The head of the Bank of Nova Scotia’s wealth management arm says that he predicts more mergers and acquisitions will happen in the Canadian brokerage industry, but hopes the trend will not result in all mid-size and small shops disappearing.
“I actually see more consolidation occurring,” says Chris Hodgson, group head of global wealth management and insurance at Scotiabank, in an interview. “If you’re asking if that’s a good thing, I would say that it’s important for clients to have choice. I think there is really a role for the independent advisor.”
The domestic brokerage industry has seen a wave of consolidation over the last several years, with many independent shops and boutique players either snapped up by the banks, or merging into bigger units. Smaller dealers have been struggling with the high costs associated with keeping up with compliance and technology, and attracting top talent; volatile markets; and skittish clients drawn to the perceived security of the big bank brokerages, among other issues.
In September, Richardson GMP Ltd. acquired Macquarie Private Wealth Inc., both based in Toronto, creating the country’s largest independent dealer. Two years ago, Montreal-based National Bank Financial bought both Winnipeg-based Wellington West Financial and Toronto-based HSBC Securities (Canada) Inc.
Scotiabank itself has built up its wealth management business in recent years by making a number of major acquisitions, including purchasing DundeeWealth Inc. in 2011, which it has committed to run as a standalone independent dealer apart from its ScotiaMcLeod Inc. full-service channel. DundeeWealth will be renamed HollisWealth Inc. in November.
“Fee-based business is really 24/7, it’s something we generate 365 days a year,” said Hodgson in a presentation to the 2013 Investment Funds Institute of Canada Annual Leadership conference in Toronto. “It balances off all of our lending businesses and the other business we have in the banking buisness around the world, it doesn’t require a lot of capital, and it is a growing business.”
However, Scotiabank has indicated that it is focusing on building its wealth business organically, and has little interest in acquiring another Canadian brokerage.
A healthy independent advisory network, Hodgson says, is good for clients and good for competition, pushing even big bank brokerages to do better.
Speaking at the IFIC Leadership Conference on Wednesday in Toronto, Hodgson said he would like to see a streamlined regulatory process to allow smaller players a chance to thrive, providing competition for the industry, and choice to clients.
Hodgson also said he expects that there will be a place in the market for good independent asset management and brokerage firms.
“I think we’re going to find that it’s the strongest, smaller niche ones that really will survive in the future,” said Hodgson at the conference.
With files from Fiona Collie.
For more about Chris Hodgson’s strategy to grow Scotiabank’s wealth management and insurance business, see Scotiabank targets HNW, mass affluent in the mid-October issue of Investment Executive.