JUST 18 MONTHS AFTER BUYing Winnipeg-based Wellington West Holdings Inc., National Bank Financial Ltd. (NBF) has sold off Wellington West Holdings’ financial planning subsidiary.
The buyer, Toronto-based Manulife Financial Corp., picks up Wellington West Financial Services Inc. (WWFS) – a 39-advisor business with $900 million in assets under administration (AUA) – while Montreal-based NBF gets out of a business that it says wasn’t strategic for it.
Martin Lavigne, president of NBF’s wealth-management division, says his team had looked at WWFS from a strategic point of view and concluded it simply wasn’t a natural fit.
“We decided that the independent [Mutual Fund Dealers Association of Canada (MFDA)] business isn’t the type of business that we foresee ourselves being in,” Lavigne says. “We want to focus on the [Investment Industry Regulatory Organization of Canada (IIROC)] business – that’s where we’re going to put our energy.”
Selling a division that had been in the family for less than 18 months had nothing to do with poor due diligence, Lavigne says. WWFS simply came with the Wellington West Holdings package that NBF had bought for $333 million in May 2011.
It’s not the only piece to have been divested. A year ago, NBF sold 50% of Wellington West Pro Ice Management Inc., a company that provides “personal chief financial officer” services to more than 30 hockey players in the National Hockey League, to Pro Ice founder Grant Skinner, who already owned the other half.
There are no more pieces of WellingtonWest to sell off, Lavigne says: “[Wellington West Capital Markets Inc.] has been integrated. It was a great strategic play for us, to grow outside of Quebec and to grow in the IIROC world. We couldn’t integrate [WWFS] with anything we had.”
Manulife found out that WWFS was for sale earlier this year, when its corporate-development people spoke with NBF’s investment bankers, who asked if Manulife was interested in acquiring an MFDA dealership.
“I said, ‘Absolutely’,” says Rick Annaert, senior vice president of Manulife and president and CEO of Manulife Securities Investment Services Inc., the latter of which will take over the operation of WWFS.
There was no doubting WWFS’s reputation for good financial advice with a long-term focus, Annaert says, so the main question was whether the enterprise was a good cultural fit with Manulife Securities.
The $900-million bump to Manulife Securities’ AUA represents about one year’s growth, Annaert says. “When you can accelerate your growth by one year with a nice strategic fit,” he says, “you take that opportunity.”
The acquisition gives Manulife Securities a team of more than 1,250 independent advisors with $20 billion in AUA. The deal, which is subject to regulatory approval, is expected to close by November.
About 70% of WWFS’s AUA comes from clients in Winnipeg, 25% from clients in the Greater Toronto Area and 5% from clients in Calgary.
Dan Hallett, vice president and director of asset management at Oakville, Ont.-based HighView Financial Group, wasn’t surprised that NBF wanted to sell WWFS.
MFDA VS IIROC
“Banks generally have no interest in the MFDA model because, in part, it’s too low margin,” Hallett says. (National Bank of Canada is NBF’s parent.) “But that’s still a big part of Manulife [Securities]’ distribution channel, and increased scale is good for it. So, this deal appears to make sense.”
Dan Richards, CEO of Client-insights, a Toronto-based firm specializing in client communications, agrees. He says there has been a clear trend over the past decade or so of advisors moving away from the MFDA model and onto the IIROC platform.
“It’s a credibility issue as well,” Richards says. “Rightly or wrongly, there’s a perception out there that a securities licence is a higher standard than an MFDA licence. Part of [attraction of IIROC licensing] is just being able to facilitate transactions.”
Lavigne says NBF has been making some significant progress in building up its asset base outside Quebec. It’s not quite a 50/50 split yet, but it’s getting close. As of April 30, NBF had $176 billion in AUA.
“We have made a strong statement to the Street,” Lavigne says. “National Bank Financial is a true player, from coast to coast.”
When NBF decided to focus exclusively on the IIROC platform, its new goal became finding the best home for the WWFS people, according to Charlie Spiring, founder and former CEO of Wellington West Holdings and now vice chairman of NBF.
“I have a lot of friends [at WWFS]. I hired them all,” Spiring says. “These are all people I care about. Manulife is a good name, and it was very accommodating to keep the same commercial arrangements [regarding payouts and contracts].”
Where WWFS’s financial advisors will ultimately hang out their shingles remains to be seen. Manulife Securities has negotiated one-year leases for them to stay in their current locations.
During that time, Annaert says, Manulife Securities will come up with a long-term plan.
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