Halifax-based investment dealer Beacon Securities Inc. is gearing up for expansion across Canada this summer with the introduction of Beacon Wealth Management, which will give advisors a 100% payout in exchange for an asset-based fee.

At present, no firm in the investment dealer universe comes close to replicating this business model, with the exception of yourCFO Advisory Group Inc., the Burlington, Ont.-based investment firm that offers advisors payouts of up to 90%. In an industry in which advisors routinely gripe about how much their dealers eat away at their take-home pay, Beacon WM is positioning itself as an alternative for both high producers who want to keep more of their commissions and moderate producers who don’t want to be pressured into moving up the grid.

Beacon WM is the brainchild of Beacon Securities president and chief financial officer Jane Smith and her founding partner, advisor Wayne Lang of Toronto. The pair had not met until a mutual business acquaintance noticed a common thread: both shared a vision of creating an investment firm that supports entrepreneurial advi-sors who no longer need the array of services for which their dealers charge them. Instead, Smith and Lang wanted to create a hands-off firm that offers a strong compliance department and an efficient back office, without taking exorbitant commissions.

“I was looking for this model as an advisor, and I couldn’t find it,” Lang says. “So, we decided to create it.

Here’s how it will work: advisors joining the firm will operate under the principal/agent model and can choose to brand themselves under the Beacon WM banner or use their own personal branding. They will keep 100% of their commissions in exchange for an annual asset-based fee that begins at $25,000 and increases modestly with book size. (An advisor with a $100-million book would pay about $45,000.)

Although Lang expects competition, he does not expect to run into copycat firms anytime soon. “For most IDA firms,” he says, “this would upset their economic base too much — they couldn’t do it. They’re based on making good profit margins on a select group of people, making a moderate profit on some, and weeding out the rest.”

“Personally, I think it’s greed,” Smith says of the motivation of other firms. “Most firms would think we’re leaving way too much on the table.”

Although she’s reluctant to use the terms “bare-bones” and “no-frills” to describe the Beacon WM model, Smith acknowledges that most of the bells and whistles of a traditional dealer will be absent at Beacon WM. “Our value-added is the flexibility we’re offering,” she says. “This really isn’t any different from dealing with a client: ‘What fees bother you? How do you want to be dealt with? What sorts of things can I do to make this relationship work better for you?’ Quite frankly, that’s not the way the big guys operate, and I know why: because it’s a lot harder.”

The Beacon WM model has already attracted a number of securities-licensed advisors, as well as financial planners looking to upgrade their licensing and expand their offering. But Smith and Lang aren’t aiming for blockbuster growth right away. Instead, they would like to see a slow and steady buildup of mid-career, entrepreneurial advisors who are ready to make the leap. They hope to have 50 advisors within a couple years, and eventually build to 250.

“This is the sort of thing people should take their time thinking about,” Smith says. “They need to do their homework and understand it before they say they’re the right fit. We don’t want advisors to look at us and say, ‘It looks like I can take home more money’ and that’s it.”

The transition will start this month with Lang himself. A senior advisor at a full-service planning firm in Toronto, Lang will begin transferring his 450 client families to the new business model. He expects to retain all of them.

But getting other advisors to do the same could prove difficult, says Dan Richards, president of Strategic Imperatives Ltd. , a Toronto-based financial services consulting firm. “One of the challenges for a firm like Beacon that doesn’t have a well-known name is persuading advisors to move, particularly from a bank-owned firm,” he says. “It’s a growing challenge — in large measure, because clients are asking tougher questions, ‘What’s in it for me?’ type questions.”

@page_break@At the same time, firms are getting more aggressive about retaining their clients. “That raises the stakes, in terms of what it takes for an advisor to decide to make the move,” Richards adds. “We’re in a very competitive environment for recruiting right now. But there’s always room for a better mousetrap.”

Lang and Smith say the advisors who will be attracted to their model will already have a well-established book of loyal clients who will want to follow them wherever they go.

“In this industry, the relationships are strongest when there’s a trusted advisor,” Lang says. “Once that advisor has trust, the conversation about a transition becomes less of a hurdle.”

Trusted advisors with a clean book are exactly the type of advi-sors Beacon WM is hoping to attract; not only will it make the client-transition process less of an obstacle, it will help to offset the ever-increasing compliance costs, too.

“The people we want to bring in will be ahead of the curve on compliance requirements, not just meeting them,” Smith says, adding the firm will evaluate potential advisors in a process similar to that of an IDA branch audit.

In the meantime, Smith and Lang are hoping that word of their new venture will travel fast and draw the right type of advisor. If the fit is right, advisors with a $25-million book are as good as those with a $100-million book, Smith says: “They could be happy under our model, and we could be happy with them.” IE