Boutique firm looks to bulk up

One of Canada’s youngest brokerage firms is determined to play with the big boys. Toronto-based MGI Securities plans to more than double in size over the next two years, from 43 advisors to about 100 and from $2 billion in assets under management to between $6 billion and $7 billion.

Sam Collins, senior vice-president of MGI’s retail division, says reaching the century-mark will be sufficient for the six-year-old firm. “We don’t have any desire to be anything but a boutique, that’s what our clients like about us. We don’t have any grand plans to have 500 brokers coast to coast. Beyond 100 brokers and we’d have to start bringing in more overhead and management,” he says.

Collins says MGI, which changed its name from McFarlane Gordon a year ago, is aiming to expand beyond its current base of Toronto, London, Winnipeg and Calgary and attain a national presence within the next couple of years.

“There are certain key markets in Western Canada, such as Vancouver and Edmonton, that we’re working to get into right now. There are also a lot of key areas in southern Ontario, such as Markham, Kitchener and Waterloo,” he says, noting the firm has already grown from 10 brokers to its current level of 43 in the past 18 months.

The firm’s recruitment strategy is to convince experienced brokers at other firms to jump ship by dangling packages featuring high payouts, cash and shares in MGI’s parent company, Jovian Capital. The firm’s “sweet spot” is advisors with five to seven years of experience with books between $30 million and $40 million.

“We have no desire to hire rookies. We hire people with mature books of business. We run a pretty lean ship here, we don’t really have a training department, per se,” he says.

Collins says MGI isn’t going to grow in single-broker increments either. “We want a group of three to four brokers put in place before we’d open a branch. It’s quite expensive to open a branch and there are a lot of regulatory hoops to jump through,” he says.

Collins says he’s optimistic MGI will meet its goals because he’s hearing many brokers — particularly those doing between $400,000 and $700,000 in annual gross revenue — are “getting squeezed” at the bank-owned firms.

But just being a solid mid-range producer won’t pass muster, he says, because new recruits need to be a right match for the firm.

“We end up not hiring a lot of people after we do our due diligence [on them]. We’re looking for team players, someone who understands the platform and gets the idea. Simple as that,” he says.

Collins says MGI has a flat 50% payout to all of its advisors. The company is also responsible for phone bills, computer costs and other expenses associated with running an office. MGI provides one assistant based on $700,000 worth of production.

He says stock is included in the recruitment packages because he wants all of the firm’s people to have the same commitment level to the firm and “be on the same page.”

“We also want everyone to share the risk as well. Everybody at MGI owns shares, from the top-end producers to the receptionists,” he says, noting the firm also has an employer share ownership plan.

But the road to 100 advisors may be filled with a few twists and turns, according to Windsor-based analyst Dan Hallett. He says MGI will face some “stiff competition” in its quest to reach its growth targets.

“Those seem like pretty ambitious goals. All the firms, like Richardson Partners Financial, Dundee, Raymond James, are chasing seasoned veterans with good-sized books,” he says.

Hallett says the aforementioned troika also has the advantage of being better known in the industry, particularly with the lucrative high-net-worth client segment.

“I think MGI has more of an uphill battle than the other firms. They’re not as well known and if you’re not as well known, it’s not as clear what you bring to the table for advisors,” he says.

Collins doesn’t disagree. He says overcoming that challenge has been a primary focus for the past two years and will continue while the company attempts to grow.

“Name recognition is a struggle for any firm coming out of the gate. Six years ago, nobody knew who Wellington West was, now everybody knows who they are. The key is to get out there and do some brand name recognition,” he says.

Collins is a fan of the Winnipeg-based firm’s business model and says CEO Charlie Spiring has done a “great job” in getting people to hear his story. “We think we have the firepower to do the same thing,” Collins says.

Hallett says MGI’s packages sound competitive, particularly the inclusion of shares in Jovian. “I think the more entrepreneurial advisors that would be drawn to an independent would certainly look favourably upon some equity in the firm,” he says.

Renee Alexander is a freelance financial writer

(07/20/06)