HollisWealth buyout cements iA’s presence in Western Canada

By Alain Thériault | February 06 2017 07:00AM

Carl Mustos

By acquiring HollisWealth, iA Financial Group can achieve economies of scale in technology and strengthen its foothold in securities in Canada, particularly in the west.

On Dec. 5, Industrial Alliance announced the acquisition of HollisWealth from Scotiabank. The bank’s wealth management subsidiary boasts the fourth largest network of independent advisors in Canada, iA reports, with assets under management of $34 billion.

iA’s assets under management will grow to $75 billion following the transaction. HollisWealth is also providing about 800 independent advisors distributed in over 300 offices across Canada.

In an exclusive interview, Carl Mustos, president of IA Clarington Investments, told The Insurance and Investment Journal that this transaction bolsters the national presence of Industrial Alliance in wealth management, while leveling regional disparities. He adds that this acquisition lets iA achieve a more balanced presence across Canada in its two networks: mutual funds and securities.

“We’ll have a greater IIROC penetration in the West. iA is strong nationally on the MFDA advisors side. We’ll now be more balanced between IIROC and MFDA advisors across Canada. MFDAs were more represented in the iA channel, while the HollisWealth channel was more IIROCs. You have 3 IIROC advisors for one MFDA advisor in the HollisWealth channel, that means 600 (IIROC) to 200 (MFDA) approximately,” Mustos explains.

iA’s wealth management network potentially includes 3,000 advisors, but Mustos notes that it is hard to compare the two networks. “It appears quite high but many of those 3,000 advisors are really insurance based, and have a smaller wealth business. Some have a very large practice on the MFDA side. HollisWealth is more of a pure wealth channel,” he explains.

The transaction will produce useful synergies in technology, when iA and HollisWealth combine their two platforms, Mustos says. “Investing in technology is expensive. HollisWealth has technologies that we’re excited about. We want to bring each one’s strengths together and use the best of both.”

Well aware that customers expect more technological support, he does not rule out the development of digital advisory services, similar to robo-advisors.

“We are constantly working on digital advisory services to meet our clients’ and advisors’ expectations,” explains Mustos. Advisor independence will remain at the core of these developments. If we introduce a robo-advisor, it would be for advisor’ use in serving their clients.”

Advisor independence will also enhance the product line, Mustos adds. HollisWealth was part of Scotiabank’s acquisition of DundeeWealth Inc. in 2011, which also included Dynamic Funds. Dynamic Funds is not part of the deal with iA and will remain part of Scotiabank.

Mustos emphasizes that advisors with both entities would not have financial incentives to sell Dynamic funds or IA Clarington funds. Each product must be approved by a committee before joining the network’s product offer.

“We hope that IA Clarington will be able to earn its way into the solutions that advisors provide for their clients. We want to make sure that clients are not adversely affected by this transaction so we will continue to distribute Dynamic Funds and maintain any programs that they would have been participating in already,” he says.

Mustos says that this open architecture is fundamental throughout the network. “The transaction will help to establish a strong national independent model for advice, which is good for our industry, as opposed to a more corporate approach. It creates an alternative to the banks,” he explains.

Since 2000, Industrial Alliance has concluded 25 acquisitions in wealth management. The insurer plans to close the present transaction in the third quarter of 2017.

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