Echelon Wealth Partners plans merger with PI Financial to rival larger independent wealth managers

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Echelon Wealth Partners Inc. and PI Financial Corp. are planning a merger that will create one of Canada’s largest independent wealth managers in a deal that promises a fresh start for PI after its former owner was ousted in 2020 over alleged fraud.

Combining Toronto-based Echelon and Vancouver-based PI will create an investment advisory, wealth management and capital markets company that manages more than $12-billion in client assets and has greater national reach with offices across Canada. It will have about 550 employees, including 210 investment advisers, and more than 80 capital markets staff.

The companies say it will become the country’s second-largest capital markets franchise not owned by a major bank, after Canaccord Genuity Group Inc.

The deal is a merger of equals and the companies would have common ownership as of April 1, pending regulatory approvals. They would be run independently until a plan to amalgamate their operations is complete in early 2024. At that time, Echelon’s chief executive officer, David Cusson, will be CEO of the new company, and PI Financial CEO Jean-Paul Bachellerie will be president and chief operating officer. The combined company will have a new name that has not yet been chosen.

“It’s the next stage for the firm and it’s a giant leap forward, combining these two dealers,” Mr. Bachellerie said in an interview.

The merger is the latest example of consolidation in a sector that has seen shrinking numbers of independent investment managers, as competitors have joined forces to gain the scale to compete with larger wealth managers and investment dealers owned by the biggest banks. Both companies have acted as consolidators, acquiring smaller targets over the years, and by combining they will be a stronger competitor to larger independent rivals such as Canaccord, Raymond James Ltd. and Richardson Wealth Ltd.

“Neither firm needed to do anything, but we wanted to. We have an extraordinarily complementary set of organizations,” Mr. Cusson said in an interview.

Independent wealth managers have increasingly limited opportunities to grow larger through deals as the number of competitors has dwindled through waves of consolidation in Canada.

In spite of being direct competitors, the two companies have different strengths, Mr. Bachellerie said. “There’s almost no overlap between the two dealers.”

Financial terms of the transaction were not disclosed.

Equity in the new company is split evenly, and each is bringing similar levels of capital to the deal, as well as comparable assets under management, the two CEOs said.

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The deal also marks the start of a new chapter for PI, which was engulfed in controversy after its former owner Gary Ng, who acquired the company for $100-million in 2018, was forced out in 2020, then charged with fraud and money laundering and fined and banned from the industry by a regulator. At the time he acquired PI, the company managed $4.5-billion in assets.

Mr. Ng rose to prominence several years ago with a series of bold acquisitions, of which PI was the largest, describing himself as an “admiral” amassing a “fleet” of companies. But the Investment Industry Regulatory Organization of Canada (IIROC) later alleged that he had fabricated account statements to inflate his personal net worth to secure $172-million in loans to fund those deals.

After Mr. Ng’s downfall, private asset management firm R.C. Morris Capital Management Ltd. (RCM) and Miami-based alternative assets investor H.I.G. Capital Management Ltd. – both of which were major lenders to Mr. Ng – took over control of PI.

After the merger, ownership of Echelon and PI will be shared between RCM and Peerage Capital Canada Ltd., which is led by investor Miles Nadal, who has been a significant investor in Echelon since 2016, as well as by employees. H.I.G. Capital is exiting through the deal, and RCM is increasing its stake, with an undertaking to maintain its investment for several years.

In a prepared statement, RCM managing director Christopher Morris said it has had a goal to turn PI into “a truly national financial services firm,” and the merger marks “the first milestone in that effort.”