The investment industry’s smaller firms may be facing a shakeup in the year ahead amid continued pressure on profits, suggests Ian Russell, president and CEO of the Investment Industry Association of Canada (IIAC) in his latest industry letter.
The IIAC noted that overall industry operating revenues and profits maintained their record levels in 2019 after three years of steady gains. However, some of the industry’s smaller firms continue to face challenges, such as a lack of scale and diversification.
In particular, a group of between 30 and 50 dealers has struggled with “chronic marginal profits over the past five years,” the IIAC letter stated.
These same firms will face intensifying competitive pressure in the years ahead, the letter noted.
“The next year could result [in] widespread restructuring of the small dealers within the industry,” the letter said, adding that consolidation will produce larger independent dealers that can more effectively meet clients’ demands.
“The outcome will be a more vigorous and competitive industry,” the letter said.