Wealth giants to merge

GMP Capital and Richardson Partners Financial Limited have announced a plan to combine their respective wealth management businesses, GMP Private Client and RPFL.

The resulting firm, to be named Richardson GMP Limited, will have more than $11 billion in assets under administration, managed by 114 investment advisory teams across Canada. With an average of over $96 million in assets per team, the company will have the highest average book per advisory team in Canada.

“GMP’s proven expertise, strong balance sheet and leadership in the Canadian capital markets aligned with the history and legacy of the Richardson organization, we believe, creates Canada’s preeminent independent investment firm focused on servicing the capital markets and wealth management needs of entrepreneurs and high-net-worth Canadians,” said Kevin Sullivan, CEO of GMP.

James Werry, currently the president and CEO of GMP Private Client L.P., will become CEO of the new firm, while Sue Dabarno, currently president and CEO of RPFL, will become executive chairman.

“We think this is a significant shift in wealth management in Canada,” Werry told Advisor.ca. “The new Richardson GMP will be an extremely strong firm; one that will be home to the highest quality investment professionals.”

“This is a transforming moment in the business,” Dabarno says. “When we first met and started talking, we realized that we were very much competing for the same opportunities. But [now] our purchasing power is much stronger. With scale, we can do a lot more.”

One of the primary benefits of the merger is that RPFL advisors will be shifted off of the National Bank Financial platform they currently use, and onto the GMP platform, giving the new firm more control over its own systems and reducing costs.

“The two firms were growing very well separately,” says Werry. “That being said, this past year clearly underscored the need for scale, and what we have done here is combine two strong firms.”

Under the deal, James Richardson & Sons, Limited, which owns RPFL, will take a 12% ownership stake in GMP. Upon completion of the deal, GMP and Richardson Financial Group will each own a 35% stake in the new firm, with the remaining 30% of the company being held by Richardson GMP’s investment advisory and management teams.

“Going forward, we have the ability to offer equity to new advisors joining the firm, so it’s a very, very compelling recruiting story,” Werry says. “No other firm will be able to offer the culture, the equity ownership model, or the products and services that leading investment advisors require to serve high net worth Canadians.”

In terms of what the firm is looking for in new advisor teams, assets over $100 million is a good start. Dabarno says a focus on long-term client relationships is a must.

“They’re also very energized advisor teams that are focused on building and growing and providing long-term planning for their clients,” she adds.

There is also a clear benefit for existing advisors.

“Both firms had an implied promise to our employee/shareholders, which includes Sue and me, that at some point there would be a liquidity event,” says Werry. “What this transaction has done for both organizations is give us a baked in, hard requirement for GMP to acquire the Richardson family holding and the employee holding, and exchange it for shares in GMP [Capital] in five years time.”

In a conference call with analysts, Werry said that Richardson GMP should be profitable in 2010.

The deal has already been approved by the boards of all parties, but remains subject to corporate and regulatory approval. The transaction is expected to close in late October 2009.

“We believe that with Richardson GMP’s strengths and synergies there has never been a more resourceful or powerful alternative to serve clients,” said Hartley T. Richardson, president and CEO of James Richardson & Sons, Limited. “Together, we intend to create exclusive wealth management solutions and innovations. We are confident the combined management team will further our goal of building Canada’s pre-eminent, wealth management business.”

Hartley Richardson and H. Sanford Riley, president and CEO of Richardson Financial Group, will join the board of directors of GMP.

Richardson GMP will have offices located in 17 cities across Canada, including Montreal, Ottawa, Toronto, Winnipeg, Edmonton, Calgary and Vancouver.

(07/23/09)