MGA makes another acquisition

“There is a lot of consolidation going on in the industry today,” says Hamilton. “And every MGA out there is thinking, ‘Are we buying or are we selling?’ And we are definitely buying.”

The two MGAs have signed letters of intent to join forces, with the transaction expected to close by Oct. 31. Under the deal, Financial Horizons will purchase 100% of the shares of Audis Canada in exchange for cash and shares in Financial Horizons’ parent company, Toronto-based Granite Global Solutions Inc.

The acquisition of Audis Canada, which has offices in Winnipeg and Calgary, will add more than 1,000 independent financial and insurance advisors to the 4,500 advisors at Financial Horizons. Audis Canada’s management team, office locations and staff will remain unchanged as they are absorbed into Financial Horizons. Dan Powell, president of Audis Canada, will take on the role as president of Financial Horizons’ Western Canada division.

GREATER ACCESS

Powell and Hamilton, who have known each other for more than 15 years, began having discussions about the possibility of a merger three years ago.

“There are many factors that go into a deal like this,” Hamilton says. “While there is a lot of regulation coming down right now, that wasn’t an issue for Dan and myself. But when you look at the big picture, it is always easier to combine resources and have a synergy of contracts with life [insurance] companies. If we pool our resources, in terms of production, we can provide better compensation, better bonuses, better marketing tools and enhance many of the services to all our brokers.”

Audis Canada advisors will gain access to Financial Horizons’ training program for new advisors, which is designed for those with less than five years of experience in the industry. Along with community college-level courses and mentorship, the program helps to connect rookie advisors with older advisors who may be looking for the succession-planning options of either selling their books of business or creating a partnership.

But one of the main perks for Audis Canada advisors will be greater access to supplier companies _ one of the major factors in today’s MGA consolidation trend. Advisors are starting to demand that MGAs supply a more varied product shelf, and insurers are now looking for MGAs with scale.

“This type of deal is significant for a firm like Financial Horizons, which obviously wants to be a national player,” says Rick Forchuk, vice president of retail insurance distribution with Kingston, Ont.- based Empire Life Insurance Co. “I wouldn’t say it’s there yet, but it is certainly on its way with this recent deal that puts the firm on the Western [Canada] map.”

These types of acquisitions are becoming a natural progression in today’s MGA channel, Forchuk adds, and they certainly get the attention of the insurance carriers.

“As MGAs get larger,” says Forchuk, “they gain more resources and can then provide consumers with greater choice, spend more money on compliance, pay closer attention to privacy issues and to policyholder service. These are all areas that, for many MGAs, are a big struggle _ especially if they are smaller because they just don’t have enough hands on deck.”

TARGET: 10,000 ADVISORS

Hamilton’s growth strategy for Financial Horizons is far from over. He says he will continue to look for well-run organizations until he reaches somewhere in the range of 10,000 advisors _ a target he is expecting to hit by 2014.

“I think by that point, we will have had enough of merging cultures and merging business models from the different acquisitions,” Hamilton says. “[Once we get there, ] we will want to focus more on seasoning what we have, getting all the kinks out and focusing on our goal of becoming a major marketing organization.”

Financial Horizons has come a long way since Hamilton first opened its doors in 1990 as a financial planning firm. In 1999, the firm switched gears and became an MGA, with only four employees and 100 advisors. Over the subsequent decade, Hamilton executed an aggressive growth strategy, acquiring a number of smaller MGAs. Then, earlier this year, the firm acquired 1,800 advisors through one of its biggest deals _ with Sherbrooke, Que.- based Force Financière Excel Inc. The cost of that acquisition was undisclosed, but it enabled Financial Horizons to expand into the Quebec market as well as retain the services of James McMahon, former owner and president of Excel, who took on the role of president of Financial Horizons’ Quebec division.

Upon the completion of the Audis Canada deal, Financial Horizons will have more than $4.2 billion in segregated fund assets under management, more than $300 million of life premiums in force and will be operating three divisions in Canada: Ontario/Atlantic; Quebec; and Western Canada.

Hamilton says he already has another deal on the table and that several other MGAs have approached him with interest. “Today’s environment could make things a bit more difficult for some of the smaller organizations,” he says. “And the idea of aligning themselves with a larger MGA could make things easier for them while allowing them to maintain their independence.”

© 2012 Investment Executive. All rights reserved.