George Karkoulas, who heads the new independent advisor channel at Vancouver-based Canaccord Capital Corp., regards a financial advisor’s right to run his or her own business to be almost an article of faith.

“I believe in the independent channel; I believe in the advisor owning the relationship with the client. Quite frankly, I believe in small business,” says Karkoulas, who in June was named senior vice president and head of independent financial management at Canaccord, after seven years of heading a similar advisor channel for Toronto-based Raymond James Ltd.

Based in Toronto, Karkoulas is still in the early stages of building out the new platform, which he says will complement Canaccord’s existing channel of branch-based advisors. As of June 30, the brokerage had 335 advisory teams and $10.3 billion in assets under administration in its branch network. (The brokerage has aggressive plans to add advisors to this channel as well as to the new independent one.)

Canaccord is in the process of seeking regulatory approval for the independent channel, which the firm hopes it will be able to obtain, barring unforeseen difficulties, in the coming weeks.

“We’re looking for established, successful advisors with sound client bases and great relationships with their clients,” says Karkoulas, describing the ideal candidates for Canaccord’s independent channel. Those advisors would also have books of at least $30 million in AUA and $350,000 in revenue — although, Karkoulas adds, there might be some flexibility in those benchmarks, depending on certain factors, including where the advi-sor’s business is located.

In the independent advisor channel, advisors will receive back-office services from the brokerage, but it is the advisor who is responsible for most of the expenses of running the business, including real estate, technology hardware and staffing. And it’s the advisor who assumes most of the business risk. In return, the independent advisors will enjoy a higher rate of compensation than do the branch-based advisors, and will have almost complete autonomy to run their businesses, as long as they adhere to regulatory guidelines.

“It’s not for everyone,” Karkoulas says. “In my own view, of all the registrants in the industry, maybe 15% are suited to be independent agents, not employees. You have to have the appetite, the desire and the entrepreneurial mindset to want to travel down this path.”

Karkoulas says he plans to have four independent advisor offices in full operation by next March 31, the end of Canaccord’s 2010 fiscal year. Three years after that, he envisions 45 offices managing a total of almost $3 billion in AUA and producing $30 million in revenue. And, in the fifth year, Karkoulas hopes to have 75 offices managing $5.5 billion in AUA with $60 million in production.

The independent advisor channel will allow Canaccord to expand its distribution capability across the country, Karkoulas says, including into markets it may have had difficulty entering in the past — particularly those in smaller communities.

“You need to have a substantial amount of revenue that’s guaranteed on an ongoing basis to undertake the financial challenge [of opening a branch in a small community],” he says. But with the new platform, he adds, an advisor in a small community can take on the risk, and reap the potential reward, of operating his or her own business while being supported by the back office of the brokerage.

In developing an independent advisory base, Canaccord enters a field already occupied by a number of other financial services firms — including Raymond James and National Bank of Canada’s correspondent network, among others — but also a field that offers the Vancouver-based Canaccord the opportunity to grow while making the most out of the firm’s existing operational and support infrastructure.

“For Canaccord, it represents an opportunity to add incremental revenues without, presumably, adding significantly to incremental costs,” says John Aiken, an analyst with Dundee Securities Corp. in Toronto. “To me, the strategy makes a ton of sense.”

The fact that Canaccord has chosen now to launch an independent advisory channel also appears to make sense, says Dan Richards, an industry consultant and president of Strategic Imperatives Corp. in Toronto.

The economic downturn has given rise to two diametrically opposed trends, he says. One sees advisors seeking out the perceived stability of bank-owned brokerages; the other sees advisors moving toward the autonomy of the independent advisory channel.

@page_break@“[This latter group of] advisors are saying, ‘I didn’t come into this business to be an employee, but I’m increasingly being pressured or constrained by head office as to how to operate, and that’s not how I believe I can serve my clients best’,” Richards says. Such advi-sors may be drawn to independent advisory platforms, such as the one Canaccord is launching.

At Canaccord, the new independent channel and the existing branch advisor channel will operate under the umbrella of private-client services, headed by John Rothwell, who joined the firm in October after five years as president of Winnipeg-based Wellington West Capital Corp.

The branch advisory channel is headed by Oded Orgil, senior vice president and director of corporate development, who himself joined Canaccord only in January.

Peter Bailey, who formerly served as president and CEO of Raymond James but left prior to Karkoulas’ departure, has joined Canaccord as a consultant and will be aiding the executive team.

Canaccord is still in the midst of reinventing itself after a turbulent two years that had seen the brokerage hit, in succession, by the asset-backed commercial paper crisis, a meltdown in equities markets and the lingering economic downturn. In fiscal 2009, which ended March 31, Canaccord booked a loss of $1.4 million — down from a profit of $79.3 million in fiscal 2008. In the first quarter of fiscal 2010 (ended June 30), Canaccord posted a profit of $9.1 million, down by 44.6% from the same period last year.

Last fall, the firm instituted a number of cost-cutting measures, including laying off 150 staff members and implementing salary reductions for executives. This spring, Canaccord parted ways with 75 of its lowest-producing advisors as part of its long-term plan to revitalize its private-client services.

Karkoulas, an industry veteran, believes he’ll be able to attract strong, entrepreneurial advisors to Canaccord. He says he intends to travel to a number of places around the country this fall, meeting with advisors. He adds that some advi-sors, interested in the new platform, have already contacted him.

For Karkoulas, his new role at Canaccord represents another chance to help advisors build their own small businesses.

“I can’t tell you how passionate and excited I am about building the independent platform here,” Karkoulas says, “and [for] the opportunity, not only for me but for the many advisors who will take the time to understand what we have to offer them.” IE