Canaccord looking for “highly talented” human advisors

“I think everyone in the industry is looking at robo advisory and trying to uncover where, if at all, it applies to their strategy,” says Stuart Raftus, Canadian president of Canaccord Genuity Wealth Management, in an interview.

Read: Banks vs. robos: competition will transform industry, says BoC

“As the industry moves more toward robo advisory, or more toward commoditization or more towards off-the-shelf […] one-size-fits all, we think it creates more opportunity for us. We’re a boutique. We’re looking for clients with real, specialized needs,” Raftus says.

Canaccord Genuity Group Inc., the Vancouver-based investment banking and financial services company, is looking to strengthen its wealth management services in seven Canadian cities — Halifax, Montreal, Waterloo, Toronto, Calgary, Edmonton and Vancouver — by attracting investment advisors offering both wealth management and transactional investing.

Transactional investing

Depending on suitability, some clients are looking for “wealth creation” in addition to the usual wealth preservation, diversification, estate planning and related services. Wealth creation tends to be “idea-driven investment solutions, what we refer to as more the transactional side of the business,” Raftus says.

Read: What if: a prospect is skeptical about your value?

“Sometimes we have clients that are CEOs of small companies that are looking to raise capital. We have the ability to help them raise that money, to move their business plan forward,” he says.

The Canadian unit has 139 advisory teams (including 392 licensed professionals), about 90% of them in-house corporate team members. The remainder are independent wealth managers operating on a franchise model.

Hiring

Over the past four months, Raftus says, he has hired seven advisors from banks, whose assets in aggregate amount to $550 million, averaging more than $78 million per advisor.

Read: Artificial intelligence, overseen by humans, key to new robo

“It’s our strategy to continue to hire seasoned, talented investment advisors — not specifically from the banks, it could be from other independents — but we see that as an opportunity for us over the next few years,” he says.

A Canaccord investor presentation notes an “excellent recruiting environment” in Canada – likely a consequence of industry dynamics like consolidation and downsizing by the banks amid pressures from online banking and other fintech.

The Globe and Mail has reported that Toronto-Dominion Bank, seeking to expand its wealth management business, is a serious bidder for independent firm Richardson GMP Ltd. Other bidders, it reports, include big American players Raymond James Financial Inc. and Wells Fargo & Co.

M&A

Raftus says merger activity in the sector tends to come in “flurries.” Wealth management is a scalable, profitable business, and one way to grow is through acquisition. “Larger firms want to get larger,” he says.

While Canaccord has “been on the acquisition trail” in the U.K., its Canadian operation would only “consider a very specific acquisition,” he says. It’s not trying to expand its platform and profitability by adding thousands of advisors.

Read: IPC eyes WealthSimple as it expands private wealth offering

“We would look at acquisitions that would have to fit very, very neatly with our overall strategy, and our overall strategy is to be smaller than larger,” Raftus says. “Clients are going to come in and receive more of a bespoke experience based on their own individual objectives and investment goals, and deal with a very high level investment advisor.”

That said, he is looking to acquire “highly talented, experienced, individual investment advisors,” he says.

Turning a profit

Canada is just one part of the company’s wealth management business, which manages close to $33 billion from its offices in the Canada, the U.S., Europe and Australia.

Canadian AUA was $9.8 billion at the quarter ending June 30, down 7.8% from $10.6 billion a year earlier, which the company says reflects lower market values and a reduction in advisory teams.

Its most recent report to shareholders noted the Canadian wealth management business had returned to profitability for the first time since fiscal Q2 2012. Income before taxes for the quarter ended June 30 was $400,000, up from a loss of the same amount a year earlier.

“This result was largely driven by our ongoing expense reduction initiatives. Looking ahead, we will continue to focus on improving recurring revenue growth across our wealth management operations, to help offset the inherent volatility of our global capital markets businesses,” Dan Daviau, CEO, said in a letter to shareholders.