Dealer CEOs are relatively optimistic about market conditions in 2014, according to a survey released today Investment Industry Association of Canada (IIAC), however, challenges remain for firms looking to grow, particularly small dealers.
Results for the IIAC 2014 Capital Markets Outlook: A Survey of Canada’s Investment Industry CEOs, show that 48% of CEOs believe their firms’ profitability will improve somewhat in 2014. Ten per cent of CEOs predict that improvement in profits to be significant. Last year, no CEO surveyed expected a large increase in profits.
Despite the expectation of higher profits, most CEOs do not intend to put that cash towards acquisitions. Only 10% of CEOs surveyed said they planned to acquire a firm or enter into a joint venture in 2014. Comparatively, 30% of respondents in 2013 said they planned to make an acquisition or enter into some type of arrangement with another firm.
Speaking to the Empire Club of Canada at a Toronto event on Thursday, Ian Russell, president and CEO, IIAC said firms were unlikely to make many acquisitions in 2014 because of the dwindling number of candidates. Said Russell: “Some of the more valuable firms have already been acquired in the industry.”
Instead, firms looking to expand will likely do so by buying assets directly and hiring personnel, said Russell. In fact, 52% of CEOs surveyed said they intended to hire in the coming year.
Next: The biggest roadblock to growth
The biggest roadblock to growth
The biggest roadblock to growth in 2014, according to Russell, is regulation, particularly the implementation of the new client relationship model (CRM 2) this year. Eighty-four percent of respondents said regulatory burdens would be the biggest barrier to growth.
Small dealers in particular are likely to struggle in the coming year given how “abysmal” 2013 was for them, said Russell, with half of the boutique firms losing money and 13 dealer registrants resigning from IIROC.
Said Russell: “The next year or so has the potential to be a make or break situation for many small investment dealers.”