Berkshire rumour part of larger trend

By Steven Lamb | March 9, 2007 | Last updated on March 9, 2007
3 min read

While rumours and innuendo swirl concerning the apparently imminent sale of Berkshire, some within the industry say there is a better way to grow than buying an entire dealership. Taking the 80/20 rule into account, why should an acquirer buy the whole firm when it wants only the top 20% of producers?

“Our view is that we would rather the money go to the advisor. At the end of the day, our client is the advisor,” says Chris Reynolds, president of Investment Planning Council of Canada. “When you buy a dealer, your money is concentrated with a few individuals who may own that dealership, when in fact, who you really want to make happy is the advisor.”

Not only do the advisors reap the rewards of “transition costs,” but they are in control of the move. They choose the firm they are joining, rather than feeling that they have been sold by one head office to another.

IPC is itself at the centre of rumours that place the number of recruits between 50 and 100. Without tipping his hand too much, Reynolds admits the bulk of this cohort is coming from IQON, although “there’s probably a good 20 coming from other areas as well.”

He says the current cohort moving to IPC is made up of tight-knit groups of advisors who find it easier to do their due diligence together before making such a decision.

“This should be a very good year, but we will recruit anywhere from $500 million to $700 million worth of advisors in a normal year,” he says. “This is just, hopefully, an exceptional year.

“We’ve had about 10 advisors join us to date and hopefully there will be a few more over the next little while. I guess we’ve had more than our fair share.”

Reynolds admits that the sale of Berkshire — a rumour he’s been hearing for the past two years, he points out — would open the door to cherry-picking some of that firm’s better reps.

“While a company is in transition and the advisor is sitting there contemplating their options, we simply put up our hand as one of those options,” he says. “When change is catapulted upon them, that’s the time when a company like ours puts its hand up.”

Acquiring firms may find themselves raising their hands more frequently in the near future, as the industry seems primed for another round of consolidation. Increased competition from the banks is squeezing fees, while regulatory overload is increasing costs of compliance. Narrowing margins will inevitably drive less profitable firms to sell out, usually to a larger player with better economies of scale.

But the size of the new corporate master is not always the issue for advisors who are unhappy with being sold by their firm.

“It’s not just being bought by someone bigger,” says David Christianson, a planner with Wellington West Total Wealth Management in Winnipeg. “It’s what the emphasis is on. Respect for independence and co-branding seem to be the big things.”

As a fee-for-services planner, and only loosely affiliated with his dealer, he considers himself to be an outsider looking in on the typical MFDA model.

“It seems to me that a smart thing to do would be to target the advisors you want and see if you could acquire them as opposed to buying the dealership,” he says. “You don’t bring a legacy that you have to integrate, and you don’t get the chaff with the wheat.”

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Steven Lamb