Toronto-based investment firm GMP Private Client LP has teamed up with managing general agent PPI Financial Group in a bid to bolster the former’s offering to Canada’s high net-worth set. Just don’t call the partnership trendy.

Although the arrangement highlights a broader industry trend that has sent virtually every firm on the Street scrambling to tap into the high-end market, both GMP and PPI insist they’re simply deepening the commitment they made to affluent clients from Day 1.

“I started the private-client business alongside GMP Capital Trust two years ago, in large part to provide services to existing GMP clients,” says James Wherry, CEO of GMP Private Client. “And we think we’re ideally suited to continue those relationships.”

GMP Capital provides investment banking research and trading for mid-cap companies, most of which are owned and operated by entrepreneurs. When those same entrepreneurs asked Wherry to help manage their finances, he reluctantly had no choice but to tell them: “We don’t do that.”

It didn’t stay that way for long. In 2005, Wherry created GMP Private Client, a retail investment dealer aimed at high net-worth investors, many of whom started out as GMP Capital’s corporate finance clients.

Today, the private-client division has grown to more than 30 advisor teams spread throughout offices in Vancouver, Toronto and Calgary, and it manages $4 billion in assets.

Now the firm is hoping to fill in the missing pieces with a lineup of insurance and estate planning services via Toronto-based PPI Financial, an MGA that has carved out a niche among high net-worth clients and business owners since its inception in 1978. With a 200-member staff, including actuaries, accountants and lawyers, PPI says it is naturally suited to work with affluent professionals or business owners whose businesses are worth $1 million or more — exactly the type of client GMP Private Client attracts.

The partnership, which was announced in April, will give GMP clients access to PPI’s four suppliers on the individual life side, including RBC Insurance, Standard Life Assurance Co. of Canada, Manulife Financial Corp. and AIG Life Insurance Co. of Canada. The firm also has a relationship with Royal and SunAlliance Group, which underwrites the firm’s triAccess product, a medical insurance policy offered exclusively by PPI.

In addition to GMP, PPI also works with a number of smaller regional investment firms that are beginning to recognize the importance of insurance as part of their overall offering. Still, PPI describes its service as one that “layers” its support and services on top of what its partners already offer — and it has no intentions of taking over.

“Our goal is to be behind the scenes — we’re not the insurance advisor, but we’re working with the insurance advisor,” says Kevin Wark, senior vice president of business development with PPI. “PPI was formed to act as an intermediary between the insurance company and the insurance advisor to provide an extra layer of support.”

The partnership of GMP and PPI is a natural fit, Wherry says: both are entrepreneurial, independent and have a track record in working with the affluent. From PPI’s perspective, its role is simply taking the wealth-management process one step further.

“The unique thing about GMP is it helped put in place a process in which it helps people become very wealthy,” says Wark. “And now it’s saying, ‘How do we help preserve and protect it and pass it on to the next generation in the most tax-efficient basis?’ And that’s the role we’re assisting [GMP] in.”

The arrangement will see GMP advisors partner with PPI’s group of experts to devise a plan and choose the products most appropriate for GMP clients; although most GMP advisors are licensed to sell insurance, those who are not licensed can still access PPI’s services through one of the firm’s licensed advisors. For every policy sold, PPI earns a slice of the override.

Offsetting tax liabilities with thorough estate and insurance planning is one of PPI’s areas of expertise, and one that Wark feels is sorely overlooked by most of the firm’s competitors: “The investment industry as a whole has recognized the importance of insurance and catering to high net-worth individuals, but I don’t think they’re doing the job that clients need them to do. They’re often product-focused, and they need to be solution-focused.”

@page_break@A typical PPI client may have built a private company that he or she wants to take public and perhaps even sell, thereby setting off a string of complicated insurance needs, estate and trust issues, and tax liabilities. And unlike most investment firms that are courting high net-worth clients with a plethora of investment vehicles aimed at growing their wealth, PPI is aiming to preserve what’s already there.

That’s not to say GMP and PPI won’t have their fair share of competition in the high net-worth space. Although it’s generally accepted that any client with $1 million or more is considered high net-worth, the terms “mass-affluent” (usually identified as those with more than $250,000 in assets) and “ultra-high net-worth” (generally, $50 million-plus) are regularly used to describe high-end target markets. Sometimes, the terms are used interchangeably.

Suffice to say firms are moving upmarket: this past March, for example, Royal Bank of Canada merged its domestic, U.S. and global wealth-management businesses in an effort to target investors with $250,000-$1 million in investible assets. And RBC Dominion Securities Inc., the securities arm of RBC, recently announced that 10% of its asset base is in discretionary assets, a sure sign of its footprint in the high net-worth market.

Meanwhile, Bank of Nova Scotia is ramping up its private-client group; in May 2006, it bought a 51% stake in Corporate Planning Associates, a Toronto-based wealth-management firm that caters to the “ultra-wealthy.”

Then there’s UBS Bank (Canada), which has long served clients with more than $1 million in assets and recently developed its KeyClient Group for ultra-wealthy clients with more than $50 million in assets.

That’s only the abridged list of recent efforts to chase after wealthy investors — and more are sure to come as firms scramble to scoop up the millions of dollars expected to change hands in coming years. A report published in April by Ottawa-based Decima Research Inc.says Canadian seniors will transfer an estimated $1 trillion to their children over the next 20 years. Furthermore, the report says, future inheritances are expected to be worth approximately $300,000 — roughly five times the average inheritance to date.

If the supposed transfer of wealth unfolds as expected, investment firms probably will have enough business to go around. But some argue that financial planning and advice are still largely lacking, and the products could be more in tune with the needs of those who are passing on their wealth.

“There are lots of products out there, but there is certainly room for more that are tailored to the boomers,” says Dan Kirkland, executive vice president of Decima. “At the same time, very few people are actively seeking financial advice on how to prepare to give or receive and inheritance.”

For his part, Wherry says GMP is on track to expand its advisory base to 100 teams, and is eager to open new offices in Quebec. But the firm isn’t counting on an impending wealth transfer to bring in new business; with a built-in roster of potential clients from GMP Capital — not to mention the new clients that come in with advisors who join the private-client side — the firm is sticking to its game plan. Instead of chasing down new money, the firm will stay focused on entrepreneurs and other high net-worth clients.

Says Wherry: “We always thought if we bring the right products and services to the clients, we’ll be successful in what we’re doing. We haven’t strayed from that.” IE