Coast Capital Savings Credit Union’s decision to choose Worldsource Wealth Management Inc. as its mutual fund dealer and managing general agency marks something of a new direction for both organizations — and a significant step for the credit union industry as a whole.

“Not only have we not worked with Worldsource before, but it is a publicly traded company,” says Mike Bushore, chief innovation officer at Vancouver-based Coast Capital. “So, there’s a different dynamic there. This is new territory for us.”

Coast Capital, the country’s second-largest credit union, will receive fund-dealer services from Worldsource Financial Management Inc. and MGA services from Worldsource Insurance Network Inc. Both are divisions of Markham, Ont.-based Worldsource Wealth, which is a subsidiary of Guardian Capital Group Ltd. , a Toronto Stock Exchange-listed company.

The deal is expected to close by the end of January.

Worldsource Financial serves about 500 advisors, 75% of whom are also insurance-licenced, across the country, while Coast Capital has 75 dual-licensed advisors. Coast Capital will add $2 billion in assets under management to Worldsource Financial’s $5.5 billion in AUM.

The deal runs indefinitely, which was a selling point, Bushore says: “People might says that’s disruptive, but it was cast in the spirit of maintaining the quality of the deal, the quality of the relationship and recognizing that [the wealth-management] space is very competitive.

“Investment services in the credit union space is an increasingly important business line,” he says. “It’s something that membership is demanding and it’s increasingly something to which all credit unions are turning their attention.”

The deal is significant for Worldsource, as well.

“Obviously, Coast Capital will be our largest ‘branch’ and it will be serviced accordingly,” says Andy Mitchell, president of Worldsource Financial and a managing director of Worldsource Wealth.

“We’re not dropping the ball with any of our current partners because we’ve done a deal with Coast Capital,” he adds. “If anything, we’re leveraging the opportunity, the revenue and the scale this deal brings to provide better service to everybody.”

Although Coast Capital’s insurance business is less developed than its wealth-management business, the credit union hopes that its partnership with Worldsource will grow the insurance business as well.

“We like Worldsource’s payouts to us,” Bushore says. “We like the relationship that it has with the insurance companies themselves. And we like Worldsource’s commitment to the business, in particular.”

Coast Capital, which served as its own mutual fund dealer before forming this deal, chose Worldsource for the strength of its technology platform, its practice-management expertise and the possibility of developing tailored Coast Capital products in tandem with Worldsource and Guardian, Bushore says. He says there will be no job losses because of the deal, but some credit union employees will shift into different roles; a handful will actually move to Worldsource.

“There is tremendous strategic potential in this deal,” Bushore says. “We’re very much going down the path of exploring what those are and how best to realize them.”

Bushore says that Worldsource’s IT platform will allow Coast Capital to make a big leap forward in technology — without making the capital expenditure to upgrade on its own: “This is really an opportunity for us to leverage a great IT platform that Worldsource brings.”

Mitchell says that the key to Worldsource’s technology strength is how the company supports advisors: “How you leverage the technology as a dealer to provide better service to the end-client is where you gain opportunity.”

For Worldsource, the deal represents a feather in its cap, and opens it up to future deals with other credit unions. In addition, the Coast Capital deal will strengthen the Ontario-based Worldsource’s position in Western Canada. Worldsource plans to open a centralized advisor services call centre team in British Columbia that is intended to serve all of Worldsource’s Western advisors, not just Coast Capital’s.

Mitchell maintains the Coast Capital deal represents a trend in the industry toward seeking out one wealth-management partner instead of dealing with a number of providers: “The reality is someone who is in the financial planning arena today, whether a large organization such as Coast Capital or a single, professional advisor, wants to have one distribution partner. To me, that’s a shift in mentality. It used to be: ‘I have my two MGAs, my MFDA dealer, my GIC broker over here.’ Imagine managing that. You can’t.”

@page_break@By signing an agreement with Worldsource, Coast Capital has spurned two natural wealth-management partners: Credential Financial Inc. , the wealth-management firm that is owned by the credit union industry, and Qtrade Financial Group, a wealth-management company that works primarily with credit unions (although Qtrade remains Coast Capital’s online brokerage partner). Both are based in Vancouver

“Credential and Qtrade do a very nice job and they do a lot of work around developing their skill sets and technology,” Bushore says. “But we like the relative attractiveness of what Worldsource offered us.”

Credential remains the credit union industry’s primary provider of wealth-management services, but the loss of the Coast Capital deal is something of a setback for the firm. “We would have loved to have Coast Capital’s business. We made a quality pitch,” says Don Rolfe, outgoing president and CEO of Credential. (See page 35.) “We have an excellent offering as a mutual fund dealer, MGA, online broker, etc. Not getting the deal is not stopping us in our growth plans and pursuing opportunities.” IE