IIAC Media Coverage Specific to SAID
The IIAC leverages its strong media profile to raise awareness of, and shape the discussion around, the plight of Canada’s Small and Independent Dealers (SAID). The following is a collection of the IIAC’s recent SAID-specific media commentary:
The Globe and Mail – July 15, 2018 – ‘Transformative impact’: Proposed regulations could sink smaller firms, investment group says
Key passages:
• Regulatory proposals that outline changes to the way financial advisers provide investment advice and to the products being sold to retail clients may force smaller wealth-management firms out of business, according to the head of an investment industry association.
• The proposed rules and guidelines are out for public comment until Oct. 19, but Ian Russell, president and CEO of the Investment Industry Association of Canada (IIAC), says one thing is for certain: The rules will revolutionize the way advisers – and their firms – currently do business.
• “These rules and guidelines will result in changes to existing business practice to meet the targeted outcomes of best interest and client-first conduct,” Mr. Russell said in an industry note last week. “Over time, these reforms could have a transformative impact on the retail business in the investment industry, particularly driving further structural change and forcing greater reliance on financial technology.”
• Developing clear and well-defined guidelines for advisers will be critical to provide a “bright-line test” for investment firms on required conduct, and for regulators responsible for monitoring compliance with the rules, he adds.
• Mr. Russell says once the consultation process has ended, firms will need to implement new compliance systems, including adjustments in business practice, new policies and procedures for operations, new supervisory and oversight systems and new technology systems. One-time fixed costs will be significant and ongoing variable costs will increase, which will be a heavy burden for small retail firms.
• “The increased costs and reduced operating margins that will result from implementing the new rule framework will lead to further consolidation of the domestic wealth industry as small firms amalgamate, merge and terminate operations,” said Mr. Russell.
Advisor.ca – July 12, 2018 – How CSA’s ‘detailed and sweeping’ proposals will affect you: IIAC
Key passages:
• On the back of CSA’s proposed client-focused reforms, expect more industry consolidation as business practices change and advisor compensation is affected, says IIAC president and CEO Ian Russell in his latest industry letter.
• It remains to be seen how the reforms will look in final form, but Russell says they’ll have “a transformative impact on the retail business in the investment industry, particularly driving further structural change and forcing greater reliance on financial technology.”
Investment Executive – July 12, 2018 – CSA proposals will transform investment industry: Russell
Key passages:
• Proposed reforms to many of the rules that govern client-advisor relationships will transform the retail investment business fundamentally, put pressure on advisors’ pay and may force smaller firms out of business, warns a letter from Ian Russell, president and CEO, Investment Industry Association of Canada (IIAC).
• Russell’s letter outlines the IIAC’s initial assessment of a set of sweeping reforms proposed by the Canadian Securities Administrators (CSA) in late June.
Bloomberg – June 21, 2018 – Canadian Stocks Hit Record But No One’s Wearing Party Hats Yet
Key passages:
• It’s no secret that Canada’s stock market suffers from a lack of diversification, with too much exposure to cyclical commodity stocks and not enough to growth drivers like technology and health care. But some of the country’s business leaders say the reasons for its long-term underperformance go deeper than that: a lack of risk capital, too few independent investment dealers, and uncompetitive tax policy.
• In Canada, it’s not so easy to bring new companies to market. Nearly 50 independent investment dealers have closed shop in the past five years due to higher operating costs and weak commodity markets, and consolidation will only accelerate over the next several years, said Ian Russell, president of the Investment Industry Association of Canada.
• That means fewer options for companies that want to go public, pushing them to other sources of funding like private equity and venture capital, or to acquisitions by larger competitors.
• Investors are then left with fewer opportunities to diversify into underrepresented, high-growth sectors like technology — the real standout of U.S. markets.
Investment Executive – June 14, 2018 – Robust internal growth offers alternative to acquisitions, by IIAC President and CEO Ian Russell
Key passages:
• From 2005-15, firms were active in acquiring businesses and advisors to expand their business reach. The typical approach was to identify likely target firms based on price and compatibility with the existing business model. With efficient cost-management, integration of the independent businesses can improve earnings and performance. The cumulative result? One and one equals more than two.
