Canada’s brokers are all over the map when it comes to the question of bank mergers. Some are sure they’re going to happen, some don’t think they’re an issue and the rest would like to see some clarity on the issue. Their bosses, on the other hand, are paying close attention. They see mergers as an opportunity to add to their talent pools.

As part of our Brokerage Report Card survey, Investment Executive asked brokers to rate the impact of possible bank mergers on their firms. We also asked them to rate the impact of industry consolidation on their firms.

Not surprisingly, brokers at the bank-owned firms felt bank mergers would have a greater impact on their firms than those brokers who call the independent investment dealers home.

When we asked management at the various firms to comment on our findings, none of the firms indicated bank mergers would lead to layoffs (although executives at two firms, BMO Nesbitt Burns Inc. and ScotiaMcLeod Inc., declined to be interviewed). But certainly a number of them did expect unhappy brokers who would be looking elsewhere for employment.

Both Charlie Spiring, chairman and CEO of Winnipeg-based Wellington West Capital Inc., and Bob Larose, executive vice president and national sales manager at Canaccord Capital Corp. in Vancouver, are confident it’s only a matter of time until the federal government legalizes bank mergers.

“They’re inevitable. We’re all wondering when — one, two or three years? My guess is two,” Larose says.

“We think mergers are going to happen, no question,” says Spiring. “We believe it will only be one merger. We don’t think the government will allow more than that.”

Both men also agree opportunities are sure to arise in the aftermath. Larose says his firm would see the activity as a chance for expansion, particularly if a newly merged bank is asked to divest one of its brokerage arms. “There could be an opportunity for cherry-picking, to expand and maybe purchase branches or possibly a whole firm,” he says.

“I think it will be a windfall for firms such as Wellington West,” Spiring echoes, “because there will be a lot of great people who will be [on the open market].”

Both Raymond James Ltd. and First Associates Investments Inc. also see the merger glass as half-full. “We’ve had a number of terrific new partners join us over the past year or so from our good competitors at the bank-owned firms,” says Terry Hetherington, national sales manager at Raymond James in Toronto. “If two of the large dealers came together, they’d have such a large market share in some towns they might not be able to prospect any clients. I think Raymond James is a terrific alternative for some of those folks.”

Stuart Raftus, president and COO of Toronto-based First Associates, predicts that as the banks’ oligopoly gets stronger, both advisors and clients will search out independent firms. “The need for an entrepreneurial environment will be that much greater. We believe there will be an enhanced recruiting opportunity, from not only an investment advisor point of view but also from a client point of view. We would look forward to [bank mergers] and think this would create an enhanced opportunity for us, not only in our private-client business but also in our capital-markets business,” he says.

Neither Edward Jones nor CIBC Wood Gundy is spending much time worrying about potential bank merger activity. Both think the impact, if any, will be minimal on their shops.

“I don’t think it’s much of an issue,” says Tom Monahan, head of Toronto-based CIBC Wood Gundy. “My biggest concern is how I serve investment advisors and their clients to ensure their needs are met. How do we consistently perform on behalf of our clients? Whatever structural changes occur, if I can focus on that, I think our clients will be well served — and that’s the objective.”

Gary Reamey, head of Canadian operations
at Edward Jones in Mississauga, Ont., says the firm will monitor the changes to the banking landscape but doesn’t anticipate any direct effect.

“We’re always on the lookout for quality investment advisors at other firms who may be unhappy, but we’re not really concerned about mergers or consolidations. We don’t see any direct impact on Edward Jones,” he says.

On the other hand, Bill Hatanaka, vice president of Toronto-based TD Wealth Management, takes a macro view. “I think it will be exciting to see how the Canadian financial services industry evolves and matures on a global basis. I think each individual, when looking at issues around potential bank strategy, will come up with a different opinion, based on the input they have,” he says.