How much does the average Canadian financial advisor earn? You will be shocked....

2014 was an outstanding year for Canadian financial advisors according to PriceMetrix. It could be termed the year of the Yacht (making reference to the classic takedown of Wall Street Where are the Customers' Yachts? by Fred Schwed) for advisors. That's not just figuratively true, it is literally true. Anyone who makes $655,000 in a year is into yacht territory. Yes, that's right, the PriceMetrix press release crows about that being the average advisor income, not the top 1% or 10%, the average!

Advisors are doing well indeed - their 13% rise in revenue over the previous year contrasts with only an 11% increase in average client assets under their management, all this while advisors have been reducing the number of clients each deals with, i.e. the advisors have been firing clients, and it doesn't take a rocket scientist to know it is the clients with low assets who provide less revenue bang for each advisor time buck.

There is an increasing shift to fee-based revenue (which probably means a separate charge for assets under management but might include trailing commissions on mutual funds), as opposed to transaction revenue (one-time commission). It's hard to tell exactly what types of charges are being described - see Preet Banerjee's more detailed run-through of various terminology for various charges on MoneySense - but the end result is clear, clients of advisors got dinged for more per dollar of invested assets in 2014.

Another interesting figure in the PriceMetrix report is that each advisor served 150 clients on average. In a typical year of 236 on-the-job days (251 working days minus 15 for holidays on the yacht), that gives each client 1.6 days of advisor time per year, discounting anything else the advisor does in his/her business. No wonder $20,000 client accounts don't pay and advisors want to get rid of such clients (1% of $20k provides only $200 and 150 of such clients is $30,000 of annual revenue).

Finally, perhaps robo-advisors really are the way of the future. The report says advisors and their clients are getting older. Advisors are making no efforts to attract younger clients, who may not be interested anyway since they can get all of what typically passes for financial advice (10 simple questions and your portfolio is determined) plus automatic rebalancing for a lower cost (using lower MER ETFs plus lower robo charges on assets) from the robos.

BMO InvestorLine allows swaps between like accounts

Recently I've been liberating cash in preparation for buying an annuity. To my relief and delight BMO InvestorLine allowed me to swap cash in my LIRA for bonds in my RRIF, saving me the considerable embedded commission (around 1% from what I have observed from bid-ask spreads) cost of selling the bonds in the RRIF.

It's good to know that at least one broker has not thrown out the baby with the bathwater by banning any and all swaps after the Canada Revenue Agency clamped down on abusive gaming of the system to boost tax-protected balances. Swaps between accounts with like tax properties are still perfectly legal (per this post at TaxInterpretations.com) but some brokers seem to have simply stopped doing any and all swaps (e.g. the discussion following this post at Canadian Capitalist and this other CC post). Swaps between registered retirement accounts like RRSPs, LIFs, LIRAs, RIFs, or TFSA to TFSA are ok but not between TFSA and RRSP (or other retirement) or with taxable accounts.