Vancouver-based PI Financial Corp. has emerged as among the consolidators of the domestic brokerage business with a three-way deal announced Monday.
PI has entered into a definitive agreement to get the retail clients of two Western Canadian firms, Wolverton Securities and Global Securities Corp.
The two deals, announced at the same time, are scheduled to shut at different times, in part because of the time that it takes to complete “bulk transfers” of client accounts. Bulk transfers are felt to be more useful for brokers as well as their clients since it obviates the necessity to get transfer forms signed prior to the accounts move. The 3 firms are all “self clearers.”
The financial details of the transaction have not been disclosed but it is understood the deal involves cash. In time PI works with employees in the two firms, deciding whom it wants and providing them retention packages. PI’s final payment will be a function of the number of advisors move. The two transactions also require regulatory approval.
After both deals are completed and assuming all advisers move, the “new” PI Financial will be the place to find a lot more than 300 employees, 200 retail advisers, (35 who are generally portfolio managers or derivatives portfolio managers), 40,000 clients contributing to $4 billion of assets under management. Before the proposed deal, the “old” PI had 200 employees contributing to $2 billion of client assets under management.
“This transaction reflects PI’s commitment to expanding and strengthening our business,” said Max Meier, the business’s chairman and chief executive, when stressing that “independent dealers are crucial to the health of Canadian capital markets and provide investors unbiased use of a complete suite of investments.”
In a job interview, Richard Thomas, a PI director, said the “impetus” for that two transactions ended up being to create larger scale. “There’s so much complexity in the market that you need scale to supply clients using the tools and information that they need.” Too clients will have new opportunities since the deal brings Wolverton’s wealth management prowess and Global’s derivatives’ focus.
Brent Wolverton and Art Smolensky, the 2 senior executives at Wolverton and Global Securities respectively, will become senior officers at the “new” PI. PI’s Thomas said there’s no plans to look for other acquisitions within the next 6 months considering that it will likely be busy completing the 2 deals announced Monday.
Aside from PI, Toronto-headquartered Euro Pacific has also been busy as a consolidator: over the past five months it has acquired Pope & Co. and the retail network of Dundee Securities. Mackie Research Capital has additionally been busy.
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PI’s acquisition plans were announced the same day the Investment Industry Association of Canada (IIAC) released it’s presidential letter and also the brokerage industry’s financial performance for 2015.
In the letter, Ian Russell referred to the difficulties faced by the retail firms, specially the client relationship model (CRM) and “rising regulatory costs,” adding that the country “can ill-afford losing the boutique sector.”
Russell asserted 10 % hike in operating costs for that self-clearing retail boutiques occurred since the firms hired “compliance specialists and consultants and (adopted) the necessary technology and systems to comply with the brand new CRM rule framework.”
Russell also requested the Ontario Securities Commission to experience a cost-benefit analysis of plans to further reform the client-advisor relationship and make up a “best interest” standard.
bcritchley@nationalpost.com
