Promutuel Capital Trust Co. Inc. is hoping its acquisition of beleaguered Triglobal Capital Management Inc.’s assets and goodwill will give the firm the breakthrough it needs to become a major player in Quebec’s financial services sector.
The takeover, which was finalized in January, doubles the size of Quebec City-based Promutuel Capital, a subsidiary of Groupe Promutuel, and should help the firm expand its reach into life insurance and mutual fund sales, which is beyond the parent firm’s traditional realm of property damage insurance.
Following the acquisition, Promutuel Capital is expected to have more than 300 advisors and more than $1 billion in assets under management, says Serge Roy, Groupe Promutuel’s first vice president of marketing and business development. It depends on how many Triglobal advisors decide to stick with the firm, because they own their books of business.
“What’s important for us is to have a critical mass of $1 billion,” Roy says. “After that, it’s easier for us to operate and to recruit new reps.”
The parent firm, which has been around for more than 150 years, specializes in residential, business, farm and auto insurance; it has 550,000 insured clients across the province, served by 34 “mutual associations” across the province, Roy says.
According to Groupe Promutuel, the concept behind the mutual insurance company dates back to the early days of the industry.
The first fire “mutuals” — essentially insurance co-operatives — emerged when few insurers were interested in agricultural insurance, says Jos»e Garneau, public relations officer for Groupe Promutuel.
In response, farmers at risk of damage from fire, lightning and wind established their own fire mutual insurance companies.
In 1956, the so-called “mutuals” formed a federation to help with underwriting and benefits. In 1976, a reinsurance company was established, and less than 10 years later, the corporate name Promutuel was adopted.
This initiative by these early activists eventually laid the foundation for the co-operative movement in Quebec, the company says.
Groupe Promutuel, which employs a total of 1,800 staff, began selling mutual funds in 2000 through fund dealer Promutuel Capital. And the takeover of Triglobal, which had 28,000 clients before its regulatory problems, will place the subsidiary among the top five providers of mutual funds in Quebec, Roy says: “We are a real player.”
Promutuel Capital doesn’t offer its own mutual funds, but instead sells any mutual fund a client wishes to buy. This gives advisors, who own their own books, a leg up as they are not restricted to any fund families.
As for life insurance, Roy admits Promutuel Capital has a tiny slice of the market, but he expects to widen the firm’s market share as 75% of the former Triglobal advisors are licensed to sell life insurance.
“They can sell a lot of products,” Roy says of the company’s plans to break into life insurance. “We are very small, but we’re looking to be a major player in five years.”
Roy is not ruling out expanding into Ontario, as about 10%-15% of Triglobal’s advisors are based in the neighbouring province.
“We have already had calls from reps in Ontario who want to join us,” Roy says.
But although Roy is happy to promote mutual fund sales in Ontario, Groupe Promutuel would not be looking to offer property damage insurance in another province for regulatory reasons.
Promutuel Capital bought out Triglobal’s assets after the latter and its officers became the subject of a regulatory probe into alleged illegal investments in offshore funds.
Triglobal and its officers, including Themistoklis Papadopoulos of Laval, Que., are accused of directing clients to invest individual nest eggs of between $10,000 and $350,000 in two funds under investigation by the Autorit» des march»s financiers: Focus Management Inc., based in the Cayman Islands, and Ivest Fund Ltd., a fund manager registered in the Bahamas.
The small group of clients have collectively lost tens of millions of dollars, and are still waiting to learn the fate of their money.
The Ivest and Focus funds were being sold without a prospectus, says AMF spokesman Frederic Alberro, and Triglobal was not authorized under the Securities Act to act as a dealer or advisor in securities. It was registered as a mutual fund dealer and was allowed to sell mutual funds, group savings plans and scholarship plans and provide financial planning advice.
A cease-trade order against Triglobal, Ivest, Focus and other parties was issued by the Quebec regulator on Dec. 21, 2007, and bankruptcy expert Jean Robillard, a partner and vice president of the turnaround group at accounting firm Raymond Chabot Grant Thornton LLP in Montreal, was appointed to examine Triglobal’s operations. Robillard also arranged the sale to Promutuel for an undisclosed amount.
@page_break@This was not the first time Promutuel Capital has expanded by picking up assets from a troubled rival.
As for concerns about Triglobal’s reputation, Roy says Promutuel didn’t suffer when it bought out Tandem Wealth Management Inc., a subsidiary of the Norbourg Group of Cos. in 2005.
Norbourg Asset Management Inc. and several other companies filed for bankruptcy in 2005 after it was revealed that millions of investors’ dollars had disappeared. A total of 9,200 people were defrauded in that scam, which ended in the recent conviction of Norbourg founder Vincent Lacroix.
Both advisors and customers of Tandem were relieved to have the security and stability of Promutuel Capital, Roy says.
“That scandal was bigger than the Triglobal one and our experience was very positive,” Roy says, adding that Triglobal’s advisors “are happy to land at a financial institution that’s solid like ours.”
Groupe Promutuel is offering, for example, a savings account interest rate of 3.75%, with the goal of targeting industry giants such as Quebec City-based co-operative Desjardins Group, TD Bank Financial Group, Laurentian Bank of Canada and National Bank of Canada.
Groupe Promutuel also offers RRSPs, mortgages, car and business loans, personal lines of credit and credit cards, as well as its Beacon Assistance Service of telephone information from a range of experts in a wide variety of areas. The service provides free referrals to Promutuel clients for names of contractors and lawyers. It also offers a phone line for clients’ questions about health, diet, fitness, lifestyle, child care and seniors’ concerns.
Groupe Promutuel, which also offers travel insurance, has a special 24-hour phone line for questions about travelling to France, with information on hospitals, medical centres, pharmacies and medication, as well as passport and embassy information. IE
Promutuel now a “real player” in Quebec mutual fund market
- By: Laura Bobak
- February 1, 2008 February 1, 2008
- 19:44