Professional invest-ment Holdings (Canada) Inc. has acquired Calgary-based mutual fund dealer Generation Financial Corp. for an undisclosed sum. The Toronto-based company is the newly created subsidiary of Australia’s Professional Investment Holdings Group, owner of Australia’s largest mutual fund dealer, Professional Investment Services.

The acquisition marks the second jolt in a tumultuous year for Generation advisors, who are still adjusting to the arrival of new president Ken Parker in May. The firm’s 105 independent advisors currently operate on a unique desk-fee model that grants them a coveted 100% payout. That model stands in sharp contrast to the traditional grid model of Professional Investment Services, whose advisors sell proprietary products. In-house products currently do not exist at Generation.

Ken Rousselle, former IQON Financial Inc. president and new head of the Canadian operation, says Generation advisors will “continue to do their business the way they want to do business.” Advisors will be given the option to continue on the desk-fee model or move onto the grid, which typically pays between 70% and 90%.

Advisors who choose the latter option will be privy to the firm’s Activity Train program, which guides advisors through a cycle of business-enhancing sessions aimed at doubling their books of business within two years. For an established set of advisors such as those at Generation, however, such a program may not be necessary; Rousselle says the program is entirely optional.

The same goes for selling in-house products, he says: “Advisors won’t be forced to do anything they don’t want to do. But we do want to introduce some products that are as good or better than what the market has today.” Rousselle will not say what form the products will take, but concedes one of them will be a white label asset-allocation program from a well-known manufacturer.

The next step is re-aligning the Gen-eration brand with PIS, which is already in the works. The merged dealers will operate under the Professional Investment Services banner, with headquarters in Toronto. It is a curious choice for head office, given that Generation’s 100-plus advisors are currently spread throughout Saskatchewan, Alberta and British Columbia. But Rousselle insists it is a non-issue.

“We didn’t believe that location was all that important considering the boundaries to getting a licence in any of the provinces have really disappeared. Making sure we have a presence in Ontario is one of the reasons I’m going to stay here,” Rousselle says. Generation is currently not registered to sell mutual funds in Ontario.

Parker, who will trade in his title as president for the titles of chief financial officer, chief operating officer and chief compliance officer, says the acquisition probably won’t bring any major changes for Generation advisors, who are used to a hands-off corporate culture.

“PIS allows its people to have an appropriately independent way of doing things. And they maintain a strong compliance culture, as well,” he says.

As for the feelings of trepidation that usually come with new ownership, Parker says he has seen very little of these. He was mindful to keep advisors in the loop when news of the acquisition surfaced over the summer, a strategy that has kept uneasy feelings at bay.

“So far, the reactions of advisors have been positive. They’ve met with Ken Rousselle already, and that has given them a lot of comfort with the process,” he says.

Advisors who had equity in the company have cashed out. But they will be given the opportunity to own equity in their new parent company, Professional Investment Holdings Group, when they generate a certain amount of revenue (although the details have yet to be worked out, Rousselle says).

Generation was a natural fit for PIS, which had been looking at points of entry into the Canadian marketplace for more than a year. “It has a profitable distribution, it has high-quality advisors and a strong technology background,” Rousselle says.

What is more, the similarities between Canada’s and Australia’s compliance cultures makes Canada an ideal testing ground for the model before Rousselle takes it south of the border, a move, he says, that may come “sooner rather than later.”

PIS has grown aggressively since its inception in 1996, expanding into markets in Hong Kong, Singapore, Malaysia, New Zealand and soon in China.

The company has 1,500 advisors and currently manages $13 billion Australian in assets.

@page_break@That success is at least partly owing to the firm’s unique partnership with more than 1,000 accountant practices throughout Asia and Australia. The firm targets small independent accounting companies with three to five partners, and pairs them with a PIS advisor to bring in new clients. In turn, PIS allows the accountants to share ownership in the firm and gives them a cut of the fees generated by the new business.

The model is still being tweaked in Canada, but Rousselle has already contacted the Canadian Institute of Chartered Accountants to have it approved.

“It will be a concentrated effort to the get the accounting practices on board, then get some early success stories out there and let the word spread,” he says.

Generation advisors will not be forced to partner with accountants; the partnership is only open to those who choose to move to the grid model.

But Rousselle is confident advisors will find value in the grid model on which virtually all Australian advisors currently operate. Although the payout is less, more services are included. Advisors on the desk-fee model pay thousands of dollars in annual fees for access to back-office technology and compliance.

Although the two companies seem to have very little in common, both come from humble beginnings. Generation was founded in 1998 by a group of eight advisors who later sold it to HPM Group, which subsequently sold to Generation Financial Group Inc., an ownership group headed by Calgary businessman Sig Gutsche. Professional Investment got its start on Australia’s Gold Coast in 1996 with eight advisors. It now serves 600,000 clients.

“We see this acquisition as good news,” says Rousselle. “We want to make sure that advisors are aware of the changes and assure them that their relationship with their clients will not change.” IE