In striking two key deals with Mackenzie Financial Corp., Laurentian Bank of Canada is bolstering its trust company unit, solidifying its position as a top provider of banking products to advisors, and offering its retail customers access to one of the top fund families in the country.

In September, Montreal-based Laurentian announced that its B2B Trust subsidiary would acquire MRS Trust Co. and MRS Inc. , a carrying dealer, for $165 million from Toronto-based Mackenzie. Laurentian also announced a distribution deal with Mackenzie that will see Laurentian become a primary distributor of Mackenzie’s mutual funds.

“These transactions,” says Réjean Robitaille, Laurentian’s president and CEO, “capitalize on two solid assets of the bank: B2B’s capability to serve the financial intermediary market; and the effectiveness of the bank’s sales force in Quebec to serve retail customers.”

Both deals will help Laurentian generate more fee-based income, Robitaille said, and fit with Laurentian’s strategy of investing in areas in which it has already established a competitive advantage.

The MRS companies and B2B Trust will be merged to create a combined entity with about $6 billion in loans and mortgages, $10 billion in deposits and more than $25 billion in assets under administration in self-directed accounts, with a network of more than 22,000 advisors.

Both B2B Trust and MRS offer banking products intended for distribution through financial advisors and provide back-office administration services to dealer and broker firms. The acquisition is expected to close in November, pending regulatory approvals.

The MRS deal appealed to Laurentian, say bank executives, because B2B and MRS have complementary strengths: B2B has developed a robust business in deposit and loan products, while MRS has built up a significantly larger business, compared with B2B, in self-directed products and account administration.

“A lot of advisors were dealing with us for one product and with MRS for another,” says François Desjardins, president and CEO of B2B. “Now, they can deal with one firm and have a much simpler and consolidated relationship.”

Apart from the MRS acquisition, B2B also has applied to the Office of the Superintendent of Financial Institutions for a charter to operate as a bank under the name B2B Trust. The process of merging the MRS firms and B2B Trust, as well as launching a bank, pending approval, would take an estimated 12 to 18 months.

“[It] will be quite a great organization,” Desjardins says, “[that will] really support advisors with all the different product needs they have.”

Meanwhile, the principal distribution arrangement Laurentian signed with Mackenzie, which will be effective at the beginning of 2012, will make Mackenzie funds the de facto “house brand” for Laurentian. The funds will be sold through Laurentian advisors at the bank’s 157 branches — almost all of which are in Quebec.

Laurentian’s clients may continue to invest in mutual funds from among a variety of fund families available through Laurentian in-branch advisors; however, Mackenzie will become the premier fund family at Laurentian, behind which the bank will throw its marketing and training support.

Laurentian has an existing principal distribution arrangement with Toronto-based IA Clarington Investments Inc. but the bank has indicated it is prepared to pay Clarington’s Lévis, Que.-based parent, Industrial Alliance Insurance and Financial Services Inc. , a $7.6-million penalty to break the agreement in early 2012.

“We had great success with Industrial Alliance in raising the sales of the mutual fund network,” says Stéphane Langlois, president of Laurentian Bank of Canada Financial Services. “Mackenzie has great resources, great support and a great mutual fund family. We think they will help us achieve more growth in the future.”

To begin, Mackenzie will offer Laurentian and its clients access to 40 Mackenzie mutual funds — almost all of which will be existing products. The two firms have discussed new products that could be launched for Laurentian, but nothing has been decided.

“The conceptual design is to create a suite of products that Laurentian feels will meet its client needs and enhance its ability to grow its client business,” says Charlie Sims, president and CEO of Mackenzie. “We’re delighted to have the opportunity [to partner with Laurentian].”

Mackenzie decided to sell its MRS Trust and MRS Inc. businesses to concentrate on its core business of investment management, Sims says, and because Mackenzie felt that it had gone as far as it could go in growing the trust business itself.

Adds Sims: “With the need for continued capital investment — economies of scale are important — we felt that a partner or a new owner [for MRS Trust and MRS Inc.] would be able to continue these businesses and meet the needs of advisors in a way that would be an improvement to the way the businesses should
operate.” IE