RBC Dominion Securities Inc. intends to leverage its brand’s strength, as well as bolster its operational capabilities, to continue to lure advisors away from competitors as clients seek both advice and stability, says the head of Canada’s largest full-service brokerage.

“We have so many positive things going for us,” says David Agnew, CEO and national director of DS, “including [parent firm Royal Bank of Canada] — what it stands for, the brand reputation of RBC, the way RBC has come through this financial crisis.”

But as the financial advisory industry continues to consolidate, and as some firms seek out greater profitability by concentrating on serving high net-worth clients, the fight for advisors — particularly those who can serve the needs of executives, business owners and wealthy family clients — has never been tougher.

This past summer, for example, GMP Private Client LP and Richardson Partners Financial Ltd., two Toronto-based boutique brokerages that specialize in serving the high net-worth market, decided to join forces — in part, to strengthen their collective ability to recruit advisors.

“[The advisory] industry has always been very, competitive, but I think it’s becoming more and more competitive,” Agnew acknowledges. “All firms are looking for distribution, and they’re looking for very good-quality distribution —people who have relationships with clients.”

From November 2004 to early September of this year, DS had hired 170 experienced advisors from competitor firms. “[The recruited advisors are coming] from all firms — small firms, medium firms and large firms.” Agnew says. “There isn’t one trend.”

Although Agnew says DS does not set targets, in terms of recruiting, the firm continues to maintain a consistent focus on attracting “high-quality professionals… who share our firm’s values and our commitment to investment management and wealth management.”

The brokerage’s primary strategic focus, however, remains retaining its existing base of 1,433 advi-sors by continuing to boost its operational strengths — including an emphasis, over the past several years, on its wealth-management support services. Also, RBC had added to its asset-management capabilities last year, when it acquired Vancouver-based Phillips Hager & North Investment Management Ltd., a mutual fund and a private-client investment-counselling firm.

Reinvesting in DS’s operational capabilities also aids in recruiting, Agnew says: “Almost as a byproduct, our advisors become advocates, and they tell their friends at other firms that we do have a top-notch offering at RBC Dominion Securities.”

Attracting advisors, as well as boosting asset- and investment-management and support services, Agnew says, is all about getting ready to deal with a massive intergenerational transfer of wealth.

“There [will be] so much money changing hands over the next 10 to 15 years. And, as organizations, we have to be ready to take care of that,” Agnew says. “We figure it is $80 billion-$140 billion that’s going to change hands in Canada. And baby boomers have already started to retire, so the world is changing right in front of us.”

DS isn’t alone in having identified the opportunity, of course; but, says one observer, the firm has committed to building out its capabilities to capitalize on it.

“Wealth management has the strongest organic growth profile [for all the banks], largely owing to favourable demographics,” says Robert Sedran, an analyst with National Bank Financial Ltd. in Toronto. “Of the banks, RBC appears to be the most dedicated to the business line.”

Although some firms have let go of lower revenue-producing advi-sors in the aftermath of the market turbulence of the past 18 months, Agnew says, RBC has not had mass layoffs of advisors, nor of support staff or of product-side staff.

DS also has not changed its compensation model, nor lowered its payout, in response to the recession, although Agnew acknowledges that some revenue streams for advisors, such as the revenue generated from the debit and credit spread on certain products, has essentially dried up — much as it has throughout the financial services industry.

As with other banks, RBC’s wealth-management business, which includes Canadian, U.S. and international operations, has seen declines in profitability, with net income through the first nine months of fiscal 2009 down to $422 million, a drop of 23% compared with the same period a year earlier. DS, however, remains the largest full-service brokerage in Canada, with $147 billion in assets under administration — about 23% of industry AUA — as of Aug. 31.

@page_break@“We are able to invest back in the business to support our advi-sors,” says Agnew, “which ultimately gives our clients the best experience out there.”

He adds that he thinks consolidation will be a continuing theme in the advisory industry: “When you’re going through a recession, everybody is revenue-challenged. Therefore, the profitability is not where it was. And I think it forces you to reassess your business model.”

Despite this reality, Agnew says, landing new advisors through acquisitions of smaller firms is not a strategic objective for DS.

“We’re not looking for any major acquisitions; we’re not looking for any minor acquisitions,” he stresses. “Our strategy has been to find really high-quality people, and bring them in one at a time.”

That could be sound strategy, says Brenda Lum, a financial analyst with DBRS Ltd. in Toronto: “It’s positive, in terms of [DS] being able to pick and choose which advisors it wants, as opposed to buying a firm and inheriting advisors who don’t necessarily fit in with the firm.”

Another area of focus for DS is building its high and ultra-high net-worth services, a highly competitive area that has DS going head to head with a variety of domestic and foreign banks. “We’re winning about 75% of the mandates that we’re competing for,” Agnew says, “so [ultra-high net-worth] is a big focus for us.”

RBC’s brand name, as well as the strong reputation of the Canadian banking industry as a whole, is drawing business DS’s way.

“Interesting enough,” Agnew adds, “we are receiving interest from people outside Canada, looking for investment expertise.”

Along with continuing to recruit from other firms, Agnew says, DS remains committed to hiring and training new advisors, taking aboard 80 to 100 advisors a year through its President’s Club rookie program.

Agnew says today’s rookie classes increasingly feature more experienced and accredited professionals — lawyers, accountants and other financial services industry people — than those in the past.

At DS, rookies are paid a salary for the first 15 months as they do the hard work of building out their practice from scratch.

That compensation system for rookies works well today, Agnew says, but he acknowledges that the firm might consider looking into changing the system to reflect the experience and education that today’s rookies are bringing to the firm.

“Our compensation is adequate today, but we do look at someone’s personal situation,” Agnew observed, “[such as] where they are coming from, what their requirements are.

“But [rookie compensation],” he adds, “is something that, as we review things toward the end of the calendar year, is something I’ll review.” IE