CI takes fight to banks’ turf

Canada’s financial services industry has experienced rapid integration in recent years, with the traditional “four pillars” crashing down. With only two pillars remaining — insurance and everything else — Canada’s big banks have made significant inroads into the investments industry with very little new competition in their home market segment.

Now one of the largest mutual fund manufacturers says it will eventually make a foray into the banking and trust sector. At CI Financial’s annual general meeting held yesterday in Toronto, CEO Bill Holland suggested that the firm may soon need to push back against the banks, which have taken a dominant role in his backyard, the fund business.

CI would be joining a list of fund companies and insurers that have made small gains in the banking and trust sectors. To name just a few, AGF Management Limited and Franklin Templeton Investments have been relatively successful in the trust sector, while Manulife Financial and Dundee Wealth Management offer banking services.

“[Our advisors] are having problems in the fund business, because the banks are getting [the business],” Holland said in an interview with Advisor.ca. “All banks have a relationship with the client because all clients have a bank account. If advisors can offer basic banking services, there is less likelihood that the bank would end up with their investment management business.”

Holland says that within its 4,000 plus network of affiliated advisors, CI has an upper hand on other fund companies because of their economy of scale.

“A company our size has the ability to compete in all areas of financial services, other than an area that we have no interest in, which is corporate loans,” he says. “I think ours is a unique situation because we have so many branches across the country already. I think we would try to tailor our banking services to this financial planning network that we already have across the country.”

Holland says he’s not yet sure what form CI’s banking services would take but he expects it to be available within the next couple of years.

Dan Hallett, an industry analyst and president of Dan Hallett and Associates in Windsor, Ont., says CI’s move into banking isn’t surprising, given a broader trend by the independent fund companies starting to push back against the banks invasion of their market. He wouldn’t be surprised to see them offer banking products that other fund companies have already had success with.

“High-interest savings accounts and RRSP loans are two of the biggest products that competing firms are getting a lot of traction on,” he explains. “A company CI’s size is looking for more outlets to grow their business, and it makes sense for them to want to get a piece of that action.”

He notes that CI is in a unique position because of its close relationship with Sun Life. Sun Life owns a large share of CI and jointly they offer a number of products. Hallett says that the two companies have a huge distribution network when you combine the former Clarica advisors at Sun Life with CI’s large channel. All they are missing to compete with the big banks — and Sun Life’s chief rival Manulife — is a retail banking system.

“To have all of those advisors be able to distribute their products makes a lot of sense,” Hallett says. “It gives Sun Life a product that competes with Manulife, and gives CI a pretty good running start on the distribution network that it has under its roof.”

Those in the distribution channel are already giving Holland’s idea the thumbs up. Peter Hartel, an advisor with Assante in Kingston, Ont., says he had been turning to the alternative banks like Manulife and AGF in order to develop integrated investment plans. He would prefer to offer an integrated approach to his clients by using CI services.

CI offering banking services will increase the appeal of their brand, he adds. “The banking should come as a result of the clients who are with CI-related products, as opposed to people who like their bank and choose their [investment] products,” Hartel says. “I think that if we can provide an affordable alternative to the typical banks with some sort of consolidated and flexible reporting, that will be a good thing.”

Filed by Steven Lamb, Advisor.ca, steven.lamb@advisor.rogers.com and Mark Noble, Advisor.ca, mark.noble@advisor.rogers.com.

(05/18/07)