Canaccord Genuity Group Inc. is making a push to expand its brokerage division’s investment advisory team. The goal is to become the largest independent wealth-management company in Canada.
To that end, the Vancouver-based firm recently announced plans to raise $60 million through a private-placement agreement with a large Canada-based asset manager. Canaccord will use that money to recruit 30 to 40 advisors to its seven offices nationwide.
“We see a unique opportunity in the marketplace to attract highly talented investment advisors and, because of that, we’re going to accelerate the growth portion of our business plan in wealth management in Canada,” says Stuart Raftus, president of Canaccord Genuity Wealth Management.
The recruitment period is expected to last about 18 months, but could stretch to two years. The target number of advisors could change, too, especially if early converts have particularly large books of business.
Canaccord is on the hunt for advisors who have well- established relationships with demanding clients and who want to create customized portfolio solutions for these clients.
“Some advisors are fiercely independent,” Raftus says. “They don’t want any [corporate] influence [regarding] the investment products they sell to their clients, and they want to go above and beyond with meeting their clients’ long-term investment goals.”
Canaccord had 138 advisory teams as of the end of its second fiscal quarter, down by one from three months earlier and down by nine from the corresponding period a year ago. Assets under administration (AUA) in Canada were $9.8 billion as of the end of June, up by 6.5% vs $9.2 billion as of March 31, but down by 7.5% from $10.6 billion vs June 30, 2015.
Thanks to the firm’s smaller size, Raftus believes Canaccord could be more nimble and agile in meeting client demands than if it had legacy systems for thousands of advisors – and Canaccord can differentiate itself in the marketplace by enabling its advisors to provide clients with customized solutions.
“The banks seem to be pushing more toward commoditizing the business and segmenting clients by household investible assets,” Raftus says. “My belief is that over time, clients will have [a few] off-the-shelf solutions available to them from the large banks and financial services institutions.”
Canaccord is focusing on growing its business organically because the firm wants to be as targeted as possible; thus, its plans don’t include acquisitions.
“[With an acquisition], you can end up with a lot of stuff you really want; some stuff that you’re OK with; and some stuff that you don’t really want. We’re going out and recruiting specific individual advisors one at a time,” Raftus says, noting that the size of the cheque that incoming advisors receive will depend on the size of their business, including their AUA and the quality of the revenue they produce.
Vancouver is Canaccord’s biggest office and home to almost half of its advisors, but the firm also has a presence in Halifax, Montreal, Waterloo, Ont., Toronto, Calgary and Edmonton. The firm would consider expanding into other cities if a “dynamite advisor” came along, Raftus says, but Canaccord’s first priority is filling excess real estate capacity in its existing markets.
You don’t need to tell Raftus that Canaccord is swimming upstream after so many independent firms have either been sold off to larger competitors or have left the wealth-management business over the past decade or so, with the trend continuing in 2016.
Indeed, this past April, Toronto-based Echelon Wealth Partners Inc. completed its acquisition of Toronto-based Dundee Goodman Private Wealth, the retail brokerage division of Dundee Corp. Then, in July, Toronto-based Raymond James Ltd. received unanimous approval to acquire Montreal-based MacDougall MacDougall & MacTier Inc.
Furthermore, Toronto-based Richardson GMP Ltd., one of Canada’s biggest independents, is reportedly on the auction block; Toronto-Dominion Bank is believed to be one of the bidders.
Canaccord management’s resolve is strengthened by the fact the firm’s wealth-management division is profitable and fundamental to the parent’s capital-markets strategy in Canada, Raftus says: “The dominance of the banks will feed into our strategy. We want to be the largest independent in Canada. We’ll be able to exploit [the wealth-management] niche and significantly grow our business.
“You have an oligopoly with the banks and larger financial services institutions,” Raftus adds. “Advisors and clients are going to demand independence. We are a boutique player focused on client solutions, and we’ve built a profitable business around that. Once you’re profitable, you can expand selectively.”
Canaccord’s Canadian wealth-management division posted a pretax profit of $400,000 for the quarter ended June 30, the first quarter in the black in almost five years. And the firm’s announcement that it has $60 million to grow its advisory sales force demonstrates how serious Canaccord is about that line of business.
“[The announcement] puts to rest any questions about our commitment to wealth management,” Raftus says, “or our commitment to this space.”
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