Stemming broker defection is a challenge in any merger. Since acquiring Macquarie Private Wealth last year, Richardson GMP has lost 13 advisors – and $1.3 billion in assets — it wanted to keep, says Andrew Marsh, president and CEO of Richardson GMP.
But aside from this growing pain, the firm is happy with its purchase. November 2013’s $132-million deal more than doubled Richardson GMP’s advisor teams (from roughly 115 to almost 300), and pushed assets from around $15 billion to $28 billion. In January, the firm sold 66 lower-revenue Macquarie advisors, worth $2 billion, to Dundee Goodman Private Wealth.
Between that sale and teams leaving or retiring, the firm is down 90 advisory teams, says Marsh. GMP Capital’s Q2 2014 financials say the firm now has 204 teams.
Marsh adds Richardson GMP was prepared for assets to settle around $26 billion after the acquisition, given broker defection. As of Q2 2014, his firm’s asset level is $28.87 billion, of which roughly $2.5 billion is thanks to stock market growth.
To offset outflows from the departures, Richardson GMP has organically grown assets more than $800 million over the past year, and recruited six teams with about $650 million in assets. Over the next six months, Marsh says the firm expects to recruit new advisor teams representing another $1 billion in assets.
“We knew with retention risk, as competitors came at us, we could stand to risk losing advisors,” Marsh tells Advisor.ca. “But as long as we’re able to add new partners selectively across the country, we could offset whatever losses we had for those who chose to work elsewhere.”
New comp for Macquarie brokers
Effective January 1, 2015, Richardson GMP will end the compensation plan available to Macquarie advisors.
Macquarie’s payout ranged from 25% to 52% of annual commissions and fees, whereas at Richardson GMP, payout ranges from 20% for those generating less than $375,000, to 55% for those generating more than $6 million. “For those generating greater than $1 million, the payouts are very close to identical between two former policies,” according to Marsh.
Marsh says some Macquarie advisors may receive lower base payouts under Richardson GMP’s plan, but the firm’s cash bonus for net new assets and stock bonuses for revenue growth could potentially bolster compensation. “They will actually have more paid to them if they grow their business and their revenues,” says Marsh. “It’s just managing change.”
Different share structures
Macquarie advisors became equity owners after joining Richardson GMP. But people familiar with the firm’s shareholder structure say Macquarie advisors’ private share dividends are equivalent to half of what some Richardson GMP advisors receive.
Marsh declined to comment on the shares held by Macquarie advisors, but confirms the company has different share classes based on when someone joined the firm. For instance, full dividends go to those who have personal capital invested in the company and who have been with the firm since before the 2009 merger of Richardson Partners Financial Ltd. and GMP Capital Inc.
“All of the shares will be merged together once we feel that we’ve treated our original pioneering partners as fairly as possible,” says Marsh.
Managers and advisors at Richardson GMP currently hold about 37% of the company shares, while the rest are held by GMP Capital and the Richardson family.
Since Richardson GMP’s shares are private, advisors cannot easily liquidate them. But Marsh says the company will roll out an internal liquidity pool at the end of the year to enable existing employees and advisors to sell up to 10% of their shares.
Retirees, on the other hand, will be able to sell all their shares into that pool. The board has yet to determine the share price, but at this point, “we actually have way more buyers lining up than sellers,” says Marsh.
Marsh says Richardson GMP is now ready to grow average revenue per advisor team from $146 million to $200 million, and to push the firm’s overall assets from $29 billion to $50 billion over the next five years. But they don’t want to grow beyond 250 teams; rather, they’ll help existing advisors’ practices grow.
In particular, the firm plans to expand its tax and estate group across Canada given the ongoing demand for its services with the Macquarie advisors, says Marsh.
It also plans to ramp up its offering to U.S. clients. Richardson GMP formed a strategic alliance with New York-based Dynasty Financial Partners that enabled Richardson GMP to serve Dynasty clients in Canada, and allow Dynasty Financial to provide services to Richardson GMP clients in the U.S.
And through its U.S. unit, Richardson GMP has a platform for advisors with portfolio management designations to serve U.S. clients without having to take U.S. securities exams. Marsh says progress with that platform has been slow, since people who would have supported the initiative were managing the Macquarie transition. But the platform now supports around $100 million in assets, and the firm’s looking to add more clients throughout the fall.
“We know we’ve got a lot of work to do yet, and we continue to stay on the right path,” says Marsh. “We’re thrilled with what we’ve seen so far.”