Toronto-based Dun-deeWealth Inc. has been busy this past spring, implementing a new business plan for its corporate offices’ financial advisors, a unique group that is now being broken out into a separate retail division and placed under new management.

Among other things, the new division, which is as yet unnamed, will provide these advisors with a greater focus on portfolio management as well as a closer working relationship with the firm’s capital-markets division.

DundeeWealth is well known in the advisory industry for its full-service model, which consists of Dundee Securities Corp. (the Investment Industry Regulatory Organization of Canada platform), Dundee Private Investors Inc. (the Mutual Fund Dealers Association of Canada platform), Dundee In-sur-ance Agency Ltd. and Dundee Mortgage Services Inc.

DundeeWealth is home to 1,100 advisors, who are split evenly between the IIROC and MFDA platforms. The majority of these advisors are part of the firm’s independent platform, which consists of advisors being compensated with an average payout of 80% in return for providing their own support services and local branch office expenses.

A much smaller group, which consists of approximately 45 advi-sors, work out of the company’s corporate offices in Toronto, Montreal and Vancouver. This latter group of advisors tend to differ quite a bit from their counterparts in the independent model, says Joanne Ferstman, vice chairwoman and head of capital markets at DundeeWealth.

“When you look at our entire group of advisors, they are not a homogenous group,” says Ferstman. “They are very different, with different needs. And what we want to do is to make sure that our firm is constantly meeting the needs of the advisors, whatever they may be.”

The change also came about after reviewing DundeeWealth’s capital-markets competitors. This analysis revealed that many companies, including Vancouver-based Canaccord Financial Ltd. and Richardson GMP Ltd. of Toronto, have retail advisor groups as part of their capital-markets businesses.

“When we looked at our group of advisors,” says Ferstman, “we were lumping the capital-market advisors together with the 1,100 [independent] advisors, a large portion of whom are mutual fund advisors or prefer managed products. The plan, really, was to separate the advisors within the management of the retail operation and ensure that someone was looking after their needs specifically, which may not be the [same] needs of the other 1,100 advisors.”

The “corporate” advi-sors have a stronger focus on portfolio management, and a large percentage of them hold a discretionary portfolio management designation. These advisors receive a lower payout percentage than their independent peers but do not have to pay for office expenses and have access to all support services within the firm. Corporate advisors place 80%-90% of their business in stocks, bonds and managed portfolios, vs 20%-25% for the independent agents. In addition, the average book size for a corporate advisor is approximately $85 million, vs $28 million for independent IIROC advisors.
@page_break@“The difference tends to be more in terms of the style of business they do,” says Gordon Martin, senior vice president of DundeeWealth’s capital-markets division. “[Corporate advisors] tend to be much more [focused on the] brokerage and portfolio-management business — as opposed to independent advisors, who are more focused on managed money and financial planning.”

The corporate advisors, previously under the management of Richard McIntyre, executive vice president, retail, for DundeeWealth, will now be jointly managed by Martin and John Panneton, vice chairman of the capital-markets division. Both teams will continue to work on a common back-office platform as well as draw on the same compliance department and pool of support services.

Although McIntyre’s group of independent advisors will still have access to capital markets, the corporate advisors will be much more involved with the company’s capital-markets division, which consists of 26 investment bankers, 24 training and sales professionals, and 16 research analysts.

“Many of these [corporate] advisors are stock-pickers themselves and do a lot of their own analysis and research,” says Ferstman, “so having access [to the division] is a key part of their business.”

This strategic change is the next step in a progression that Dundee-Wealth has undergone in recent years. The firm began to make strategic changes in November 2008, when it sold its Quebec network of about 400 mutual fund and insurance advisors to Quebec City-based Industrial Alliance Insurance and Financial Services Inc. At the same time, DundeeWealth reduced staff by 250, or 16% — mostly in operations, infotech and administration.

In addition, DundeeWealth has intentionally downsized its advisor force to 1,100 from 3,500 over the past five years in order to focus on a smaller but higher-quality advisory base. Over the past two years, the firm has accelerated its downsizing efforts.

But this doesn’t mean Dundee-Wealth has stopped searching for new recruits. Currently, the corporate advisors are made up of approximately 36 advisory teams, and the firm hopes to expand that to between 75 and 100 teams over the next three years.

“We don’t want to build the team through mergers and acquisitions, and we are not aiming to be a 500-plus team,” says Martin. “We are being extremely selective in terms of what we are looking for, specifically with regard to the quality of advisors. And while we are certainly going to grow over the next three years, it is not going to be an explosive growth.”

Martin and Panneton have already started the recruitment process — and while there are some advisors from the independent IIROC channel showing interest in the corporate model, recruiting from within is not their main strategy.

“We are getting a lot of positive feedback when we are talking to advisors on the Street,” says Martin. “We are talking to them about a unique, small brokerage firm that is tied very closely to the capital-markets side of the business, as well as being able to leverage on our research and investment banking.”

The corporate advisor model also varies from the independent model when it comes to direct competitors. For the former, these consist of the larger independent and bank-owned brokerages. Many of those independent firms offer their advisors competitive compensation models with strong equity ownership programs, but, Ferstman says, DundeeWealth’s offering is competitive, with a strong stock-purchase program and access to the other parts of the Dundee group of companies.

IE