{"id":331679,"date":"2005-03-30T13:20:00","date_gmt":"2005-03-30T18:20:00","guid":{"rendered":"https:\/\/www.investmentexecutive.com\/uncategorized\/news-28231\/"},"modified":"2005-03-30T13:20:00","modified_gmt":"2005-03-30T18:20:00","slug":"news-28231","status":"publish","type":"post","link":"https:\/\/www.investmentexecutive.com\/newspaper_\/news-newspaper\/news-28231\/","title":{"rendered":"Industrial Alliance fine-tunes strategy
"},"content":{"rendered":"

Executives at quebec City-based Industrial Alliance Insurance and Financial Services Inc. have added another building block to the geographically diversified wealth-management business it has been building over the past five years.

In a deal announced March 3, the firm\u2019s wholly owned subsidiary, Industrial Alliance Securities Inc.<\/b>, acquired the business of Toronto-based full-service securities broker KingsGate Securities Ltd.<\/b>, a wholly owned subsidiary of the KingsGate Group of Companies<\/b>.

Pending regulatory approval, expected this month, the deal will see KingsGate Securities\u2019 30 employees \u2014 including 23 licensed brokers \u2014become the Ontario arm of Industrial Alliance Securities. More important, the acquisition provides a platform for Industrial Alliance to expand in Ontario and later throughout the western provinces.

KingsGate Group will manage that growth as a separate service contract, says Fred Roberts, KingsGate\u2019s co-founder and CEO.
Roberts plans to use higher than normal commission payouts, in-house resources and advisor ownership of the client book to attract brokers to the Industrial Alliance Securities stable.

\u201cWe can offer all the same resources as the large institutions, if not better, but in an environment that is conducive to the independent practitioner,\u201d he says. \u201cThere\u2019s not a brokerage house on the Street that will have higher comp than we will.\u201d

The actual commission differential will depend on factors such as whether the recruited advisor works for a large full-service investment dealer or a smaller independent operation.

Roberts has two recruitment targets for building up Industrial Alliance Securities in Central and Western Canada: disenchanted brokers looking to leave their current arrangements and smaller companies available for acquisition.

The two parts of this deal complement Industrial Alliance\u2019s long-held geographical strategy, launched in the late 1980s, to extend its presence across the country without forsaking its Quebec roots.
\u201cIndustrial Alliance \u2014 the life insurance company \u2014 is already in Vancouver and Toronto and in the Maritimes, too,\u201d says Ga\u00e9tan Plante, president of Industrial Alliance Securities. \u201cSo Industrial Alliance Securities should offer these products across Canada. That\u2019s the only way to do it.\u201d

The newly created Ontario subsidiary of Industrial Alliance Securities will act as regional headquarters for Ontario and the western provinces, reflecting the company\u2019s attempt to accommodate cultural differences among regions. \u201cOntario reps will report to our Ontario regional office. They won\u2019t report in Quebec,\u201d he says. \u201cWe believe there are different cultures in Canada and it is easier if you serve people in their area with people who are there.\u201d

This deal also complements Industrial Alliance\u2019s five-year-old strategy of expanding its wealth-management business by adding to the company\u2019s assets under administration and bringing an additional
5,000 accountholders to its customer base.

Industrial Alliance views securities brokerage as one of two components in its wealth-management strategy. Indeed, the KingsGate deal is only the latest in a string of brokerage acquisitions over the past three years. The other component \u2014 mutual funds \u2014 has two subsets, manufacturing and distribution. Both segments have been built up through acquisitions.

Several positive factors underpin Industrial Alliance\u2019s strategies, says Gavin Graham, director of investments at Guardian Group of Funds Ltd.<\/b> The cost of buying companies with assets under administration has actually decreased in recent years. \u201cYou\u2019re not paying too high a price these days in terms of percentage of assets under management compared with years ago,\u201d he says. In 2000-01, for example, prices in such transactions as AIM Funds Management Inc.<\/b>\u2019s acquisition of Trimark Investment Management Inc. ranged between 8% and 10% of assets under management, he adds. They now range between 3% and 6% of assets.

Moreover, Industrial Alliance\u2019s methodical approach has meant an orderly insertion of pieces into the puzzle. \u201cIt has the various areas covered. It has insurance, segregated funds, mutual funds, distribution, securities brokers and distribution in place,\u201d Graham says.

The strategy does face obstacles, including the company\u2019s size and market capitalization relative to larger insurers such as Great-West Life Assurance Co., Manulife Financial Corp.<\/b> and Sun Life Financial Inc.<\/b>

The ever-present need to increase distribution also remains an obstacle.
\u201cDistribution is the key. The battle for shelf space is getting more and more intense,\u201d
Graham says, adding that internal growth appears easier and cheaper but is slower than growth through acquisition.

\u201cIf you buy control of FundEx [Investments Inc.]<\/b> you have ready-made distribution, and if you buy KingsGate Securities assets, you have a ready-made client list,\u201d he adds.
Industrial Alliance recently increased its ownership of FundEx to 75% from 25%.

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