In September, Advocis announced that Greg Pollock, pictured in 2012, had left the organization 'effective immediately,' but offered no explanation for his departure. He had been CEO since 2008.Michelle Siu/The Globe and Mail
Greg Pollock abruptly departed his CEO role at Advocis after the national industry group for financial advisers lost $2.5-million in 2022 and, according to its new leader, likely overstated its membership count for years.
Now, interim chief executive officer Harris Jones must sort out the organization’s numbers and right the ship in preparation for a permanent leader.
Last month, Advocis announced that Mr. Pollock, who had been CEO since 2008, had left the organization “effective immediately,” but offered no explanation for his departure. Advocis appointed Mr. Jones, a member of the board since this past June, as interim CEO and said it would commence a formal CEO search in the near term.
“I didn’t want this job,” Mr. Jones said in an interview with The Globe and Mail. “I reluctantly agreed on an interim basis to take this on.”
Mr. Pollock declined to comment when contacted by The Globe, as did Linda Illidge, a 20-year Advocis veteran who served as vice-president of finance and administration before leaving the group in July.
Advocis, also known as the Financial Advisors Association of Canada, is a lobby group for financial advisers in Canada that provides its members with designation programs, continuing education credits and mentorship. The group is also a frequent participant in regulatory discussions around industry changes.
After years of financial stability prior to the pandemic, Advocis reported a sharp financial downturn in 2022, and said it borrowed large sums to cover its costs.
The organization reported a deficit of $2.54-million in 2022 as its revenue fell by 3 per cent from 2021 levels, while expenses rose by more than 20 per cent. What Advocis calls “administrative and governance” expenses rose by 12 per cent, to $10.61-million.
In its most recent annual report, Advocis said part of the increase in expenses was linked to the rising costs of in-person training and development programs that it provides its members, compared with prepandemic levels. Events now require virtual attendance options that come with additional technology costs. Revenue declined as the number of in-person registrations for Advocis events were below expectations, the report said.
That undermined one of the keys to the organization’s prior financial health.
From 2009 to 2021, Advocis reported program revenue that exceeded program expenses by at least $1-million a year. Even in the pandemic year of 2021, program revenue exceeded expenses by $1.18-million, financial statements show.
In 2022, however, the programs failed to provide a similar financial benefit. Program revenue remained essentially flat at $3.11-million, but program expenses spiked by 56 per cent, to $2.85-million. The resulting slim margin of just $262,000 was unprecedented in Advocis’s recent history.
At the same time, the organization took on additional costs to become approved as a credentialing body under the Financial Professionals Title Protection Rule, a new regime Ontario’s government put in place to protect consumers from unqualified individuals using certain titles.
In its annual report, Advocis acknowledged in a footnote that “the financial results of 2022 have put a strain on the financial resources and liquidity” of the organization.
In response, Advocis took out a loan of $610,000 and expanded its lines of credit by $2.2-million, for a total of $2.81-million in new funding in 2023, while Mr. Pollock was still CEO. The organization had less than $100,000 in borrowings at the end of 2022.
Rob Carrick: A retiree seeks reassurance that investment advisers can be trusted to manage her money
Overwhelmed by all the negative news? You might need financial therapy
It also said it was “in the process of completing a restructuring plan with a view to significantly reduce operating expenses.”
Mr. Jones said some of that cost-cutting has occurred already, while he’s still in the process of making other changes. Advocis now has about 55 employees, down from a peak of more than 80.
“I believe we’re pretty stable at this point,” Mr. Jones said when asked about the organization’s liquidity, given the combination of cost cuts and new funding. “My job is to control revenues as best I can, stabilize them, keep them coming in and contain costs.”
Part of that includes re-examining the “professional financial adviser,” or PFA, designation offered by an Advocis subsidiary called the Institute for Advanced Financial Education.
Mr. Jones estimates the program cost about $1-million to develop. However, only 196 people have completed the designation, with another 47 currently enrolled.
Advocis publicly launched the PFA designation in 2020, and it was included in the approved list of designations for those who wish to use the title financial adviser in 2022. But shortly after, investor advocates took aim at the approval process – saying the bar should be set higher for designations offering the financial adviser title.
The Canadian Investment Regulatory Organization, which oversees about 260 investment firms, is now working with regulators to become a credentialing body and offer its own designation. That could further affect the enrolment numbers for Advocis’s programs as a large percentage of advisers in Canada already hold a securities or mutual fund licence with CIRO.
“[The PFA] is obviously on my things to look at,” Mr. Jones said. “It’s an excellent program but I’m not sure it’ll stay as it is. It may get broken up a little bit into more bite-size pieces ... [advisers] want weekend-warrior-type courses.”
Mr. Jones also acknowledged Advocis may have been overstating its membership numbers in the past.
In a number of annual reports over the past decade, Advocis said its membership count was somewhere between 11,000 and 13,000 – although in some years it did not disclose a number. In 2020, it said the COVID-19 pandemic cost it about 20 per cent of its members – a decline that would put the number somewhere around 9,600 at the end of that year, based on previous disclosures.
In its 2021 and 2022 annual reports, however, Advocis said it had 17,000 “members and clients,” a sudden near-doubling of the number.
Mr. Jones said he can only speculate about the increased membership count, but Advocis has a number of non-member clients for things such as insurance or education programs, and he believes some or all of them may have been included in its count for a number of years.
“I’m not pleased with how our membership numbers were reported,” he said. “I think they wanted to have bigger numbers to talk to the government [so] the government would think that we’re bigger than we are.”
Mr. Jones, who served as chair of the board’s finance and audit committee before becoming interim CEO, said he believes the membership has been “relatively stable around 7,500 financial advisers for a number of years now.”
“I don’t think we are in decline [of members], but I believe I’ve got some work cut out for me to move forward and stabilize.”