John O’Connell, founding partner of The Harbour Group at RBC Dominion Securities, and who recently left the company, has struck a deal to buy discretionary money manager Davis-Rea Ltd.
He says he is officially still an employee of RBC until the end of the month.
Having worked with RBC DS national director David Agnew for 24 years, O’Connell says he wanted to give him ample notice of the acquisition and leave the company on good terms.
“It wasn’t about me trying to sneak out the door over a long weekend,” he says.
“I’ve always wanted to run my own business,” O’Connell explains. Upon regulatory approval, O’Connell will become chair and CEO of Davis-Rea Ltd.
He had hired investment banking firm Crosbie and Co. to identify a potential takeover target. The firm introduced him to the management of Douglas Davis and David Rea.
His first order of business is to get to know the client base better, in order to reassure them that there will not be any substantial change in the way the firm manages their money.
“These people’s portfolios have been managed very, very well; there is some low cost base stock in there and you have to be sensitive to that,” he says.
He says the client base is made up of roughly 80% individual investors and 20% institutional clients.
The firm will “aggressively” pursue new distribution, including forging relationships with the planning community, which would include more accessible pools with investment minimums of $50,000. Current minimums are $250,000.
Further down the road, he is considering relationships with sub-advisors who could provide access to similar, value-based investors outside of Canada. These relationships would probably entail rolling out new pools for clients.
“I will be the sole shareholder of the business, but I don’t expect that will be the case forever,” he says. “I intend to look for strategic acquisitions or mergers, because I think the industry is going to go through a major restructuring, quite frankly.
“I think a lot of people have had a ‘near death experience’ and the regulatory requirements are increasing all the time — I think you’re going to see the smaller players get pushed out.”
On the flipside of that consolidation, he says there is a very strong desire for independent investment counsellors.
“My sense is that you’re going to see a big change in the financial services industry in Canada,” he says. “It’s changed dramatically already in the United States, where you have a more aggressive [registered investment advisor] model, and I wouldn’t be the least bit surprised if you saw that come to Canada as well.”
(10/05/10)