Advisors shocked by Macquarie sale

They figured an acquisition was coming, but thought their firm would be the buyer.

Macquarie advisors, who spoke to Advisor.ca on condition of anonymity, say the news Richardson GMP will be purchasing Macquarie Private Wealth came as a surprise.

While sale rumours had circulated about three months ago, Macquarie head Earl Evans rebuffed them.

One advisor suggests that, given the firm’s global parent is more than 15,500 kilometres away, even he may have had little warning.

Read: Richardson GMP buys Macquarie Private Wealth

Nevertheless, advisors knew consolidation was inevitable.

“You could see it coming with the other [international firms] dropping out of the industry,” says Tom Trainor, managing director of Hanover Private Client in Toronto. “Consolidation is something we continue to expect.”

It’s a means of self-preservation for independents, adds Trainor, since bank market share in the wealth business is increasing. That contrasts with the U.S., where advisors are fleeing dominant firms and setting up boutiques.

But south of the border, there are more clients – and more dollars – to go around.

In Canada, “the wealth doesn’t materialize at the top end,” says Trainor. “I don’t think there are that many [ultra-rich] clients. A lot of them have multiple advisors, many of whom are outside the country. There are other competing forces you don’t see domestically.”

Read: What’s up in the boutique sector?

Michael J. Lagopoulos, former deputy chair of RBC Wealth Management (now retired), says he “never thought Macquarie fit into the local market” since it didn’t have a natural client or referral base. “I’ve never seen their financial statements, but I doubt if they ever made money. It makes sense they would sell to a consolidator.”

He adds the banks will target Macquarie advisors making at least $500,000 per year in revenue, luring them with signing bonuses and guaranteeing minimum earnings.

“That’s why I never liked buying these kind of businesses,” where the loyalty is to the advisor, not the organization, Lagopoulos says. He was involved with RBC’s PH&N purchase, and says PH&N clients had “bought an institutional name and relationship,” making them stickier after the changeover.

“If you don’t keep the advisor, you’re lucky to keep a quarter of his book,” he adds. When the advisor stays, about 90% of clients do, too.

Advisors worried, but optimistic

“Everyone’s wondering what the culture’s going to be like,” says an advisor whose firm was acquired upon Macquarie’s entry into Canada. Clients were impressed by Macquarie’s global research and brand, but the advisor says, “Clients stay on because of you.”

RGMP CEO Andrew Marsh says the firm is in talks with Macquarie “to find ways to benefit from what the Australian firm does,” but Trainor is skeptical.

“As a casual observer, RGMP is trying to develop that cachet, but it’s not a Goldman Sachs,” he says. “You can’t clearly say it has international reach.”

Read: Small firms fight for survival

A recent recruit from RGMP will miss Macquarie’s “fantastic culture,” praising the competency of head office staff and the local branch manager, as well as the firm’s strong philanthropic capabilities. (The advisor adds RGMP’s online access is stronger than Macquarie’s.)

But the advisor doesn’t expect much to change for clients, saying the two firms are similar in that they offer open architecture and access to a wide variety of investments. Plus, both have similar philosophies on social media use.

Another advisor says, “GMP and Macquarie were the two best independent firms. If I had to leave Macquarie before this announcement, Richardson would have been the place to go.”

Read: Advisors prefer independent firms: survey

As for how the deal affects the Canadian wealth management landscape, “Overall it’s a net negative,” says Trainor. “It’s not going to be the right thing for the end client as their financial advice tends to be highly concentrated within a limited number of companies.”

Lagopoulos agrees.

“The only winner is the broker,” he says. “The client gets nothing out of this. She’ll have to do new documentation.” He adds clients should use this change as “an opportunity to reassess financial affairs and make sure they’re getting the best service.”

Read: How to tell clients you switched firms

For advisors who have to tell clients the news, Lagopoulos suggests positioning it as “not your fault. You didn’t initiate this. Say [to clients], ‘You’re important to me and I’ll do whatever I can to make this work for you.’ ”

Melissa Shin

Melissa is the editorial director of Advisor.ca and leads Newcom Media Inc.’s group of financial publications. She has been with the team since 2011 and been recognized by PMAC and CFA Society Toronto for her reporting. Reach her at mshin@newcom.ca. You may also call or text 416-847-8038 to provide a confidential tip.