RF Capital to focus on recruiting, M&A to boost growth

RF Capital says it will ramp up advisor recruitment efforts this year and seek out acquisitions and partnerships in the second half of 2023 in a bid to boost growth following a period of costly transformation.

The firm put its recruitment efforts largely on hold last year while it managed a transition to back-office provider Fidelity Clearing Canada, which began in January 2023, as well as managed a move to new head offices in downtown Toronto.

“The bottom line is much of the heavy lifting is behind us,” said Kish Kapoor, president and CEO of RF Capital, parent firm of independent brokerage Richardson Wealth, at the firm’s annual general meeting on Thursday in Toronto. The firm released its first-quarter results on Wednesday.

Through the first three months of the year, Richardson Wealth added four new advisors, while holding recruitment meetings with advisors managing $21 billion in assets under administration in total, Kapoor said. Richardson Wealth currently has 158 advisor teams and 21 offices across Canada.

RF Capital would also “be investing more time” to acquire or strike partnerships “with like-minded firms” later this year, with the goal of boosting services to its advisors.

Kapoor said RF Capital expects to derive 60% of its growth over the next three to five years from mergers and acquisitions, and 20% each from recruitment and providing additional support services to its advisors, with the goal of tripling assets under administration (AUA) to $100 billion.

At the end of the first quarter, RF Capital’s AUA was $36.0 billion, up 3% from $34.9 billion at the end of the previous quarter, but down 3% from $37.1 billion a year ago. Average AUA in the quarter was $35.9 billion, up from $34.8 billion in the previous quarter, but down from $36.6 billion in the first quarter of last year.

Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) were $13.1 million in the first quarter, down 23% from $17.0 million last quarter, but up 18% from $11.1 million in the same quarter last year.

Kapoor said he expected the firm would increase adjusted EBITDA by 10% “through the balance of 2023” assuming continued growth in average AUA.

“While we expect debt and equity markets to remain flat, we’re very confident we can grow by recruiting more advisors and deepening client relationships,” Kapoor said.

RF Capital posted a net loss of $5.3 million in the first quarter of 2023, a drop from a net loss of $990,000 in the previous quarter, but improved from the same quarter last year, when the firm posted a $3.1-million loss.

Adjusting for transformation costs, as well as amortization of acquired intangibles, net income was $105,000 for the quarter, down from $3.5 million the previous quarter and from $393,000 the same quarter last year.

RF Capital generated revenue of $88 million in Q1, a decrease of 1% from both the previous quarter and the same quarter last year.

Fee-based revenue was $63 million, unchanged from last quarter, but down 8% from the same quarter last year.

Operating expenses were $38.5 million for the first quarter, up 6% from $36.2 million in the previous quarter, and up 5% from $36.9 million in the first quarter of 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.