Some of Canada’s independent investment dealers are thriving after attracting top investment advisors and experiencing burgeoning client asset levels.
These firms have been able to accomplish this feat at a time when business conditions have been less than ideal. All dealers have faced rising costs associated with increasing regulation and compliance – but it’s the independents that have felt the most pain, with about 50 closing up shop during the past five years.
“It’s Darwinian,” says Ian Russell, president and chief executive of the Investment Industry Association of Canada. “And only the stronger independents have survived.”
Those firms have been able to leverage new technologies and better cater to advisors, many of whom have been seeking greater independence than the Big Six banks’ brokerage arms provide.
Furthermore, many of the bank-owned brokerages have also changed their compensation structures in a manner that have made conditions less favourable for some of their most successful, experienced advisors, says Stuart Raftus, president of Canaccord Genuity Wealth Management in Toronto.
“That’s what has spurred a lot of movement on the Street, with more and more advisors wondering if they’re going to be able to serve their clients the way they’ve grown accustomed to and not be forced to offer proprietary products,” he says.
Mr. Raftus adds that these conditions have favoured Canaccord, which recruits experienced advisors by offering them greater independence and a more open corporate architecture.
The firm’s recent growth is proof of its success. In the three years ended June 30, the independent dealer has added $8.9-billion in new client assets by recruiting 34 advisory teams, Mr. Raftus says.
During that time, the firm’s total assets under administration rose to $21.2-billion from $9.8-billion while the total number of advisory teams – including additions and natural attrition – rose to 153 from 138.
The shift among clients, many of whom are older and fall into the high-net-worth segment, is another big reason for independent dealers’ recent growth. As wealthy baby boomers began getting older, holistic wealth-management services – including retirement planning, discretionary portfolio management and tax and estate planning – became more and more important.
“The needs of baby-boomer clients changed,” says Andrew Marsh, president and CEO of Richardson GMP Ltd. in Toronto. “The only way to survive was to shift the conversation with clients more to a ‘value of advice’ platform – and that simply costs more to run.”
Early on, this change posed a challenge to independent dealers unable to bear the costs of changing business models, Mr. Marsh says. However, independents adapted to meet the needs of this demographic and the changing marketplace.
That trend has picked up steam in recent years, he adds. As the big bank-owned firms became less entrepreneurial, independents saw an opportunity to poach their dissatisfied, “best-of-the-best advisors.”
As a result, Richardson GMP also has experienced significant growth. The firm now has $30-billion in client assets, up from $11-billion in 2011. And, most recently, one of the firm’s owners, GMP Capital Inc., announced plans to sell its investment-banking business in an effort to focus exclusively on wealth management.
But it’s not only the growth of existing firms that demonstrates the recent resurgence of independent dealers. New independents have launched in recent years in an effort to win over competitors’ advisors and clients.
In 2017, the launch of Winnipeg-based Wellington-Altus Private Wealth Inc. saw Charlie Spiring, the firm’s co-founder and chairman, return to the independent space. He had spent the previous six years at National Bank Financial Ltd. after selling off his previous firm, Wellington West Holdings Inc., to the Montreal-based bank-owned dealer for $333-million in 2011.
“We saw a massive opportunity for a strong, scalable independent to walk in and own the business,” he says.
Thus far, the plan is coming to fruition. After launching with about $1-billion in client assets, Wellington-Altus has since grown to about $7-billion in client assets – and Mr. Spiring says he expects that figure to reach $10-billion soon.
As Mr. Spiring explains, the decision to sell Wellington West was that of the advisor-ownership group, not his alone. Afterward, he found the industry lacked options for experienced advisors seeking to embrace the latest technologies and an entrepreneurial culture. “There were levels of unhappiness I had not seen before.”
And Wellington-Altus – much like other successful independents – is built to capitalize on that discontent, appealing to successful advisors with large books of business worth tens or hundreds of millions of dollars.
“When you build infrastructure from ground zero, you’re afforded this wonderful luxury of designing something scalable with no legacy, history or band-aid solutions,” says Shaun Hauser, the firm’s co-founder and president.
Mr. Spiring adds that Wellington-Altus is not like independents of a decade or more ago. “In the past, most independents started out on shoestring budgets and had to fight their way out of it.”
Now, Wellington-Altus and other big independents have “an embarrassment of riches,” Mr. Spiring adds. “But those riches are not only money; it’s skill, experience, talent and, of course, opportunity in the marketplace.”