• But the transforming wealth-management business offers a robust second option for independent retail firms to expand their client base and engagement. Specifically, this approach involves the use of a sophisticated, modern platform that adapts innovative technology, offers a more complex array of products and services, and changes advisors’ practices. Success, using this approach depends critically on crystallizing the vision to project the firm’s wealth-management value proposition.
Conseiller.ca – May 8, 2018 – « Tornade technologique » en gestion de patrimoine
Key passages:
• Le patron de l’ACCVM observe que cette réponse aux demandes conjuguées de la clientèle et des organismes de réglementation a « déclenché un cercle vertueux en même temps qu’un cercle vicieux ». D’un côté, l’offre de valeur des services financiers et l’accès pour les clients ont en effet été bonifiés et rendus plus accessibles avec l’arrivée d’« une plus large gamme de produits financiers, intégrés à des conseils financiers et fournis avec davantage de moyens technologiques ». Une amélioration qui a permis l’établissement de normes de service plus élevées, indique le dirigeant, notamment parce que l’investissement dans le numérique a « incité les entreprises à augmenter les applications informatiques pour réaliser des gains d’efficience dans l’exploitation et [mieux] répartir les coûts ».
• Mais d’un autre côté, nuance-t-il, « plusieurs petites sociétés spécialisées avec des ressources limitées, forcées de définir une stratégie à long terme et de déployer la technologie nécessaire, ont été incapables de résister à la tornade de demandes des clients et d’exigences prévues par les réformes réglementaires et de faire face aux coûts informatiques associés ». Au cours des cinq dernières années, quelque 17 sociétés de détail indépendantes ont ainsi dû fusionner, ont été achetées ou ont mis la clé sous la porte. Ces « réajustements opérationnels et structurels majeurs » ont fait en sorte qu’il reste aujourd’hui « environ 90 sociétés de détail indépendantes » en activité dans un marché très compétitif, relève le dirigeant, pour qui « les grands gagnants » ont été leurs clients.
Conseiller.ca – March 29, 2018 – Temps durs pour les firmes de courtage indépendantes
Key passages:
• L’année 2018 devrait être marquée à la fois par la persistance des incertitudes économiques et commerciales, une grande volatilité du marché et une diminution de la mobilisation des capitaux par les petites et moyennes entreprises, estime Ian Russell.
• Dans la dernière édition de sa Lettre du président, le président et chef de la direction de l’Association canadienne du commerce des valeurs mobilières (ACCVM) note que « la performance du secteur des valeurs mobilières a été compromise au cours des dernières années par l’augmentation persistante des frais d’exploitation concomitante de la faiblesse des marchés des ressources naturelles et de la mauvaise conjoncture des services bancaires d’investissement dans le secteur des entreprises de petite et moyenne capitalisation ».
• Résultat : les sociétés de courtage indépendantes de petite et moyenne taille ont obtenu les pires résultats, tandis qu’une cinquantaine d’entre elles ont mis la clé sous la porte au cours des cinq dernières années.
Advisor.ca – March 27, 2018 – Industry in flux will emerge lean and resilient: IIAC president
Key passages:
• Strength in the retail brokerage business drove Canada’s investment industry revenues and earnings higher last year, but with turmoil in other parts of the business, continued consolidation is on the horizon, says the Investment Industry Association of Canada (IIAC) in a new report.
• In his latest letter to the industry, Ian Russell, IIAC president and CEO, predicts industry consolidation will continue, amid tepid economic growth, subdued commodity prices and rising costs.
• “The industry will continue to consolidate around the firms that have stayed profitable through the period—a tribute to strategic vision and focus, sound management practices and cost control,” Russell says. “It will be a lean and resilient industry that eventually emerges, but one that will be smaller.”
