Advisors react to IPC takeover

(February 26, 2004) Yesterday’s announcement that Investors Group (IG) is acquiring IPC Financial Network brought mixed reaction from advisors. With IG’s deep pockets, some see it as a guarantee of IPC’s future success, but others worry that IPC is too small to maintain its identity, let alone its independent culture.

“I don’t have a concern with the recent announcement that IG is acquiring IPC [Financial Network] as long as IPC remains independent,” says Brian W. Goss, president of IPC Investments/Balanced Financial Services Ltd. in Vancouver. “I have been assured that IPC will remain independent and that business will continue as usual.”

Goss points to the IG takeover of Mackenzie in 2001 to support his expectation for non-interference.

“When IG acquired Mackenzie Financial, there was concern in the industry that IG may interfere with the operation of Mackenzie,” says Goss. “IG was true to their word and Mackenzie continues to operate today with the same philosophy and independence they had prior to the takeover.”

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But some feel Mackenzie was given an easier ride because of its size and fear the relatively small IPC could disappear altogether.

“Sure, when IG bought Mackenzie, they left them alone. Mackenzie already had critical mass and a strong brand in their market. Not the same for IPC,” reads a Talvest Town Hall posting by an advisor identified only as “wondering.” “I wonder how long it will be before IG lowers the rep payout and swallows the IPC reps into its fold. This is likely going to get very interesting!”

This concern is echoed in another Talvest Town Hall posting, which also casts doubt over whether IPC advisors will continue to own their client book.

“IPC is a decent firm to work for, but IG is very predatory. Their payout ratios are ridiculous and their contract states that IG owns the clients, not the advisors,” read a message by an anonymour poster. “I am very nervous about this deal and may decide to take my clients to a firm that will not try and steal my business.”

But Goss says IPC advisors should take it as a good sign that IG plans to leave Steve Meehan and Chris Reynolds in place, actively managing IPC.

“It is also important to us that all client information remain with IPC and not be shared or integrated in any way with IG,” he says. “I believe IG will respect this.”

Culture Clash

It is the potential clash of cultures which drove many advisors from IG to IPC in the first place, according to Michael Boni, an investment advisor at IPC Securities Corporation in White Rock, B.C.

“Probably 25% of IPC reps have come through the IG culture. We left IG for various reasons and one was some sense of independence,” he says. “IG said that we were independent contractors while working for them but that was far from the truth. Now they are saying nothing will change under IPC. It’s hard to accept that notion.”

But Bradley Sumner, a CFP with IPC in Kingston, Ontario, says it is IPC’s successful formula that attracted IG in the first place and he sees no reason for IG to start meddling. He suggests IPC might have had more control in the negotiations than outside observers might expect.

“My understanding is that there were a number of companies bidding for IPC and IG and Power Corp.wanted it more than the others — and just as important, IPC felt that the fit would be complementary,” says Sumner. “IPC planned to continue and thrive as an independent company. However, being a public company the officers had to review any serious offers. I see no downside.”

Goss agrees, saying the average IPC rep will not likely see any changes in the near future. In fact, he says the deep pockets of Power Corp. will fortify IPC’s financial future.

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What do you think? Does IG pose a threat to IPC’s independence? Or will its deep pockets ensure IPC’s long-term future? Share your thoughts about this topic in the Talvest Town Hall on Advisor.ca.

Filed by Steven Lamb, Advisor.ca, steven.lamb@advisor.rogers.com

(02/26/04)

Steven Lamb