Hub buys Daystar

Daystar was founded in 2002 by co-CEOs Rene Pereux and Keith Brown, and it has offices in Vancouver, Calgary, Winnipeg and Toronto. It specializes in serving insurance advisors who cater to high net-worth clients.

Since Hub Financial hasn’t previously offered substantial support in this area, the acquisition provides the MGA with important new capabilities.

“Certainly, [Daystar has] a very, very strong presence in the high net-worth market, and [it] can offer some exceptional support in that arena,” says Terri DiFlorio, president of Hub Financial. “That definitely complements what we have to offer.”

The deal also bulks up Hub Financial’s geographical presence in the prairies and Western Canada. DiFlorio says Hub Financial had been particularly interested in establishing a presence in Winnipeg.

“That’s somewhere we’ve always identified a big opportunity,” she says, “so we’re really happy to have a regional presence there now.”

The decision to sell Daystar was primarily driven by personal reasons, according to Pereux. He says eventually selling the firm had always been part of the plan.

“For us, at this stage of life, it was a good time to sell,” he says.

Brown and Pereux will stay on with Hub Financial as independent consultants for at least three years, continuing to provide support for advisors working with high net-worth clients. In addition, Pereux and Brown will continue to run their own insurance and financial planning practices.

“We’re very much going to focus on our other businesses,” Pereux says.

The deal is positive for Daystar advisors, according to Brown, as it provides them with access to greater resources.

“I think this is a good thing for all of our advisors,” he says. “Our advisors will get access to a wider variety of services and support than we were able to provide.”

Advisors will also benefit from a stronger technological platform — a factor that has become increasingly important.

“We knew that we had to invest more money in technology to do a better job for our advisors, and we’ve already invested a ton of money in technology at Daystar, but it’s almost like it was never enough,” says Brown. “Hub has very robust technology systems to support their advisors, so that was an attraction for us.”

The rising costs associated with growing compliance requirements and continually advancing technology have made it challenging for all smaller industry players to compete, Brown says. He says that’s a key factor which has fuelled much of the consolidation among MGAs in recent years.

“Smaller MGAs are facing lots of pressure,” he says.

Given Daystar’s size, however, Pereux says rising costs were not an issue for the firm, and were not a factor in the decision to sell. “We were very well positioned for all of that,” he says.

Pereux points out that 2013 had been the company’s strongest year yet. “Business was booming,” he says. “We’ve had the biggest year we’ve ever had in our history.”

In the near term, the acquisition won’t mean many changes for advisors: their contracts will not change, and compensation will remain the same.

Advisors will also continue working with many of the same staff members: of Daystar’s 53 employees, eight are leaving the organization, while the rest have been hired on with Hub. Among those departing is Paul Isaacson, former president of Daystar.

“It was important to us to be able to retain as many employees as we could,” says Brown.