Raymond James Financial Inc. agreed to acquire Canadian private-wealth manager MacDougall MacDougall & MacTier Inc., the latest in a series of takeovers by the U.S. financial services firm.Getty Images/iStockphoto
The Canadian arm of Raymond James Ltd., one of the few sizable independently owned financial-services firms left standing, will extend its recent expansion by acquiring asset manager MacDougall MacDougall & MacTier Inc.
The acquisition will add $6-billion in assets under administration to Raymond James's businesses, bringing its total to $33-billion. It will also help the United States-based investment dealer grow in Quebec, where 3Macs – as the target is known on Bay Street – is based.
Raymond James's Canadian arm gets to bulk up its most prominent unit through the deal. "Nothing will ever be larger than our wealth business," chief executive officer Paul Allison said in an interview.
The news that an independent asset manager is being acquired by another independently owned dealer, and not a bank, sends a message to all financial services firms. Independents have increasingly struggled against the big banks over the past decade, particularly in wealth management and more recently in capital markets – the latter issue compounded by the pain of the commodity rout. Many of the country's boutique dealers have been shuttered or absorbed in acquisitions amid the chaos, leaving fewer independent dealers in the ecosystem.
Within wealth management, independents have wrestled with how to attract wealthier clients who will pay higher fees for specialized management, and also with the shift toward digital technologies and lower-cost funds that retail customers are adopting.
To adjust, more firms are offering exchange-traded funds, and some are investing in so-called "robo-advisers" that use Internet platforms to help clients manage their investments. But there will be yet another hurdle as regulatory changes that require investment firms to disclose greater transparency on fees as well as fund performance hit the market in July.
Even the comparatively strong bank-owned brokers have been making some changes to adapt to this new environment. In April, Bank of Nova Scotia cut 7 per cent of its staff in its ScotiaMcLeod retail adviser network, with a strategy to retain only its top-end brokers.
In this environment, 3Macs started a strategic review roughly one year ago, and the board decided to run a sale process to see what options were available, CEO Randy Ambrosie said in an interview.
Early on, the company was open to all options, but Mr. Ambrosie said there was always a feeling it would end up this way. "We didn't start saying it's going to be Raymond James," he explained. But "when we started looking through these [criteria] lenses we created, I had a funny feeling it was going to be Raymond James."
By joining an independent dealer, 3Macs' advisers can remain product agnostic. Lately, bank-owned dealers have developed more of their own proprietary funds and portfolio products that advisers are encouraged to offer their clients. "Our people are so proud of that – that when a client comes in, we don't have something to sell them," Mr. Ambrosie said.
Scale also matters more than ever for a shop such as 3Macs, with bigger firms able to spread mounting technology and compliance costs over more assets under management.
For Raymond James, the deal was helped by the long-standing relationship between the two firms. "If I go back to when I started here, one of my first calls was to Tim Price," who is 3Macs' chairman, Mr. Allison explained. That tie dovetailed with the recent Canadian strategy. "Our next wave of growth has to be in Quebec," he added.
3Macs has a storied history in Canada and five generations of the MacDougall family have moved through the business, which was founded in Montreal in 1849 – the city's first stock broking firm.
The acquisition follows recent deals by Raymond James to acquire Allied Irish Banks' Canadian assets, which helped establish a lending platform here, and the purchase of Cougar Global Investors, which provided an ETF business.
Raymond James has also been bulking up its capital markets business, adding senior bankers in sectors such as energy, financial services, and mergers and acquisitions. "This is a great time to be building a business because it's a troubling time in the marketplace," Mr. Allison said. The firm's strategy: "Don't waste a good crisis."
A purchase price for the 3Macs deal wasn't disclosed, but Mr. Allison said the metrics were "market-based." Asset managers are typically acquired for between 1 to 3 per cent of assets under management, likely putting the purchase price around $120-million.
Tim Kiladze