Richardson GMP Ltd., one of Canada’s largest independent wealth managers, is heading into 2020 with plans to double its client assets while debunking persistent rumours that the company is up for sale.
On Dec. 6, investment dealer GMP Capital Inc. closed the sale of its investment banking arm, GMP Securities, to U.S. brokerage house Stifel Financial Corp. for approximately $65-million. Since then, GMP Capital has shifted gears into the second phase of its transformation – consolidating the ownership of its wealth manager, Richardson GMP, under a single umbrella.
Currently, GMP Capital has a 33-per-cent stake in Richardson GMP, but plans to buy the remaining 67 per cent from employees and Winnipeg’s Richardson family in a stock swap.
Richardson GMP has approximately $30-billion in client assets and 170 teams of financial advisers. The stock swap will make the Richardson clan the company’s largest shareholder. The family currently holds a 24-per-cent stake in GMP Capital and 33-per-cent ownership in Richardson GMP.
Despite the family’s public commitment to the wealth manager, industry speculation has continuously surfaced about potential buyers looking to scoop up the firm.
The rumours have been rampant since a 2016 deal to sell the Richardson GMP fell through, says Sandy Riley, chief executive of Richardson Financial Group Ltd, the family’s holding company.
“It has been a frustration for us that somehow the narrative developed in the public’s mind is that we didn’t want to be in this business or we were not committed," Mr. Riley said in an interview. “We believe strongly in this business, and no – it is not for sale.”
Mr. Riley says the 2016 bank deal was something the family “was never keen on doing.”
“We had a partnership that forced us into that situation, but we never wanted to do that,” he said. “We were mightily relieved when it didn’t work out ... now we are all eager to allow the company to really blossom.”
Details of the exact value shareholders will receive for their GMP Securities and Richardson GMP stakes are not known at this time, and depends on completing valuations of the both companies.
GMP Capital CEO Kish Kapoor says a special committee of independent directors of GMP Capital are working diligently to complete this next phase. He expects RBC Capital markets – which was retained to assist in share valuation of both Richardson GMP and GMP Securities – to present its analysis “any day now.”
“From there we will move fairly quickly,” Mr. Kapoor said in a phone interview from his family home in Tanzania. “We hope to have everything completed over the next several months.”
The new branding for both GMP Capital and Richardson GMP has not yet been announced, although Mr. Kapoor says it will “obviously feature the Richardson family name quite prominently."
The brokerage is well positioned to benefit from becoming the sole operating entity under a “really strong brand” in the industry, with a cushion of capital that smaller competitors may not have, said Ian Russell, president and chief executive of the Investment Industry Association of Canada.
“They have done a really good job to build out an enhanced wealth platform to sophisticated investors," Mr. Russell said. “The firm has sufficient capital to attract new experienced advisers to the firm and is well positioned to take advantage of continued momentum of wealth markets.”
Now, after selling its capital market division, GMP Capital holds approximately $198-million in cash. Richardson GMP’s CEO Andrew Marsh says that capital will be largely used to recruit financial advisers – including “re-recruitment” bonuses to the existing advisers at the firm. In addition, the company will spend money to boost services such as tax and estate planning and technology capabilities.
Mr. Marsh said he is already forging ahead with “aggressive” recruitment that will double the company’s $30-billion in assets. He wouldn’t give a specific timeline for his target growth but said the company is already ahead of expectations. Since August, it has added seven adviser teams who manage a combined $1.1-billion in assets.
“Our No. 1 focus coming through this to really accelerate our growth," Mr. Marsh said. "And that will be accelerated through recruitment and acquisition where an opportunity might surface.”
Mr. Marsh has had several “high level” discussions with other investment dealers about possible acquisitions, but has held off on any “serious talks” until the second part of the transaction has been finalized.
“We are keeping our powder dry a bit to get ourselves in position,” he said. “As rumours start to fall away, our momentum has begun to quickly turn.”