PI Financial acquires two independent dealers as consolidation heats up in brokerage business

Vancouver-based PI Financial Corp. has become among the consolidators from the domestic brokerage business having a three-way deal announced Monday.

PI has applied for a definitive agreement to acquire 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 close at different times, in part because of the time it takes to do “bulk transfers” of client accounts. Bulk transfers are felt to be more useful for brokers and their clients since it obviates the need to get transfer forms signed prior to the accounts move. The three firms are “self clearers.”

The financial information on the transaction have not been disclosed but it’s understood the deal involves cash. In time PI will work with employees in the two firms, deciding whom it wants and offering them retention packages. PI’s final payment is a purpose of how many advisors move. The 2 transactions also require regulatory approval.

After both deals are completed and assuming all advisers move, the “new” PI Financial is going to be home to more than 300 employees, 200 retail advisers, (35 who are either 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 and about $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 leader, when stressing that “independent dealers are essential to the health of Canadian capital markets and supply investors unbiased use of a complete suite of investments.”

In a job interview, Richard Thomas, a PI director, said the “impetus” for the two transactions ended up being to create larger scale. “There’s a lot complexity in the market that you need scale to supply clients with the tools and information that they need.” As well clients may have new opportunities because the deal brings Wolverton’s wealth management prowess and Global’s derivatives’ focus.

Brent Wolverton and Art Smolensky, the two senior executives at Wolverton and Global Securities respectively, will end up senior officers at the “new” PI. PI’s Thomas said there is no intends to search for other acquisitions within the next six months given that it will likely be busy completing the 2 deals announced Monday.

Aside from PI, Toronto-headquartered Euro Pacific has additionally been busy like a consolidator: in the last five months it has acquired Pope & Co. and also the retail network of Dundee Securities. Mackie Research Capital has also been busy.

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PI’s acquisition plans were announced within 24 hours an 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 known the challenges faced by the retail firms, specially the client relationship model (CRM) and “rising regulatory costs,” adding the country “can ill-afford the loss of the boutique sector.”

Russell said that 10 % hike in operating costs for that self-clearing retail boutiques occurred because the firms hired “compliance specialists and consultants and (adopted) the required technology and systems to adhere to the brand new CRM rule framework.”

Russell also requested the Ontario Securities Commission undertake a cost-benefit analysis of plans to further reform the client-advisor relationship and create a “best interest” standard.

bcritchley@nationalpost.com