentality has really been embedded in the culture of the fintech landscape, not just wealth management.
If Canada moves to a more open-banking environment, and as you see these fintechs becoming more competitive … we’re really going to have an API-first model.
Of course, it won’t really be in the interest of the large incumbents. The Big Five banks are at the top of the list. They’re not necessarily that keen on letting the data get out and giving customers the ability to price shop and move their accounts or assets very readily, but this is a problem that transcends Canada. This is the big banks and incumbents everywhere.
Aggregation is a big part of it. This question of who owns the data? It’s really the client. As an advisor, being able to work with your client to get that whole view of wealth allows you to do tremendous things. Not just advice, but around planning holistically.
What trends have emerged that are considered a technology-related development?
Canada is a little bit more risk averse but we’re seeing in the States an explosion in securities-based lending – the rise of the lending advisors.
So, data aggregation is really important. Being able to work with custodians or large platforms in Canada, like an Envestnet Inc., coming to the market – that’s a big part of the story. Tools like low-code or no-code platforms such as AirTable can help or Zapier.
There’s an increasing array of solutions out there for advisors, the challenge is until you have that kind of consolidation, it’s sort of hunt and peg.
The very busy advisor has to go out there and search for solutions on their own. So, we’re not quite where we need to be, but I have little doubt that in three to five years, you’re going to see those capabilities.
This interview has been edited and condensed. View the entire interview here.
– Globe Advisor staff.
Must-reads from Globe Advisor this week
Six energy-dividend stock picks with bountiful payouts
Energy stocks are notoriously volatile, but many oil and gas companies flush with cash are now turning into high-octane dividend payers. Some are offering payouts for the first time. Others are raising their quarterly base dividends, adding variable or special dividends, and buying back stock. Bountiful payouts stem from rising commodity prices amid warnings of a supply crunch, and companies returning capital to shareholders instead of investing heavily in production growth. Shirley Won speaks with three portfolio managers about their top picks among dividend-paying energy companies.
Will Canadian crypto ETF providers keep funds open with losses mounting?
What a wild six months it has been for crypto. The asset class’s market capitalization plummeted to less than US$800-million this month from record highs of US$2.7-trillion a year ago, according to CoinMarketCap.com. Bitcoin lost three-quarters of its near-$67,000 value from November 2021, languishing at just over $16,000 a year later. A streak of stunning disasters stoked the decline. The collapse of the TerraUSD and Luna stablecoin pair this past May wiped billions from the cryptocurrency market. The unravelling of the FTX cryptocurrency empire in November stunned an already rattled sector. No wonder, then, that cryptocurrency exchange-traded funds (ETFs), which reflect the market’s fortunes, are also on the ropes. Danny Bradbury speaks with Canadian providers about their plans for the funds.
Top year-end tax strategies for 2022
While not much is new in year-end tax planning this year, tried-and-true strategies can be good conversation openers with the potential to strengthen advisor-client relationships. A side benefit is that saving taxes means more money available to invest. After a year of market turbulence, some clients may benefit from realizing capital losses to offset capital gains in 2022 or any of the three prior calendar years. Alison MacAlpine looks at strategies for individuals to implement at this time.
Investors pull out of long-term mutual funds as market conditions deteriorate
Soaring inflation has sent investors scrambling to buy funds that aim to protect them against the market impact of higher costs. However, advisors are encouraged to keep their clients focused on longer-term investments, especially as inflation may have peaked and the trade appears to be shifting. Data from the Investment Funds Institute of Canada show sales of long-term mutual funds have been falling since February and turned negative in April. There were $9.2-million in redemptions in October, the latest data available, reflecting a downward trend for most of the year. Brenda Bouw speaks to experts about how portfolios should be built to withstand different market environments.
Also see:
Should investors avoid companies that spent billions on share buybacks as new taxes take effect?
Key tax considerations for self-employed people who become employees
Why it’s important to start teaching kids about money early on
Investors pump almost US$16-billion into U.S. corporate bond funds
Goldman Sachs makes ‘white-label’ bet on white-hot ETF market
What you and your clients need to know
Tense conversations lie ahead as investors process their losses and fees paid
The business model of investment advice is that clients pay fees regardless of whether their portfolios go up or down. This will be an issue as we close out the year and head toward the investment industry’s annual accounting of advice fees for clients in early 2023. Rarely have investors faced such a disconnect between fees, advice and returns. Down years for investors are a normal thing. Winter is always coming when you invest in stocks. What separates 2022 from other disappointing years is the fact that the worst declines came from bonds, the supposedly safe and non-threatening part of a portfolio. Rob Carrick looks at how advisors might have prepared clients for this year.
Desjardins to acquire Guardian Capital’s insurance, wealth management operations
Financial services giant Desjardins Group has agreed to buy Guardian Capital Group Ltd.’s insurance and wealth management operations, tripling its advisor network to more than 7,000 professionals across Canada. Desjardins – the second largest property and causality insurer in the country – announced on Wednesday it will pay $750-million to acquire three separate operations from Guardian Capital: IDC Worldsource Insurance Network Inc., a life-insurance advisory business; mutual-fund dealer Worldsource Financial Management Inc.; and Worldsource Securities Inc., a securities licensed investment company. Clare O’Hara gives details on the deal.
Why venting isn’t cathartic and how to channel your anger
This sometimes seems like the Age of Anger, as people let loose their frustrations and vitriol on social media. But anger also might be on the rise in the workplace – and our own psyche. An expert found tensions high in the pandemic era while researching their book and people revealed that they had recently lost their cool over seemingly small triggers. Anger can drive us into a frenzy, but it can also lead us to work harder and accomplish more. Harvey Schachter looks at how to channel your anger to make things right.
– Globe Advisor Staff
