Dundee sells retail brokerage arm to Euro Pacific

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Dundee Securities Ltd. is selling its retail brokerage arm as it plans to shift focus to its alternative asset management and private investment counsel lines of business.

Dundee Securities, wholly owned by Toronto holding company Dundee Corp., said Thursday that Dundee Goodman Private Wealth will be acquired by Euro Pacific Canada in a deal that will see $3.5-billion in client assets move from Dundee to Euro Pacific.

"If you chase two rabbits, then you will likely see both of them escape, and while we love the retail brokerage channel, we decided we needed to focus on another segment of our business – the alternative asset management side – where we believe there is a lot of future potential," said Richard McIntyre, executive vice-president and head of Dundee Global Investment Management.

When the deal closes, Euro Pacific will increase its overall assets under administration to $4.2-billion and triple its overall adviser head count as 78 advisers move over from Dundee.

The sale price was not disclosed but Dundee says the transaction will generate $40-million in liquidity and cost savings.

In December, The Globe and Mail reported that a number of companies had recently kicked the tires at Dundee Goodman. At the time, Dundee said it was not "shopping" the asset.

The pace of mergers and acquisitions in the retail brokerage sector has accelerated of late, driven mostly by bigger shops acquiring smaller firms that have been hit by higher costs and increased competition from the larger independents and the brokerage arms of the big banks.

Dundee Corp. had a difficult year in 2015 – knee-deep in unprofitable resource investments in the midst of a punishing bear market – and will welcome a cash infusion.

Dundee Goodman has struggled at times to keep its top performers. In August, four Dundee brokers with a combined book of business in excess of $1-billion jumped ship to industry heavyweight RBC Dominion Securities Inc. The unit booked a loss of $4.3-million in the quarter that ended on Sept. 30.

For some Dundee advisers, this could be the fifth firm they have seen in 10 years. The bulk of the 78 advisers only joined the firm two years ago when Dundee Private Goodman purchased 60 investment advisers from Richardson GMP for $15-million.

It was during this time that Richardson GMP acquired 185 advisers from Macquarie Private Wealth Inc., which had entered the industry in 2009 when it purchased wealth management firm Blackmont Capital from CI Financial Corp. But less than four years later, the Australian company decided to exit the Canadian market.

Upon completion of the deal, Richardson was left with a segment of 60 investment advisers it did not want to retain and put the block up for sale.

At the time of the acquisition, the group of 60 advisers managed a combined value of approximately $2-billion, and Ned Goodman, the founder of Dundee Corp., had said the Macquarie deal "marked a significant step forward in Dundee Corporation's strategic plan to build its private wealth and capital markets divisions into first-class entities."

But with volatile market conditions – and the potential to unlock capital – the company's strategy changed over time, Mr. McIntyre said.

"This was a strategic move where we can focus on our asset management side as well as continue to build our investment counselling business," he said. "The independent channel is one that is very exciting but it also ties up capital and sometimes that is a hard business to make work."