ECI Investments Ltd. says its $28-million acquisition of Regina-based Partners in Planning Financial Group Ltd. is an important element in its strategy to capture its share of the wealth-management market — not a move to bring a distribution channel under its wing.
ECI is a wholly owned subsidiary of Calgary-based InterBorder Holdings Ltd. , a relatively low-profile holding company with a 28-year history in what its Web site calls “land planning, land development and asset management.” The company also owns Cordex Realty & Management Ltd., which sells raw land to end-users, and land-banking company Walton International Group Inc. , whose products were at one time distributed by some of PIP’s 1,000-plus mutual fund and insurance advisors.
“Every financial planning firm talks about independence, but this truly is an independent shop. And that won’t change,” says Dean Lower, executive vice president of marketing at InterBorder. “Advisors will not be mandated to sell anything; it will be entirely their choice.”
The deal, which closed on March 1, gives InterBorder 100% control of PIP and its subsidiaries — mutual fund dealer PIP Financial Services Ltd. and MGA PIP Insurance Services Inc. — which have an estimated $4.7 billion in assets under administration.
PIP’s acquisition marks the end of a lengthy courtship by a string of interested parties. Although PIP stopped selling Walton products in August 2005 among concerns of how the product was regulated, PIP’s founder and outgoing CEO, Michael Wolfond says the two firms have remained on good terms. “Our advisors have been very loyal to [Walton] products, and a lot of our clients have fared well in them,” he says.
But the new ownership doesn’t mean PIP advisors will become agents for InterBorder products, Wolfond adds: “InterBorder didn’t buy us for the reason of distribution. We would never be told what to sell.”
If InterBorder is smart, it will do everything in its power to make PIP’s advisors happy, Wolfond says: “There’s very little margin dealing with a distribution arm. So, for InterBorder to pay as much as it did for this firm, it will want to satisfy the needs of the planners. I can see it being very proactive and excited about keeping us going and not breaking us apart.”
As part of the deal, InterBorder has agreed to keep PIP’s head office in Regina for the next five years, as well as to maintain all of the firm’s branding and staff. InterBorder president and CEO Bill Doherty has stepped in to replace Wolfond as CEO until a permanent replacement is found. Wolfond will continue to run his PIP advisory practice.
Lower is tight-lipped about what’s next for PIP advisors, but says a number of new initiatives will be announced at the company’s annual convention in May. In the meantime, he says, “We hope to capitalize on what Mr. Wolfond has been able to build over the past 20 years, but inject some new thinking, some new cash and some new ideas that will take it to the next level.”
PIP has been approached by would-be buyers “many, many times” in recent years, Wolfond says, but none offered a suitable arrangement for the firm’s advisor-owned business model. When PIP’s board members recently began to seek out potential partners, ECI stepped forward with an offer.
PIP’s advisor-shareholders were bought out for $39.97 a share; Wolfond owned slightly more than 22% of the company when the deal closed.
“We were looking for a strategic partner, not for a buyer to come along and take us out,” Wolfond says.
The prospect of selling PIP is one he had been considering for some time. “We had a number of shareholders nearing or in retirement, and when you’re dealing with a non-tradeable security, how do you deal with it?” Wolfond says. “You have to find enough cash flow for new initiatives and for the retired shareholders. And so this was a good fit for us.”
The move is undoubtedly a tough one for Wolfond, 52, who founded the company in 1986. He finished his duties as CEO on Feb. 28.
“Many of the firms that approached this firm with an interest to buy wanted us to lose our identity as soon as possible, lose our pay grids as soon as possible and become who they were as soon as possible,” Wolfond says. “Anybody else would have wrapped us up inside and have us disappear. With InterBorder, we keep the name and the culture. And we know who they are, so it’s a comfortable fit.”
@page_break@But Wolfond has no intention of stepping back from the business. He and his partners serve more than 4,000 clients scattered from Ontario to British Columbia and manage a $200-million book.
“I made a promise to my clients that I’m not going anywhere, and I love what I do,” says Wolfond, who has stepped into an emeritus position on the new advisory board composed entirely of advisors. “What else could I do? I’m a workaholic.”
For the most part, PIP advi-sors are optimistic about the new ownership structure, although they admittedly know very little about InterBorder. Kevin Smith, a PIP advisor in Collingwood, Ont., says his first impressions of InterBorder’s Doherty have been positive and he’s excited about the firm’s direction.
“Change is good. If you sit still long enough, you’ll get run over,” he says. During an introductory meeting with InterBorder, he adds, some advisors had expressed concerns about being forced to sell new products. But Doherty had assured them that no such arrangement will exist. “From what I can tell so far,” Smith says, “it will be business as usual.”
“The key for us was to stay independent of any mutual fund dealers, so this was a good move,” says Paul Hillsdon, a PIP advisor in Markham, Ont.
Like Smith, Hillsdon isn’t worried about morphing into a distribution channel for InterBorder products; in fact, he says, some in-house products would help. “You want your dealer to be successful and make money so there’s no downward pressure on commissions, and to help the dealer absorb some of the costs,” he says. “There’s so little money to be made at a dealership that every bit helps.”
Hillsdon says the firm is in a “wait and see” phase right now, but he hopes to see continual improvements in the firm’s technology platform, and some serious consideration given to the formation of an investment dealer platform.
It’s too soon to tell if advi-sors’ enthusiasm will hold steady as InterBorder beefs up its presence in the coming months, but early signs are positive, says Hugh Gabruch, general counsel and chief operating officer of PIP. “There wasn’t a single dissenting shareholder, in terms of approving the transaction,” he says. “Our advisors feel very popular right now.
“Actions speak louder than words,” he adds. “And clearly our constituency spoke in favour of the transaction.” IE
PIP remains an independent
New owners look to build wealth-management business, not distribution
- By: Lara Hertel
- April 3, 2007 April 3, 2007
- 09:17