Financial planning was once a quaint, folksy business offered through legions of mom-and-pop storefront firms. But times got tough, firms began selling out and many of the old-time independent planners disappeared.
The grassroots business has been replaced in recent years by a consolidated industry dominated by a couple of giant players and a handful of tiny stragglers. Assante Corp. of Winnipeg began the consolidation trend a few years ago and rapidly snapped up 11 rivals, culminating with the purchase of Financial Concept Group from Merrill Lynch Canada Inc. Assante still buys firms, but it has moved beyond the Canadian planning business and is focusing on building a presence in sports and entertainment acquisitions in the U.S.
When the dust settled, Assante had amassed the biggest sales force and asset base in the business, 1,700 reps and about $23 billion under management, only to be quickly usurped by Montreal-based BRM Capital Corp.
In just 12 months, BRM has built a firm with about 4,000 reps and $17 billion under management. It started out with a stake in Vancouver’s Great Pacific Management Inc. After Montreal’s Cartier Mutual Funds took control of the firm, it went on an acquisition tear, snapping up most of the industry’s remaining big firms, including Waterloo, Ont.’s Regal Capital Planners Ltd., Balanced Planning Investments Ltd. of Ottawa, Heritage Financial Services of Halifax, and The Investment Centre Inc. of London, Ont. It capped the flurry off with the biggest deal of all, its acquisition of Gestion Courvie Inc. of Quebec in December. Now BRM has more or less put its wallet away, focusing on consolidating its newly acquired business.
Another active acquisitor is IPC Financial Network Inc. of Newmarket, Ont. It has mostly snapped up smaller firms, accumulating about $5 billion under management and 500-odd reps. While the other big consolidators say their work is probably done, IPC remains in the hunt for other acquisitions. It hopes to have about $10 billion under management before it is prepared to put away its chequebook.
Massive sales forces have been built as the consolidators absorbed the tiny firms that littered the industry landscape. The rush to get so big comes as a defence to the competition that is now coming from all sides.
The banks are actively building their internal sales forces, expanding sales of third-party mutual funds, and reportedly sniffing around some of the remaining independent planning firms for acquisitions. However if the banks are looking for fund dealers to buy, they may find they’ve left it too late to do a sizable acquisition. Most of the big firms have been snapped up — unless the banks are prepared to buy a consolidator.
Unlikely targets
The only large, national firms outside of the big consolidators are the monoline giants, such as Investors Group Inc. of Winnipeg, and Primerica Financial Services.
Neither appears to be a likely acquisition target. Investors is controlled by the banks’ big rival financial conglomerate, Power Corp., and is viewed as more of an underperforming mutual fund company than a distributor. Similarly, Primerica is controlled by banking giant Citigroup, and although it is a large organization it doesn’t offer the sort of wealth-management services the banks want to offer their clients. The only other large firm is Markham, Ont.’s W.H. Stuart Securities Inc., which has about 1,000 reps. While it has a large number of reps, they generally aren’t big producers, so the appeal of the firm to possible acquirers is probably limited, too.
Of the remaining firms in our Planners’ Report Card only Radville, Sask.’s TWC Financial Corp. could rightly be considered a true independent. Elsewhere, FCG, The Financial Planning Group and Equion Group Inc. all belong to the Assante stable. Regal and Balanced both belong to BRM. Berkshire Investment Group Inc. is affiliated with the fund company AIC Funds Inc. of Burlington, Ont. CMG-Worldsources Financial Services Inc. is part-owned by Guardian Capital Group Ltd. of Toronto, the parent company of the Guardian funds. Dundee Private Investors Inc. is owned by Dundee Bancorp Inc., which also owns the Dynamic Mutual Funds. Money Concepts Canada Ltd. is majority-owned by asset management industry consolidator, First International Asset Management Inc. of Toronto. Manulife Securities belongs to the insurance giant, Manulife Financial of Waterloo, Ont.
From this group TWC stands alone, unaffiliated and unrepentantly independent. The firm would make an attractive takeover target. BRM has said the Prairies are the one area it wouldn’t mind more exposure. TWC runs a strong business, with relatively high-producing reps. But so far, founder Tim Calibaba has maintained that he isn’t interested in selling.
TWC’s provincial rival, Partners in Planning Financial Services Ltd. of Regina, is another largish, strong independent. It wasn’t included in our survey because it isn’t really national yet. However, with 300 reps and slightly less than $3 billion under management, the firm is also a strong player.
Beyond these firms lie only a few other substantial planning outfits and a host of small shops. There are several firms owned by publicly traded parents. Former independent firm AFP Wealth Management of Waterloo, Ont. now boasts about 400 reps. It is now a wholly owned subsidiary of Dutch banking giant ING Group. Ross Dixon Financial Holdings Inc. is still around and has been rolled into Kitchener, Ont.’s Canadian First Financial Group Inc., along with Burgeonvest Securities Ltd. The firm, now traded on the Canadian Dealing Network, has announced a couple of possible deals involving securities dealers EFI Financial Services and IPO Capital Inc. Winnipeg’s Rice Financial Group is now also publicly traded through Rice Capital Management Plus Inc., on the Canadian Venture Exchange. Rice continues to acquire small dealers, primarily in the West.
A handful of mid-sized firms persist, including the Independent Planning Group of Ottawa, which has grown to 140 reps in Ontario and Quebec. Richmond Hill, Ont.’s Keybase Financial Group continues to chug along independently after its merger with the now-defunct Fortune Financial Corp. fell apart. PEAK Financial Group, of Montreal has grown, with almost 200 reps under the hood. Nova Bancorp., also based in Quebec, maintains a planning arm, Wright Financial Services. Nova is currently in the midst of acquiring fund company Strategic Value Corp.
Between the remaining mid-sized and small firms and the eager consolidators there’s still some shakeout expected. Many are waiting for the Mutual Fund Dealers Association and its new rules before they decide whether they have to sell out, merge or can continue to go it alone.