More than a year after acquiring Toronto-based investment dealer KingsGate Securities Ltd. in a $2-million deal, Industrial Alliance Securities Inc. is heading west to capture market share outside its native Quebec.

With about 200 Investment Dealers Association of Canada-registered advisors on board and $6 billion in assets under management, the firm is counting on its “fiercely independent” business model to scoop up talent, whether individually or through the acquisition of smaller “tuck-in” brokerages that adhere to the firm’s philosophy: IDA advisors are more than transaction-oriented stock jockeys looking to turn a quick buck.

If there is one myth the firm would like to put to rest, it is that the financial planning model has no place in an IDA shop. That is old thinking, says Fred Roberts, co-founder and CEO of KingsGate Group of Cos. and IAS’s vice president of business development in Mississauga, Ont. Roberts insists the line between investment advisors and financial planners is blurring as advisors in both disciplines focus on client relationships and financial plans.

“In the long run, anyone in the business of money management — whether Mutual Fund Dealers Association-licensed or IDA-licensed — will have to be a planner of some form because it means he or she is the ultimate go-to person when it comes to clients’ financial needs,” he says. “You might steer some business to a tax lawyer or a mortgage expert, but you’re the quarterback — and that’s what is important. That’s how you keep assets ‘sticky’.”

With that in mind, IAS has created a “hybrid” platform aimed at accommodating both traditional stockbrokers and, more commonly, IDA-licensed advisors who take a planning approach to their practices.

“Stockbrokers realize that to hold on to clients they need to create solid relationships. And that means they need to have access to a certain product shelf and fee-based systems that may not have meant anything to them 15 or 20 years ago,” Roberts says.

Taking that platform to points west means finding major centres of influence in each market, says Roberts. In Ontario, the centre of influence was KingsGate Securities, a wholly owned subsidiary of KingsGate Wealth Management Services Ltd. IAS acquired the securities business in March 2005, bringing in 24 advisors from the Golden Horseshoe area and adding 5,000-odd accountholders to IAS’s customer base.

With a minority position in the Atlantic provinces already in place, the next move for IAS is to look for similar opportunities in Manitoba, Saskatchewan, Alberta and British Columbia.

But moving west brings a degree of culture shock, Roberts concedes. For that reason, the Ontario office will serve as regional headquarters for Ontario and the western provinces, while Quebec-based advisors will continue to report to the Quebec City head office.

The firm is also choosy about whom it brings in. “When advisors join IAS, whether they are coming as individuals or as part of a mid-level firm, they already have deep ties and relationships with clients in their markets,” he says. “And those ties will provide in-roads to those markets and assist us in driving value culturally to each one of them.”

Although the firm has not yet recruited any advisors in Western Canada, Roberts is confident that IAS will attract two types of disenfranchised advisors: those who feel weighed down by their current firm’s corporate agenda and those who feel under pressure to sell its proprietary products.

“Our whole thrust is independence,” says Roberts. “Our advisors own their books, they have a high payout — and we give that to them in writing. As long as you run a clean book and have some energy, we’re interested in talking to you.”

Behind that independence are the deep pockets of parent company Industrial Alliance Insurance and Financial Services Inc. , which manages $32 billion in AUM across Canada. The Quebec City-based firm has been building up its securities platform since its first foray into the IDA world in 2002, when it acquired ISL-Lafferty Securities Inc. The purchase was the first in a series of acquisitions, including parts of BNP (Canada) Securities Inc. and Leduc & Associates Securities (Canada) Ltd. later that year, followed by Lynch Investments Inc. in 2004.

But the firm’s latest acquisition of Montreal-based iFORUM Securities Inc. in December 2005 may have caused some head-scratching. Given IAS’s goal of breaking into Western Canada, why would the parent firm buy a Quebec-based brokerage?

@page_break@“Because whenever there is an opportunity for growth — even if it is in Quebec — it is good for us,” says Gaétan Plante, IAS’s president. “This firm is registered from coast to coast, from Halifax to Vancouver. And whenever there is an opportunity, we will take it.” The iForum deal brought in 15 licensed advisors and $200 million in AUM.

Recruitment still plays a vital role in ramping up IAS’s advisory base, Plante says. In 2005 alone, the firm doubled its number of advisors almost exclusively through recruitment, and it continues to bring in advisors from independent shops and bank-owned investment dealers.

On the MFDA side, the parent company created Investia Financial Services Inc. in 1998, and increased its ownership of FundEx Investments Inc. to 75% in 2003. Both dealerships have an advisor network across the country. In some cases, planners from these dealers have obtained their securities licences and moved to the securities platform.

By and large, however, IAS attracts two types of advisors, Roberts says. Those in the first group have between $25 million and $75 million in assets, and typically come from bank-owned brokerages. “These advisors are beginning to realize that the brand they have relied upon in the past isn’t the be-all and end-all in their businesses, and they’re recognizing the value they’ve created in those relationships with clients,” he says.

The second group is made up of advisors with more than $100 million in AUM. They have several years of industry experience and aren’t looking for corporate branding or hand-holding. “These advisors are well past the ‘I need a brand’ scenario. They have been around, they’ve seen different systems, they’ve seen different agendas. And they’re at the point at which they just want to be left alone,” Roberts says. “These advisors are thinking, ‘I have my staff, I have my clients, and I don’t need to be taught or steered or ramrodded with proprietary pressure.’ And that is where we can offer them freedom.”

Compensation is determined by a number of factors, including the advisor’s province of primary licensing and required support level, but payout won’t drop below 70%. Once the payout is established — the average is 75% — it is locked in for five years and put in writing. Stockbrokers are also guaranteed ownership of their books, an anomaly in an industry in which assets are fiercely guarded.

Although Roberts is keen to grow IAS’s advisory network, he won’t put a number on how much. “To say we are not interested in building assets would be irresponsible, but it would be even more irresponsible if we let our culture diminish as we build this model,” he says. “Preserving our culture is paramount, and we are going to do it whether it is one advisor at a time or one acquisition at a time. We are not going to jeopardize that.” IE