The private wealth world has one fewer player.
Richardson GMP agreed to buy Macquarie Private Wealth Canada for $132 million. RGMP will pick up more than 185 advisor teams in 12 offices, as well as $12.9 billion of assets under administration.
In May 2012, Macquarie told Advisor.ca its AUA was more than $15 billion, but it has since dipped. A Macquarie spokesperson directed an interview request to Richardson GMP.
RGMP currently has more than 115 advisor teams managing $15.1 billion. The combined businesses will have approximately $28 billion under administration, making it Canada’s largest independent platform.
“There’s a place for a nationally branded multifamily office,” Andrew Marsh, CEO of Richardson GMP, tells Advisor.ca. “We can be the independent channel where innovative investment solutions can be shown to clients that may not make it in the banks.”
The move also marks another international firm exiting Canada’s private wealth space.
“We’ve seen HSBC get out of Canada, we’ve seen Merrill come and go twice,” he says. “No one cares about Canada more than Canadians.”
During the firm’s buildup here, Earl Evans, head of Macquarie Private Wealth, touted his firm’s international reach as a selling point for both advisors and clients. Marsh says the changeover won’t alter RGMP’s service offerings, but “we are continuing dialogue with Macquarie to find ways to benefit from what the Australian firm does.”
Back in the fold
The RGMP acquisition follows an aggressive recruitment campaign by Macquarie in 2012, which in many cases resulted in poaching advisor teams from Richardson GMP. Advisors who moved include Martine Cunliffe, Mike Philbrick, Bruce Moffatt and Wynn Harvey. At the time, Evans told Advisor.ca, “We’re receiving more and more calls from advisors.”
Advisor.ca also reported in May 2012 that Macquarie said it was on track to hit its five-year goal of 250 advisory teams in four years.
Having led RGMP through the merger of GMP Partners and Richardson Private Client, Marsh says he knows some advisors may choose to jump ship under new ownership.
“We’re reaching out to top producers and champions to make sure they’re getting their questions answered. This isn’t a firm for everyone,” he says. “We will see some people leave for other firms, and that’s OK. We want people to stay for the right reasons.”
Consolidation means competitiveness
In 2009, the Australian Macquarie Group purchased Blackmont Capital from CI Financial Corp. as a way to enter Canada. The deal closed for $93.3 million and represented 130 advisors and $6 billion in assets under administration.
The Blackmont deal valued the AUA about 33% higher, but both deals value the advisory teams similarly (about $717,700 each in 2009 versus $713,500 today).
“We got a good price on this, because all risk transfers to Richardson GMP,” says Marsh. “There’s no clawback on retention” – so if any Macquarie advisors leave between now and deal close, the purchase price will not change.
The lower AUA assessment may be because each asset dollar now represents less revenue.
Since 2006/2007, boutique firm revenues overall have fallen about a third, or $1.7 billion, according to a March 2013 report from IIAC. Most of that loss happened in the past two years.
“The viability of the smaller boutique firms is threatened,” wrote CEO Ian Russell, “unless a market turnaround occurs in the near term.”
Indeed, Macquarie’s Evans says the combined firms would be better positioned in a shrinking market.
“The combination of these businesses is a great fit,” he said in a statement. “We have grown the platform in Canada considerably and, by consolidating with RGMP, the business can accelerate its path to the next level.”
The acquisition doesn’t affect Macquarie’s other Canadian businesses, which focus on institutional equities, corporate advisory, funds management, asset finance, and fixed income, currencies and commodities.
To fund the deal, Richardson Financial Group and GMP Capital Inc. will equally subscribe to a preference share offering by Richardson GMP totalling $60 million. A common share offering will raise another $30 million. Upon completion of the offering, GMP and RFG will continue to own equal interests in Richardson GMP, with the balance being held by Richardson GMP’s management and investment advisors.
Pending regulatory approval from IIROC, the transaction is expected to close before the end of this year.