Financial services giant Desjardins Group has agreed to buy Guardian Capital Group Ltd.’s GCG-T insurance and wealth management operations, tripling its adviser network to more than 7,000 professionals across Canada.
Desjardins – the second largest property and causality insurer in the country – announced on Wednesday it will pay $750-million to acquire three separate operations from Guardian Capital: IDC Worldsource Insurance Network Inc., a life-insurance advisory business; mutual-fund dealer Worldsource Financial Management Inc.; and Worldsource Securities Inc., a securities licensed investment company.
Following the deal, which is expected to close in the first quarter of 2023, Montreal-based Desjardins will have more than $2-billion in life insurance premiums and $43-billion in assets in retail investment funds. Those assets include segregated funds – a type of insurance contract that allows investors to participate in markets.
All three of the Guardian companies will continue to operate as stand-alone businesses, with their current employees retained.
The deal will add more than 5,000 independent insurance and investment advisers to Desjardins’s existing 2,000 advisers, who largely service the Canadian retail market.
Desjardins chief executive officer Guy Cormier has been hunting for deals since 2015 when he announced his plan to boost the company’s presence outside of Quebec. In 2015, Desjardins acquired the Canadian operations of property and casualty insurer State Farm. Two years later, it entered into a partnership with five provincial credit unions and CUMIS Group Ltd. to create Aviso Wealth, which manages $100-billion in assets.
“We are always looking for opportunities to increase our footprint outside Quebec and diversify revenues outside Quebec in specific areas like property and casualty insurance, life and health insurance and wealth management, especially in the province of Ontario,” Mr. Cormier said in an interview with The Globe on Wednesday.
Over the past decade, the wealth management industry has been under pressure as rising regulatory costs has spurred a wave of consolidation among smaller companies. Today, there are about 157 independent brokerage firms in Canada, according to 2021 data provided by the Investment Industry Association of Canada. That’s down from about 200 firms that were operating five years ago.
“The costs to run these operations are significant – and you also need to be investing in technology, which is constantly changing,” Denis Dubois, Desjardins’s head of wealth management and life insurance, said in an interview. “Now, with the large addition of the advisers we’re getting, it’s a scale where it makes even more sense to be making big investments.”
For Guardian, the sale was not brought on by rising fees. Rather, it was the persistence of Desjardins’s leadership team that finally caught the attention of Guardian CEO George Mavroudis, who for years has told interested parties that his businesses were not for sale.
“Distribution [networks have] been all the rage over the last few years and we know firsthand how hard it is to build a successful platform. Our businesses have flourished over the years – we were not out talking to the market looking to sell,” Mr. Mavroudis said in an interview.
“Everyone in the industry is under pressure to gain scale – including us – but this was an opportunity that would keep these companies intact with their current leadership, and them alive in the independent channel.”
Managing about $48-billion in assets, Guardian Capital has largely been focused on institutional clients including pension funds, foundations and endowments. More recently, it has begun to pivot into asset management opportunities for retail investors – including launching exchange-traded funds in 2020.
Mr. Mavroudis says the deal has “unlocked value for Guardian’s shareholders” but he has not yet decided on where he will allocate the excess capital just added to the balance sheet.
“We already identified having a lot of capital before this transaction and we see a lot of opportunities to invest in our asset-management business – both geographically and across different client segments,” he added.
“It’s pretty exciting to have that flexibility at a time when capital is becoming a little bit more scarce for people. For us to have this financial flexibility, I think could present us enormous opportunities.”
Editor’s note: An earlier version of this online article stated Aviso manages $1-billion in assets. The company manages $100-billion.