The recently completed merger of Meritas Financial Inc. of Kitchener, Ont., with Vancouver-based Qtrade Management Inc. will result in a broader product offering for Qtrade and a stronger national presence for Meritas and its family of socially responsible investing mutual funds.

The new combined entity, which will see the Meritas brand and line of SRI mutual funds remain intact, is under the umbrella of the Qtrade Financial Group, a multi-pronged wealth-management organization with $4.5 billion in assets under administration and about $370 million in assets under management, primarily in mutual funds. Almost $300 million of the AUM are in the Meritas line of seven mutual funds and its two fund-of-funds portfolios. Qtrade also has six QFM funds, but that line is relatively small and includes no SRI offerings, which are the raison d’être for Meritas.

The move allows Qtrade to enhance its fund selection significantly and add a dash of SRI to its fund-of-funds portfolios. Products are offered through Qtrade’s various distribution channels, which include discount and full-service brokerages as well as 160 credit unions across Canada.

“SRI funds will be an important part of Qtrade’s managed-portfolio solutions,” says Scott Gibner, CEO of Qtrade. “We intend to create a dial — when reps are sitting in front of a customer, they will be able to dial up or down the SRI component according to client’s wishes. As people become more socially conscious, SRI is becoming a bigger part of their portfolios, and we think it is a great component to our offering.”

For Meritas, whose strength has been in Ontario, the deal expands its regional reach with Qtrade’s offices in Calgary and Vancouver.

“The deal is good for the economic viability of Meritas, which has a relatively small asset base,” says Rudy Luukko, investment funds editor with Morningstar Canada in Toronto. “As part of a larger organization, it can take advantage of administrative efficiencies and also tap into the marketing strength of Qtrade’s regional offices. The acquisition gives Qtrade a distinct product line that will help distinguish it from larger competitors and gives it a bigger base to build upon.”

Luukko adds that instead of competing head to head with the fund industry giants by trying to be all things to all investors, it makes sense for Qtrade to pursue a niche strategy at this stage of its development.

“It makes sense,” he says, “for a small firm to specialize and build a distinct presence.”

Gary Hawton, president of Meritas, says he is particularly pleased about having a presence across Canada, and is hiring four new sales representatives.

“Previously, our sales effort was located in Ontario and we had to fly to the West Coast once a quarter,” says Hawton. “Now, we will have a number of people on the ground, and there will be a significant ramping-up of the sales effort. We like becoming a national [firm] overnight.”

Hawton says conversations around SRI are happening much more frequently than five or 10 years ago as clients become more conscious of environmental sustainability and other social issues. He believes it behooves financial advisors to introduce the subject in either initial client meetings or during portfolio reviews.

“If the advisor is not talking about SRI, the client relationship could be at risk, as another advisor who is prospecting may be introducing the topic,” Hawton says. “Clients could be interested, and may not even know their advisor offers the product. As an advisor, you don’t want to be put on the defensive because you didn’t tell clients the product was available.”

Hawton is expecting growth momentum to pick up, and that “we’ll be talking billions, not millions” as far as the level of Meritas’ AUM in five years. In the nine years since Meritas funds were launched, there have been only two months that showed net redemptions, he says. As AUM grows, he adds, Meritas’ influence in promoting sustainable corporate practices can only increase.

“We use our ownership position in companies to talk to them about areas in which they could do better,” Hawton says. “We’ve done a lot with a small asset base, and will be able to do even more with a larger asset base. We frequently have conversations about areas in which a company’s reputation may be at risk by not being a leader on a social, environmental or moral issue.”