Given the ongoing changes in the philosophy of Canadian banks towards investors, particularly small investors, this is more than a good question.

So let us list and examine some of the major differences:

1. Independent financial advisers are business owners. Their success depends on how well they run their businesses and how well they service their client base. The costs of their offices, equipment and staff are theirs alone. Many will align with major financial firms, such as Raymond James, to take advantage of more sophisticated investment research and the economies of larger processing and compliance systems. But in every case, the responsibility to their clients is based on their specific investment and business philosophies. Most established advisers grow their businesses through referrals which generally assures that a very competent level of service has to be offered. Responsiveness to clients through effective client servicing is the life blood of their businesses.

In the institutional sector, specifically banks and credit unions, advisers are essentially employees, and as such are subject to performance assessments. Although there can certainly be referrals, the majority of new clients are provided by front line staff who are trained to direct clients with financial needs to the appropriate staff. This scenario characteristically leads to very large client bases for each representative.

There are also some firms, such as Investors Group, where the representatives function under a company umbrella. In this case the advisers cover most of their own expenses except office, processing and marketing materials. However unlike independent advisers, the client bases are considered the property of the umbrella firm.

2. Independent financial advisers are not subjected to personal assessments. Like the banks, their bottom line will indicate how efficiently they are running their businesses. There is no internal corporate influence on products and services that are offered from outside sources. Again using Raymond James as an example, there are no Raymond James products. However, the company will offer portfolio recommendations, portfolio management and insights on economic trends. They offer guidance, not products.

This contrasts to institutional advisers who may direct investments to a wide spectrum of opportunities, however their corporate personal assessments and income will be primarily based on their promotion of bank products.

3. Independent financial advisers tend to development a much higher level of personal expertise and financial knowledge. Under the institutional systems, advisers are encouraged to quickly delegate more sophisticated investment scenarios, advanced financial structuring and tax considerations to higher levels in the banking system. Consequently, clients must trust that the bank adviser is fully knowledgeable and perceptive in the recognition or potential problems or opportunities. Because independent financial advisers characteristically take complete responsibility for the implementation of the total financial process, they generally build very good professional relationships with appropriate accountants, lawyers and advisory firms. Most also have the capability to recognize where insurance solutions will be advantageous to the client.

4. Perhaps the most significant factor, in terms of client servicing and developing a more integrated relationship with your financial adviser, is the aspect of accessibility. Most independent financial advisers pride themselves on their availability to clients and their timely response to client requests. Small business owners know their clients well. As independent advisers have considerably smaller client bases, there is much less tendency to divide clients into a type of hierarchical service formula based on the client’s level of investment.

Having made this differentiation between independent and institutional financial advisers, there will always be independent advisers and institutional advisers who do not perform to the level you should expect. Ultimately you are responsible for your own wealth development and financial security. Consequently, you should always make your expectations clear to your adviser regardless of their independence or lack of independence.

Feel free to call if any clarification is required.