Dan Richards is president of Strategic Imperatives. He is a faculty member in the MBA program at the Rotman School at the University of Toronto. He also hosts a weekly conference call called Monday Morning Jump Start, which is about strategies for financial advisors. Advisors can see it GlobeAdvisor.com. He can be reached at richards@getkeepclients.com
There is a popular myth fostered by some media that massive numbers of Canadians have severed relationships with their financial advisers as a result of the market tumult over the past year. In reality, the vast majority of Canadians are working with the same advisers they were with a year ago.
What has changed are the kinds of questions that investors are asking.
A shift in mindset
In conversations with investors, there's often a generational divide on this issue. Canadians in their late 60s, 70s and 80s are more likely to operate the way they always did, deferring to their adviser to take the lead on their portfolios.
On the other hand, younger investors are increasingly assertive about the questions they ask and are looking to collaborate on decision making.
Until recently, these investors would often respond to a recommendation with, "If that's what you think, fine."
Today, even if the same decision is ultimately reached, conversations are taking longer and investors are asking tougher questions.
This is reflected in a comment from Paul Allan, senior vice-president of Mackenzie Financial regarding research about high net worth Canadians they commissioned from Toronto financial services consulting firm Investor Economics: "High net worth investors are trying to get closer to their money and are listening to multiple sources of information beyond their financial adviser.
"As a result, advisers need to spend more time addressing different viewpoints. Three years ago, clients would typically agree with financial adviser recommendations. Today, they want advisers to explain exactly why they are recommending solutions and strategies - and to provide evidence and support."
Empowering skeptical
customers
There's nothing new about more skeptical consumers - starting in the 1960s, the baby boom generation led the charge on questioning authority. You can see this in attitudes to just about every traditional institution - churches, government, the media, big business.
What's different today is how this skepticism has translated into changed behaviour, with the Internet playing a crucial role since becoming a mass vehicle 15 years ago.
Sometimes it's hard to remember the days before the Internet. Back then, information was hard to come by - perhaps the greatest long-term impact of the Net will be the remarkable fashion in which it has levelled the information playing field. That access to information has dislocated business models of intermediaries such as travel agents and put traditional media like newspapers under huge stress.
And it's also led to much tougher questions from consumers to everyone they deal with - for instance, doctors talk about patients coming in with pages of questions they've printed off the Net.
It's clear that many Canadians changed their attitude to their financial adviser and the financial industry as a result of the events of last year. That said, when you look at what's happened elsewhere in society, you can make the case that this spike in skepticism was overdue - and the financial industry is just playing catch-up with everyone else.
A short attention span world
It's not just the amount of evidence needed to back up recommendations that's changed - it's how Canadians want to receive that evidence.
There's less tolerance for financial bafflegab and industry-speak and more demand for candour, substance and transparency on things like fees.
And there's less appetite for reading generally.
Historically, financial communication was paper based - articles, newsletters and quarterly reports. Clients have long complained about the avalanche of paper they get - long on disclosure, short on meaning.
In talking to financial advisers, many doubt whether most of what they send gets read.
"Our economist publishes a monthly report that we're encouraged to send clients," one adviser said. "In my view, the chances of most clients looking at that report approaches zero."
For good or for ill, we live in a world that's moving to shorter and shorter attention spans, with greater emphasis on the impact of the visual medium. One result has been the phenomenal growth in online videos - Cisco Systems predicts that by 2012, nearly 90 per cent of consumer Internet traffic will consist of videos.
As we move into 2010, investors need to have candid conversations with their advisers about the information they're looking for - both what they get and how they get it. Only in that way will investors get the value they're paying for - and only in that way will the adviser-client relationships be sustainable.
Disclosure: Earlier this year, my company launched an initiative to allow financial advisers to send clients videos of interviews with portfolio managers and financial experts.