How can advisors redefine their value in an age of DIY investors?

DIY investing has surged in Canada, with discount brokerages making it easier than ever for individuals to open accounts and trade on their own. While this evolution raises challenges for financial advisors, it also introduces opportunities to highlight their value.

According to the Canadian Securities Administrators, nearly 30% of DIY accounts were opened in the last two years. Now, the Canadian Investment Regulatory Organization (CIRO) is reviewing its guidance for order-execution-only (OEO) firms that provide DIY platforms. These brokerages can’t give tailored recommendations, but may be able to offer more robust “decision support” like alerts, research, and educational content.

Those lines may blur in investors’ minds. A 2024 survey from FAIR Canada, the investor rights group, found that most DIY account holders believe the tools offered on their DIY platforms are defined as investment advice.

“It puts even more pressure on advice givers to differentiate what they’re doing,” says Ian Tam, Director of Investment Research at Morningstar Canada.

The KYP advantage

Know-your-product (KYP) capability is one of those differentiators. Tam notes that in ETFs alone, Canadian investors now have access to nearly 1,700 funds, and over half are actively managed or involve more complex strategies like leverage or alternatives.

Advisors are required to dig into features, risks, costs, management teams, and portfolio fit. That level of analysis just isn’t available on DIY platforms. Still, advisors with a limited product shelf will need to “up their game,” says Tam.

“You have to have not only the knowledge of the product but also the tools to be able to analyze it to a deeper level than what that DIY investor has been looking at.”

Cutting through the noise

For DIYers, there’s no shortage of tools, news, and information. While useful, Tam cautions that more isn’t always better. The abundance of resources demands the ability to sift through and make sense of them. That’s what advisors bring.

The FAIR Canada survey also found that 70% of DIY-only investors believe using a professional advisor to manage their investments is expensive; 47% also believe they can do as good, or better, a job themselves.

In reality, Morningstar’s annual Mind the Gap study shows that investors’ actual returns lag advertised fund returns by an average of 1.2%. Tam says that’s largely due to poor timing decisions, like selling in a panic or chasing trends too late. Advisors can help close that gap.

“Behavioural coaching is so important, not just for peace of mind like having a sound investment plan, but in actual financial results. That’s a huge portion of the value you can bring,” says Tam.

Increased financial literacy can be a plus

Younger DIY investors may not yet have significant assets. But many will accumulate or inherit wealth in the years ahead, and require more sophisticated planning. “At some point, they’re going to need actual advice.”

When investors migrate to advisors, many will arrive with increased expectations and more financial literacy. Tam views this as an opportunity for advisors.

“It’s a faster jumping-off point. The advisor doesn’t have to go through meetings explaining how financial markets work. You can focus more on personalization, tax planning, and financial planning. That’s what adds value and helps build that one-to-one connection.”

The new environment may reshape how advisors describe their role. “Instead of advisor-client, it’s almost like a partnership or a coach-consultant style,” says Tam.

He likens the relationship of the future to a “co-pilot mode,” where the client relays their preferences and risk tolerance, and the advisor overlays their professional judgment.

More competition ahead

CIRO’s review of guidance for OEO firms is occurring amidst broader industry shifts.

Earlier this year, several provincial regulators launched a consultation and pilot to simplify client identity verification. This is paving the way for “e-KYC” (e-know-your-product) digital onboarding and a central repository of KYC data. Meanwhile, Canada’s open banking initiative, slated for 2026, will let consumers securely share financial data across providers. Together, these changes will make it easier for clients to switch or add services.

Also looming is the rollout of total cost reporting requirements in 2027. This will require greater disclosure of all investment-related costs, including advisor compensation. That could intensify client scrutiny.

Investors will have more choice and visibility than ever before. Yet that doesn’t diminish the role of advisors. If anything, it amplifies the need for them to help clients synthesize complexity.

Given the rise of DIY investing and new decision support, Tam acknowledges the risks for advisors but reminds them that they needn’t compete with platforms on information. Their edge lies in delivering personalized strategies that align with each client’s goals.

In an era of abundant information, helping clients make sense of their investments and stay disciplined may be the advisor’s greatest edge.

“The judgment that an advisor can apply based on their experience is of utmost importance,” says Tam. “There’s still room in this new world for it.”