Quadrus investment Services Ltd., the mutual fund dealership for both Great-West Life Assurance Co. and London Life Insurance Co., plans to keep expanding its roster of advisors, with an eye to quality of talent rather than sheer numbers.

The Winnipeg-based Quadrus already has 3,700 licensed advisors, including 3,300 who fly London Life’s Freedom 55 flag. Aggressive recruiting plans underway mean the number of advisors will almost certainly increase, possibly quite substantially.

Chuck Grace, Quadrus’s vice president and chief operating officer, says he has no interest in trumpeting the number of newcomers, just their abilities. “Our goal is not specifically to be the biggest. Our goal is to serve our clients, no matter what.

“I don’t know if we’d be well served by having 20,000 advisors anyway,” he says. “We want to make sure we have the right advisors: financial planners interested in looking after their clients’ best interests, [focused on] growing their practices and aligned with what we’re trying to build. So, we don’t have specific targets in mind.”

Grace says Investors Group Inc. , Great-West and London Life’s sister company, is its closest competitor in the advice-based channel, with 3,668 advisors at the end of 2005, an increase of more than 14% in 18 months.

The goal is to expand distribution at both London Life and Great-West, so the strategies will be entirely different, he says. The channel at London Life is all about recruiting new people into the industry, investing in their development and turning them into mature planners. Great-West, meanwhile, is focused on enticing veteran producers who have between five and 30 years of experience to cross the street.

There is also a group of advisors who are affiliated with Great-West but whose mutual fund licences are sponsored elsewhere. They will continue to be targeted by Quadrus, Grace says.

“We’ve been slowly earning their business over the past couple of years,” he says. “They had independent contracts, so they had to make a conscious decision to leave that dealership and join ours. We’ve recruited more than 300 advisors using this method.”

The growth may keep happening. Grace says Quadrus’s parent company, Great-West Lifeco Inc. , is looking to build on its purchase earlier this year of the $400-million mutual fund business from iForum Financial Services Inc. in Montreal. The move netted 70 independent advisors for Quadrus and increased its distribution channel in Quebec by more than 30%.

“When the opportunities present themselves, we’ll look at them. We do intend to make strategic acquisitions of other blocks of business when it fits our strategy and is good for both parties,” Grace says.

Quadrus was created five years ago. Its introduction marked the first foray into mutual funds for Canada’s largest insurance company. The move came 15 months after London Life paved the way with LFC Group of Funds, which was subsequently rebranded as Quadrus Group of Funds.

Grace notes, however, that Quadrus has no affiliation with Canada Life Assurance Co. , the sister company to Great-West and London Life under the Lifeco umbrella.

Quadrus’s product shelf has more than 3,000 individual mutual funds from more than 84 manufacturers. In addition to its proprietary funds, names such as Mackenzie Financial Corp., Fidelity Investments Canada Ltd., AIC Ltd., AGF Management Ltd. and AIM Funds Management Inc. figure prominently.

Forty-two of the funds are Quadrus’s own, Grace says, and they represent $1.3 billion of assets under management. The shelf also includes GICs from about 20 providers, including the Big Five banks, and principal-protected notes for its Quebec and Ontario representatives.

Grace says Quadrus is quickly approaching $3.5 billion in assets under administration, up from $700 million at its inception. Although the vast majority of the people on the ground carry the Freedom 55 banner, the asset breakdown is virtually 50/50.

“Great-West folks have been with Quadrus for a relatively short period of time. Most were licensed elsewhere for quite a few years, and they had the assets and business practices built up before they joined us,” he says.

Great-West has two forms of contracts that it can offer advisors: the Gold Key contract or the brokerage contract.

With the former, if Great-West gets a certain percentage of an advisor’s business, it can offer other value-added services, such as the support of resource centres, product support, tax experience and case-management expertise.

@page_break@“Freedom 55 is an exclusive contract,” Grace says. “Gold Key is very independent, and Canada Life is even more so.”

Quadrus has a five-year plan that sets out objectives for all reps each year. The company has only a sliver of Canada’s mutual fund pie, but that means there is no place to go but up, Grace says.

“We want to meet, first and foremost, the needs of Canadians. To the extent we believe Canadians are well served by professional managed funds, we want to have our fair share,” he says. “And, by bringing on high-quality advisors, our asset base will naturally grow over time. If you have a truly market-driven strategy and you are meeting the needs of Canadians, you will attract a large asset base.”

There are two factors skewing the numbers from the Freedom 55 perspective, he adds. First, London Life is in the business of recruiting rookie advisors and training them. In fact, it has 600 to 700 such advisors in any given year. Second, it is relatively new to the mutual fund side, with Great-West having transitioned before London Life did from offering pure life insurance products to a more balanced shelf.

“Great-West probably has a five- to 10-year lead on investment funds. Freedom 55 really only took to investment funds six or seven years ago, and it’s only had the dealership for five years,” he says.

Grace says Quadrus has a trio of mandates that haven’t changed since its inception. The first is to ensure that advisors bring appropriate solutions to the table when meeting with Canadians. The second is to make sure advisors are competent and confident when presenting a mutual fund solution, something he says is a never-ending process that requires constant investment. The third is to expand its asset base while remaining financially prudent and stable.

Quadrus has succeeded on all fronts, Grace says: “We’ve been delivering compound annual growth rates on assets under administration of more than 30% for the past five years. The past two years have seen more than 50%. Five years into it, our advisors are feeling more confident in speaking about mutual funds. The market has been friendly the past few years, and we’ve been successful in recruiting advisors.”

In terms of compensation, Grace says, Quadrus is no different than most mutual fund companies in Canada that use the grid system. He says its average compensation is 76% of gross dealership commissions. “You have to keep in mind there is a whole group of [Freedom 55] rookies in there. But, if we generalized, it goes from the mid-60s to the low 80s,” he says.

Most Quadrus advisors are generalists and their strategy is to talk to their clients about their overall financial requirements, he says: “We don’t tend to lead with one product over another. It starts with the client, his or her needs and plans for the future, and we come to the table with whatever solution is appropriate at the time. Some advisors sell one [product] over the other because of personal preference. That is fair game but, generally speaking, they’re selling pretty much everything.”

Grace says Freedom 55 rookies are trained in both insurance and mutual funds, but inside the dealership there are people who are primarily life insurance experts with mutual fund books, and others who are wealth-management experts with modest life practices. “And everything else between,” he says.

The firm’s advisors are the public face of Quadrus, he says. Freedom 55 advisors present themselves as such, offering a broad suite of solutions, such as disability and life insurance, and segregated funds and mutual funds. When mutual funds are the appropriate option, both Freedom 55 and Great-West advisors are required to introduce the Quadrus brand.

“It’s securities law. You have to mention the dealership. It has to be equally prominent with signage, and you need a separate business card. It has to be perfectly clear who is facilitating the mutual fund trade,” says Grace. “In this regulatory environment, you have to disclose your mutual fund dealer. In our world, the insurance and mutual fund brands are two distinct things.” IE