Now that Blackmont Capital Inc. has the backing of CI Financial Income Fund’s financing and brand name, the Toronto-based investment dealer is aiming to build a veteran independent advisory force and a stronger capital markets presence.

“It’s early days, but certainly the discussions that we’ve had with CI have been supportive in terms of our growth plans,” says Gerry Throop, Blackmont’s president and head of capital markets. “We recognize that CI wants to capitalize on the opportunity in this business. That’s why it made the acquisition. So I’m pretty confident that it will do what it needs to do to grow.”

In fact, Bruce Kagan, Blackmont’s executive vice president and head of wealth management, sees a distinct advantage in being owned by CI, rather than Rockwater Capital Corp., when it comes to recruiting advisors.

“A lot of advisors were worried about going to an independent firm that was owned by Rockwater,” says Kagan. “Now we’re wholly owned by CI, which is an $8-billion company.” Adding stability is CI’s relationship with insurance giant Sun Life Financial Inc., which owns 36.5% of CI. “That is something most investors would be aware of. That’s very meaningful to advisors who are interested in Blackmont.”

In February, CI outbid several suitors to take over Toronto-based Rockwater. Rockwater founders Bill Packham and Bob Schultz stepped aside and left Kagan and Throop — who will remain in their present positions once the deal closes this month — to present a plan to CI’s CEO, Bill Holland. Their modest but profitable growth plans convinced Holland.

“It was very much Rockwater’s business plan based on our budget for business in 2007, taking out some costs that might not be required as a new entity,” says Kagan of the plan he and Throop presented to Holland. The loss of a few major executive packages helped, he adds.

On the retail brokerage side, Kagan says acquisitions are certainly a possibility, but he hasn’t been told to pursue any actively.

“We might have some opportunities as time goes on,” he says. “[Holland] is always interested in value. And if there’s a deal out there that makes sense for us, we’d look at it, and I know he would be interested. But a lot of that comes down to opportunity and valuation.”

For now, it’s steady as she goes. Currently the firm’s 183 advisors manage about $10 billion. Left to grow internally, Kagan would like to see 250 advisors at the firm within the next four years, managing $20 billion in assets.

Growth targets have evidently been adjusted for new market conditions. In early 2006, when the firm still had 180 advisors, then-CEO Packham projected that he would hire 25 more advisors within a year and manage $20 billion by 2008.

Attracting new brokers to Rockwater was more difficult than Packham had anticipated, Kagan admits. In fact, Kagan was hired away from Dundee Wealth Management Inc. to help on that front and the firm has made “significant progress” in two years. Blackmont now employs fewer advisors than it did but with double the assets under administration. “With a much more diversified style of business than we had a couple of years ago,” he adds.

But for a small firm, attracting veteran brokers was always going to be hard. Advisors like the financial security of a big firm — one that won’t be sold and merged with another firm.

“For brokers, changing firms is a huge trauma,” says Throop. “It’s expensive and difficult, and it takes them out of the market for a period, which they don’t like. They don’t like to change and they certainly don’t want to do it again.”

Blackmont advisors are happy with the deal. Under CI’s wing, they will be saved from the clutches of a bank and maintain their independence. Also of importance: CI does not already own a full-service stand-alone brokerage (although subsidiary Assante Corp. has an investment dealer as part of its platform). So there will be no painful merging of technologies and systems.

For that reason, Throop calls the acquisition by CI “the best of all worlds,” and it makes his challenges easier to overcome.

Greater access to capital will allow Blackmont to lead more new issues. In turn, that could lead to more so-called “bought deals” in which the lead underwriting firms buy up large tranches of shares, if not all of them, to sell them on the secondary market at much greater profit and less risk.

@page_break@“It’s the largest and most frequently used mechanism to access new issues after the initial public offering market in Canada,” Throop explains. “So, having the capital will absolutely be a big change for us. We can be more aggressive and compete more effectively with the larger organizations.”

Recruiting and retaining top talent is also a challenge for capital markets firms. Good dealmakers bring in a greater variety of business that can help insulate a capital markets business from the cyclicality of the resources-based Canadian economy, Throop says. The more diverse the firm’s equity underwriting portfolio, the better.

“We’ve built this platform on a broad scope and the challenge for us — and we’re well positioned for it — is to make sure we continue to develop that breadth of scope and make sure we’re able to rely on the breadth when the cyclicality hits the resources sector.”

Throop won’t discuss targets for equity deals, but says the firm would like to take a greater percentage of equity sales and trading in the country. The big institutions take up to 10%. Currently, Blackmont takes about 1.8% whereas other strong independents take in up to 3%.

“We want to move into that range in fairly short order. And in the long run we want to get through that range,” Throop says.

Throop and Kagan are alumni of Midland Walwyn Capital Inc., which — until it was bought by U.S. brokerage giant Merrill Lynch & Co. Inc. in 1998 — was run by Packham and Schultz. After the purchase, Throop stayed with Merrill, running the firm’s Canadian equity arm until 2003. He took some time off in 2004, until Packham and Schultz approached him about coming to Rockwater, the firm they had formed in 2002.

For his part, Kagan had been a senior broker at Midland with a large book. Merrill asked him to take on a management role and when Merrill sold its retail business to CIBC Wood Gundy Inc., he moved too, taking a regional manager and lead wealth-management training position. Dundee Wealth approached him two years later to take a similar role there. He stayed 18 months — until he took the call from Blackmont. Now their responsibilities are shifting yet gain as they join the CI stable.

“We’ll have responsibility for overall business in the sense that we have to be more involved with infrastructure, legal and human resources, finance, and being really responsible for managing the business to the bottom line,” says Kagan.

Although Kagan and Throop are new to these roles, they’re each used to the limelight. Kagan is a marathon runner and has had a handful of impressive finishing times while Throop has a doppelganger identity as singer and guitarist with the band “Men in Suits.” IE