Independent wealth manger Wellington-Altus Financial Inc. has raised $40-million in new financing, as it continues an aggressive recruitment strategy intended to attract high-end adviser teams from competitors.
The Winnipeg-based investment firm – which manages about $28-billion in assets – announced on Thursday that Cynosure Group has injected $40-million into the company, in a second-round growth equity investment. This brings Cynosure’s minority stake in Wellington-Altus to 15 per cent.
In 2021, Cynosure joined with Jessiman Family Investment to put $85-million into Wellington-Altus, and received board seats. Jessiman invested $45-million, and Cynosure added $40-million.
Almost half of the $85-million was used for recruitment bonuses to entice adviser teams to join Wellington-Altus. The move added almost $9-billion in assets.
This new injection of cash will enable Wellington-Altus to bring more adviser teams into the fold, the company’s founder and chief executive, Shaun Hauser, said in an interview.
“Reflecting on the last round of private equity investment, we really blew past our expectations as far as how fast we would need the cash to acquire adviser teams, as well as the cash needed to redeploy back into our business model,” he said. “We have a recipe that’s been very successful and we just need to keep throwing gas on the fire to keep this momentum going.”
Shelling out large recruitment bonuses is a long-standing practice within Canada’s wealth management industry. It is used to attract top talent, typically advisers who manage clients with more than $1-million each in investable assets.
But as the average age of advisers continues to rise and baby boomers prepare to retire, investment dealers – including Canada’s big banks – are becoming much more aggressive in what they are willing to pay to win seasoned books of business.
Earlier this year, Wellington-Altus chair Charlie Spiring told The Globe and Mail that while recruitment bonuses were necessary to bridge advisers’ income as they transitioned to new firms, some bonuses being offered by competitors were moving north of $5-million in cash, an amount that was difficult to match.
With the help of private equity investors, Mr. Spiring said, Wellington-Altus has been able to remain at the negotiating table by offering advisers both cash and equity stakes in the company. The latter is a perk not offered by bank-owned dealers. (Currently, more than 70 per cent of Wellington shares are held by adviser partners.)
Andrew Braithwaite, managing director of Cynosure, said he believes Canada is “in the early stages of a very long-term adviser independence trend.”
It is a trend similar, he said, to what has been happening in the United States over the past 20 years, where financial advisers at some of the largest full-service brokerages have been shifting their businesses to independent wealth managers.
“The big difference with Canada is there’s a much greater concentration of assets within the large institutions, and so you’ve got more to go after, from an independent standpoint,” Mr. Braithewaite said. We believe this will be a much bigger trend than what’s played out in the U.S., and what they have built will allow them to capture this tremendous market opportunity for years to come.”
Cynosure Group is an independent alternative asset manager and portfolio adviser that makes long-term investments on behalf of families, foundations and institutions. The group looks at alternative asset classes that include profitable small- to mid-sized companies.
Mr. Hauser said Wellington-Altus has a “medium-term goal” of hitting $50-billion in assets under management in the next several years. Recruitment of advisers and portfolio managers will be essential to that growth.
“Fiscal 2023 has been our second best year in recruitment, and it got very close to easily being our best year with just under $5-billion in assets,” he said. “We think that momentum will bleed into fiscal 2024.”