Qtrade Financial Group, best known for its online brokerage platform, is developing into a significant challenger to the dominant Credential Financial Inc. as a provider of wealth-management services and insurance agency services to Canadian credit unions.

Last month, Vancouver-based Qtrade announced a deal with Langley, B.C.-based Envision Financial, Calgary-based First Calgary Savings and Penticton, B.C.-based Valley First, in which Qtrade would supply the three credit unions with comprehensive wealth-management services, including securities and mutual fund dealer services and life insurance agency services.

The three credit unions acted together in deciding to switch to Qtrade. Envision and First Calgary are long-standing members in a partnership and the third, Valley First, has announced its intention to join.

All three credit unions had existing deals with Qtrade to provide them with discount brokerage services through Qtrade Investor. Now, with this deal, the trio of credit unions will transfer slightly less than a combined $1 billion of assets under administration over to Qtrade from their previous wealth-management provider, Vancouver-based Credential.

Slightly more than 100 advisors at the three credit unions now will be licensed through Qtrade rather than Credential.

The three credit unions “have always gotten great service from us and they’ve always gotten great feedback from the clients about our online brokerage offering,” says Scott Gibner, CEO of Qtrade and a co-founder of the nine-year-old privately owned firm. “So, it was a pretty easy extension for them to move to deepen the relationship into the full-service side.”

The three credit unions — in effect, acting as one entity — were reviewing their supplier relationships and decided to make a change in their wealth-management provider.

“We’re trying to look at how we can leverage our volume and select partners that will take us where we want to go,” says Bev Brown, chief operating officer with Envision. “With Qtrade, we feel that it has really outstanding technology, products, support and customer service, and when we were looking at our wealth-management offering, it seemed to be able to provide those elements that we were all interested in.”

SELF-CLEARING DEALER

Qtrade offers wealth-management services to some 180 Canadian financial services institutions, including credit unions, banks, trust companies and financial planning firms. Qtrade administers slightly less than $4 billion, including the AUA acquired through the recent deal, and has more than 200 licensed advisors, including those affiliated with the three credit unions, and slightly more than 100 employees.

Over the past several years, Qtrade, which also has an asset-management arm and is involved in institutional business, has been building out its full-service retail wealth-management capabilities, including adding senior executives with wealth-management experience and, last year, becoming a self-clearing dealer.

Going the self-clearing route “effectively gives us full control over our platform and processes and data,” Gibner says. “Once that last infrastructure piece was in place, we started going to some of our larger credit union partners who were wanting to consolidate their business with us.”

In January, Vancouver-based Prospera Credit Union, the fourth-largest credit union in British Columbia, switched to Qtrade from Credential. Today, Qtrade has partnerships with more than 30 financial services institutions, in which Qtrade serves as the comprehensive wealth-management provider.

“There are a number of other credit unions, long-time partners of Qtrade, who are very interested in what we’re doing and how we’re doing it,” Gibner says. “I suspect we’ll continue to grow our full-service business and our delivery out to credit unions as a primary opportunity for us.”

Credential, which is owned by the credit union system, is the industry’s dominant wealth-management provider, with some $10.8 billion in AUA and relationships with hundreds of credit unions across the country, including Vancouver City Savings Credit Union, the largest financial services co-operative outside Quebec.

However, Credential has had some recent setbacks, including being caught up in the recent asset-backed commercial paper fiasco. Its subsidiary, Credential Securities Inc. , announced a plan in April to repurchase $38.9 million of ABCP from its customers at par value, contingent on the implementation of the restructuring deal proposed by the Pan-Canadian Investors Committee for Third-Party Structured ABCP.

The company’s ABCP problem was not a factor in the credit unions’ decision to switch from Credential to Qtrade, says Dave Gregory, the president and CEO of First Calgary. Instead, all three credit unions did a review of their wealth-management needs, he says, studied different providers’ offerings and chose Qtrade for its service, technology and support.

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“Credential works hard at doing good work for the credit union system,” Gregory says. “The reality is that we need to look beyond just system partners to find the best partners to facilitate our business in a very competitive world. And I think credit unions are doing that more and more.”

Envision, First Calgary and Valley FIrst will be converting to Qtrade from Credential in stages. According to Qtrade’s Gibner, Valley First is expected to move over to Qtrade in October, First Calgary in December and Envision sometime next year, after the RRSP season.

With the co-ordinated decision to change wealth-management providers, the three credit unions appear to be signalling their intention not to wait for member approval before beginning to look for ways to begin working together.

Envision and First Calgary moved four years ago into the interprovincial partnership that allowed the two firms to integrate many aspects of their businesses, including technology, marketing and human resources, while remaining independent. The partnership permitted the two credit unions to provide more services to their customers in both B.C. and Alberta, and helped them work around provincial regulations preventing cross-border mergers.

Valley First announced in July it was considering joining the partnership. The three credit unions will be building the business model for the partnership that will be taken to each credit union’s board of directors for consideration this autumn and then to their respective memberships for approval.

Envision is the largest of the three credit unions, with $3.8 billion in AUA; First Calgary has $1.9 billion in AUA; and Valley First has $1.7 billion in AUA. IE