CI Financial's new chief executive Kurt MacAlpine, seen here, said he plans to 'build a growing presence' in the U.S. registered investment advisory market.
CI Financial Corp. has moved into the United States market for the first time with the purchase of a majority stake in Surevest Wealth Management, a Phoenix-based investment advisory business.
The deal is the first of two transactions announced by CI’s new chief executive Kurt MacAlpine, who said late Tuesday he plans to “build a growing presence” in the U.S. registered investment advisory (RIA) market.
CI also announced it has signed a letter of intent to acquire a second U.S.-based investment firm, with details to be announced by the end of 2019.
In the U.S., an RIA firm typically follows an independent business model – meaning it is not part of a larger brokerage – and advisers have a legal fiduciary obligation to clients. Surevest is a fee-only RIA firm, managing US$335.6-million in assets for more than 250 clients, according to U.S. regulatory filings.
No financial terms of the deal were disclosed. Earlier this month, during a quarterly conference call when he discussed CI’s interest in buying two firms, Mr. MacAlpine said that while neither RIA acquisition was material financially, "they are incredibly important strategically.”
“One, it allows us to provide a true cross-border experience for clients that are doing business with CI today," he said. "Second, it allows us to participate in this fast-growing segment of the market overall.”
The U.S. RIA market has more than 17,000 firms, but has seen a wave of consolidation in recent years. Canaccord Genuity analyst Scott Chan said CI’s deals involving smaller firms will enable them to “create a leading U.S. RIA aggregator” and could help boost future profits through shared services such as payroll and human resources departments.
In Canada, CI runs two large wealth-management businesses through Assante Wealth Management (Canada) Ltd. and CI Private Counsel LP. Combined, the two adviser channels have $48-billion in assets under advisement as of Oct. 31.
During the analyst call, Mr. MacAlpine said he saw a number of similarities between how CI runs the Canadian platforms and what they see in the U.S. RIA business, with both having a heavy focus on client services, financial planning and investment management.
“We do see a lot of synergies across the businesses,” Mr. MacAlpine said. “We do think both north and south will be able to provide leading cross-border services, and we do see opportunities that exist within the U.S. marketplace on a standalone basis as well.”
With about $129-billion in assets under management, CI’s expansion into the U.S. is part of the company’s attempt to modernize its asset-management business. The mutual-fund giant, which has seen its stock-market value fall from $10-billion in 2014 to about $4.7-billion today, is now looking to pivot into a larger wealth management company.
“The U.S. has the world’s largest and most accessible wealth management market and RIAs are its fastest-growing segment,” Mr. MacAlpine said in Tuesday’s statement. “CI is in a strong position to acquire leading RIAs and foster their continued expansion.”
Since joining the company in September, Mr. MacAlpine has made four transactions, including the purchase of the Canadian operations of his former employer WisdomTree Investments Inc.
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Clare O’Hara