After years of compet-ing for the same high net-worth clients and for advisors who service that much sought-after market, GMP Private Client LP and Richardson Partners Financial Ltd. have decided to join forces and combine their respective wealth-management businesses.

The two Toronto-based boutique brokerage firms announced on July 23 that they had agreed to merge and operate under the name Richardson GMP Ltd. The amalgamated firm will have assets under administration of more than $11 billion among 114 investment advisory teams, creating one of the largest independent wealth-management firms in Canada, in terms of assets.

The transaction aligns two firms with remarkably similar business plans, both focused on attracting top-producing advisors to serve the high net-worth market. Both companies rank near the top among Canadian firms in terms of assets per team of advisors, at roughly $100 million per team, and both firms are committed to continue growing their AUA.

“Our visions were very much aligned,” says Sue Dabarno, current president and CEO of Richardson Partners, who will become executive chairman of Richardson GMP. “It seemed to us much easier to grow the business if we were together.”

Although neither company was prepared to sell its wealth-management unit, both firms recognized the advantages of gaining economies of scale, says James Werry, current president and CEO of GMP, who will become CEO of Richardson GMP.

The events of the past year, says Werry, have underscored the need for scale for both firms.

“This transaction provides that scale,” he says, “[and] gives a heightened level of profitability to both businesses.”

Under the partnership agreement, GMP Capital Inc. , the Toronto-based parent company of GMP, and Richardson Financial Group, which controls Richardson Partners, will own equal stakes of 35% in Richardson GMP. The new company’s investment advisors and management team will hold the remaining 30% ownership interest.

The amalgamation is set to close in late October, and management expects the merged company to be profitable by next year. The merger is expected to result in cost savings of between $10 million and $12 million, primarily due to consolidation of the back-office platform.

Richardson Partners, which previously outsourced its back-office platform to the National Bank Correspondent Network, will transfer its advisors to the existing GMP platform.

“There’s reasonably significant savings coming from that,” Werry says.

The merged entity will have offices in 17 cities across Canada, with almost 300 capital-markets and wealth-management professionals. This network could expand quite rapidly following the integration, with leadership at both firms eager to continue expansion.

Within five years, Richardson GMP hopes to have $30 billion in AUA, Dabarno says: “We’re moving into a great growth mode, we believe.”

In fact, Richardson GMP will not wait until the merger is completed before launching an aggressive new recruitment strategy. Management believes the amalgamation will strengthen the brand, helping the merged company attract new advisors.

“Our new recruiting plan begins immediately,” says Werry.

But as Richardson GMP expands its network of advisors, the company is committed to maintaining a high standard of quality among its advisors. This is important in order for the merged entity to maintain the reputations that both GMP and Richardson Partners have built individually, suggests fund analyst Dan Hallett, president of Windsor, Ont.-based Dan Hallett and Associates Inc.

“It seems to allow Richardson Partners to tap more growth,” Hallett adds, “without really compromising the integrity of its philosophy and business plan.”

As part of the announcement, the merging firms also revealed that James Richardson & Sons Ltd., the Winnipeg-based parent company of Richardson Financial Group, is making an additional investment in GMP Capital.

By subscribing for approximately $86 million worth of common shares of GMP Capital, James Richardson & Sons will hold a stake representing, in aggregate, 12% of GMP Capital’s outstanding common shares. James Richardson & Sons will also have the right to increase its stake to a maximum of approximately 27.4% of GMP Capital’s common shares over a five-year period. IE