Industrial alliance in-surance & Financial Services Inc.’s acquisition of Toronto-based DundeeWealth Inc.’s network of mutual fund and insurance advisors in Quebec boosts the size of IA’s subsidiary, Investia Financial Services Inc., securing IA’s position as one of Canada’s five largest non-bank-owned mutual fund dealers.

Quebec City-based IA’s November acquisition — which includes 340 mutual fund-licensed advisors and 70 insurance-licensed advisors — is the second major purchase IA has made this year to beef up Investia. In June, IA acquiredAEGON Dealer Services Canada Inc. , which included mutual fund dealer Money Concepts Canada Ltd. and National Financial Insurance Agency Inc., the managing general agency through which Money Concepts advisors file their insurance business. As a result of these acquisitions, Investia now has $8.8 billion in assets under management and more than 2,000 advisors.

“Both the DundeeWealth and AEGON acquisitions will broaden IA’s wealth-management footprint across Canada,” says Jacques Carrière, IA’s senior vice president of investor relations, “allowing Investia to expand the scope and diversity of its distribution networks and increase further the size, scale and efficiencies of its mutual fund distribution operations.”

This year’s acquisitions of AEGON and DundeeWealth’s Quebec business are only the latest in a series of acquisitions made over the past seven years by IA to expand Investia. The process began with the purchase of Quebec City-based Groupe Financier Concorde Inc. in 2001 and Peterborough, Ont.-based Global Allocation Financial Group Inc. in 2003. And, Carrière points out, IA’s expansion strategy for Investia isn’t finished yet.

“Investia’s strategy has been — and continues to be — to grow the organization,” he says, “both organically and through acquisitions, throughout Canada.”

This growth strategy has worked so far, giving Investia a foothold across the country. It has 45% of its AUM in Quebec, followed by 25% of AUM in Ontario and 25% in Western Canada, with the Atlantic provinces delivering 5%. Add to that IA’s other mutual fund dealer subsidiary — Markham, Ont.-based FundEx Investments Inc., which has $11 billion in AUM — and IA ranks among the top five mutual fund dealers not owned by a bank.

“It’s important to be in the top four or five to keep costs down,” says Byren Innes, senior vice president of Toronto-based consulting firm NewLink Group Inc. “Quebec has a different regulatory environment; it’s a little bit more costly and complex than other provinces. If you’re not going to be big there, then those costs can’t be spread around. I wouldn’t be surprised if Investia is No. 1 in Quebec now.”

IA has a clear-cut advantage in managing those costs and complexities because its base of operations has always been in Quebec. That said, Innes admits, every firm is concerned about costs and is looking at areas in which its profit margins are thinning.

“This might have been a situation like that,” he says, “in which DundeeWealth was looking at its overall cost structure and saying, ‘Is this something we want to continue to do?’ IA came knocking at the right time. So, it worked out very well.”

MID-RANGE BOOKS

In addition to managing Investia’s costs better and becoming more dominant in its home province of Quebec, Innes says, the fund dealer has been able to develop and expand a niche that many larger firms do their best to avoid. Investia generally employs advisors who have mid-range books of business of approximately $5 million-$50 million, with the bulk of each advisor’s business being insurance; mutual funds are a secondary part of the book. Other firms tend to look for advisors with larger books of business.

“Investia is in a neat spot because there are a lot of advisors who do multiple things,” says Innes. “If my primary thing isn’t funds, then I’m not going to be a big fund guy. But I’ll still have an overall great practice and need a home. So, Investia can be that home for the middle[-ground] advisor.”

“It fits our growth plan,” said Normand Pépin, IA’s executive vice president and chairman of Investia, at the time of the AEGON acquisition in June. “For years, we’ve talked about our capacity to manage multiple distribution networks on the insurance side. And we have extended that capacity to wealth management.”

At press time, Pépin was finalizing the DundeeWealth deal, which is scheduled to close on Dec. 31.

@page_break@AEGON advisors and Dundee-Wealth’s advisors in Quebec should be able to make the transition to Investia without a great deal of upheaval. Carrière says the Money Concepts brand and business model will remain intact, despite being absorbed by Investia and given new technology provided by Toronto-based Univeris Corp.As well, many of DundeeWealth’s Quebec-based stable of independent insurance advisors is already well known to IA.

“In fact,” says Carrière, “advisors and their clients may benefit from Investia’s scale of operations and its first-rate technology and back-office platform.”

Still, Pépin has said, “There will be room for all of the employees, but there will be some restructuring.”

IA also has ambitions to grow beyond Canadian borders; it announced in May that it had purchased United Family Life Insurance Co., which it later renamed AI American Life, from Assurant Inc., a specialty insurance company based in New York. IA also has offices in Seattle through IA Pacific Life Insurance Co. and another office in Phoenix. In addition, IA has contracts with “a couple” of U.S. insurance distributors, Carrière says, but the U.S. business consists of less than 1% of IA’s income from premiums and deposits. IE