Richardson Wealth struggles with back-office tech transition

Richardson Wealth’s conversion to a new back-office system has led to technology headaches for the firm’s financial advisors.

However, the Toronto-based brokerage said it expects to fully clear its back-office issues by the end of the second quarter of 2023, adding that they wouldn’t derail the firm’s recruitment efforts, which are a key part of the firm’s growth strategy.

“It’s a ‘full steam ahead’ sort of thinking and approach,” said Kish Kapoor, president and CEO of RF Capital Inc., in answer to an analyst question during a conference call on Friday, following the release of the firm’s fourth quarter results on Thursday. RF Capital is the parent company of Richardson Wealth.

In his message to shareholders in RF Capital’s 2022 annual report, Kapoor said the firm intended to accelerate the onboarding of new advisors once the “heavy lifting” of its transition to Fidelity Clearing Canada’s back office was done.

“Our financial outlook is expected to benefit from our growth in our core recurring fee-based revenue, high-interest income, increasing insurance penetration and improved operating leverage,” Kapoor said in the message.

At the beginning of 2023, Richardson Wealth converted to Fidelity’s advisor technology platform from its in-house back-office system. Since then, “we’ve had extraordinary challenges,” said Kapoor in the call.

While 92% of client accounts are opening “fairly seamlessly,” the remaining 8% “are causing us and our advisors, in particular, significant friction,” said Kapoor, who attributed the problems to technology issues overall, data transfer from the previous system to the new, and user training and experience.

Kapoor said the firm was working closely with Fidelity to deal with the challenges: “Week after week, we’re making incremental progress — perhaps in some people’s minds not fast enough — but I can assure you that there’s a huge effort underway.”

Kapoor said in February, Richardson Wealth met with advisor prospects representing almost $10 billion in assets under management.

“While all the pieces of the puzzle, including Fidelity, [are] not complete, in terms of the [advisor] experience, people can see the signs of everything that they would be able to enjoy if they were to come [to the firm],” Kapoor said.

The firm’s current “recruitment pipeline” — the total in assets under administration of prospective recruits — was $23 billion, with the firm hoping to convert 10%–15% of that figure this year.

Assets under administration (AUA) at the end of Q4 was $34.9 billion, up by 3.9% from $33.6 billion at the end of the previous quarter, but down by 5.2% from $36.8 billion from a year ago.

For 2022, RF Capital posted record annual revenue of $354 million, an increase of 8% from the previous year, with fee-based revenue hitting $255 million, representing a 5% increase from last year.  For the year, adjusted EBITDA was $62 million, an increase of 21% over 2021.

RF Capital posted a net loss of $990,000 in Q4, a decline from a net loss of $724,000 in Q3, but up from a year ago, when the firm posted a $2.4-million loss. Adjusting for transformation costs as well as amortization of acquired intangibles, adjusted net income was $3.5 million in Q4, up from $3.2 million in Q3 and from $1.4 million in the same quarter last year.

Rudy Mezzetta

Rudy is a senior reporter for Advisor.ca and its sister publication, Investment Executive. He has been reporting on tax, estate planning, industry news and more since 2005. Reach him at rudy@newcom.ca.