Sterling Mutuals Inc., a mutual fund dealer based in Windsor, Ont., has purchased the book of business of Foresters Securities (Canada) Inc., the Canadian mutual fund arm of the international fraternal benefits insurer.

The transaction — details were not released — closed late in May and modestly expands Sterling’s cross-country network of 130 advisors.

The deal follows Foresters’ decision last year to expand its network of insurance advisors by acquiring Unity Life of Canada. At the time, Unity operated through about 5,000 independent advisors, while Foresters had a 100-strong captive sales force. As a result of that deal, there was less justification for having a dedicated sales force.

“Ultimately, Foresters decided that to get the kind of scale it wanted in the Canadian marketplace, it would be better off growing through an acquisition,” says Byren Innes, vice president and director of NewLink Group Inc., an insurance consultancy that has done work with Foresters. “The whole dedicated Foresters Canadian sales force was a strategy that just didn’t get executed properly.”

Part of that strategy involved setting up an internal unit, Foresters Securities, to sell mutual funds. “So, when that strategy fell apart, the reason for Foresters Securities also fell apart,” Innes says.

The integration of Sterling Mutuals’ and Foresters’ mutual funds businesses will probably be eased by their pre-existing relationship. Sterling was the carrying dealer for Foresters beginning in 2004, taking care of back-office administration and compliance.

“Foresters had its own dealer but, really, it was a dealer in name only, with an outsource to Sterling almost from day one,” Innes says.

Foresters’ main distribution strategy had long been based on a branded, in-house sales force that sold Foresters products, including mutual fund offerings. But according to Innes, that approach just wasn’t working. So, the company began exploring other ways to boost distribution.

Foresters’ decision to restructure eventually led to the recent deal with Sterling. “It goes right back to where the industry is right now,” says Rocky Ieraci, Sterling’s vice president. “The career shop model is very expensive to maintain and that’s what Foresters had — career advisors. It decided to get rid of the career shop model on the insurance side and, therefore, broke everybody loose.”

The two firms began discussing the possibility of an acquisition last fall, and the deal was closed by the end of May. Along with the book of business, Sterling is taking on a 20-person sales force, which is roughly half of the original Foresters mutual fund sales team, according to Ieraci. But it was that salesforce that was the main attraction, he adds.

“That’s what we consider to be the most valuable part of the acquisition,” Ieraci says. “These people have always been in a captive arena; they’ve always been given proprietary product to sell. And as wth any captured salesforce, the price of entry for both the advisor and for the client is very expensive.”

The transferred sales team will now have access to the roughly 6,000 funds on Sterling’s book. “Instead of just being able to sell their Foresters brand insurance products or just a specific list of their mutual funds, we’ve opened that up to the whole gamut we provide,” says Ieraci. “We see a lot of potential there.”

Those former Foresters advisors are spread throughout Ontario, Alberta and British Columbia. Sterling has always operated in these three provinces, plus Manitoba. But in the past few months, Sterling has also expanded its advisor network into Saskatchewan, Nova Scotia and New Brunswick.

The Forester acquisition is all a part of what Ieraci calls a “controlled growth strategy.” Sterling has assets under management of approximately $1 billion, which includes three mergers since 2000: Tripel Investments (The Mutual Fund Exchange), Lethbridge, Alta.-based Future Focus Financial Inc. and Kelowna, B.C.-based Money Wise Financial. IE