Investment Executive – February 15, 2018 – Technology offers significant opportunities, by IIAC President and CEO Ian Russell
Key passages:
• Operating costs in the investment industry have risen inexorably in the past five years. This has hit the earnings performance of smaller investment dealers, with their narrow revenue base and limited business scale, particularly hard. But the technology investment that has driven up costs in the immediate term has created an opportunity to lower these costs over the long haul — especially if firms can take advantage of it.
• Electronic wealth-management platforms provide a promising architecture to improve the prospects of small and mid-sized firms — so long as they have the time to catch their breath in the midst of continuous regulatory reform and challenging business conditions to seize the opportunity.
Investment Executive – December 14, 2017 – Renovating the rulebook must be a top priority for regulators, by IIAC President and CEO Ian Russell
Key passages:
• Now, the priority for securities regulators is not another round of new rules; rather, it’s to review and renovate the existing securities rulebook comprehensively. The investment industry must help regulators identify rules that are obsolete and outdated, inefficient and duplicative, rules with unexpected negative consequences and rules that interfere with capital formation without clear offsetting benefits. The review process should also seek innovative approaches to securities regulation, such as eliminating prospectuses and relying on continuous disclosure documents, and rule proportionality for specialized small dealers.
• The review would also contribute to stemming the loss of many small retail and institutional boutique dealers that dominate the financing and market-making of small business shares in public venture markets. Some 50 dealers have succumbed to the layering of the regulatory burden with insufficient business scale to spread costs. Although other factors have contributed to the difficulties these firms have faced, easing the burden would be a significant step.
Investment Executive – October 19, 2017 – Regulators must avoid unintended consequences, by IIAC President and CEO Ian Russell
Key passage:
• Given clients’ high levels of satisfaction and trust with their advisors, regulators must take the necessary steps to keep the advisor option available to investors in light of the growth of new alternatives such as robo-advisors. This means careful implementation of new rules, constant review of the existing rulebook to alleviate unnecessary regulatory burden, proportionate regulation for specialized small dealers, and streamlining of the firm audit/compliance process. An excessive regulatory burden has the risk of increasing the threshold for new and existing accounts or limiting advice and services for small clients. New rules, such as prohibitions on embedded fees, could interfere with the business of small investment and mutual fund dealers, as small clients are either denied personalized advice or forced into costly fee-based accounts that may not be suitable.
Investment Executive – September 12, 2017 – Industry performance in recent years “remarkably solid,” IIAC says
Key passages:
• However, there is wide disparity within the industry.
• “Performance at the large integrated and mid-sized retail independent franchises has held up relatively well over the past three years,” says IIAC President and CEO Ian Russell. “Independent institutional firms and small retail firms have had mixed results, but on balance recorded relatively poor performance.”
BNN – September 12, 2017 – Investment industry shifts to attract more of the ‘average’ investor
Key passage:
• Ian Russell, president and CEO of the IIAC, joins BNN for a look at how the Canadian investment industry is handling another wave of consolidation and why the ‘commoditizing’ of investing could end up being a boon for the average investor.
Advisor.ca – September 12, 2017 – Retail advisory business driving the industry
Key passage:
• Here’s the good news: despite economic and industry challenges, the investment industry’s performance, “when viewed on an aggregate basis, has been remarkably solid and stable over the past four years,” says Ian Russell, president of the IIAC, in his latest letter.
• This is a surprise, he adds, when you think about “the pressing need to keep pace with innovation and […] unrelenting tempo of regulatory reform.”
• But don’t get too excited. The downside is “earnings performance has been far from uniform when examined from a more disaggregated perspective—in terms of type of business and size of firm.”
• Large integrated and mid-sized firms have done relatively well over the last three years, he writes, while independent institutional firms and small retail firms have, on average, “recorded relatively poor performance.”
Conseiller.ca – September 12, 2017 – Valeurs mobilières : le secteur se porte plutôt bien, mais…
Key passage:
• Globalement, la performance des grandes sociétés intégrées et des franchisés indépendants de taille moyenne du secteur de détail s’est « assez bien maintenue » depuis trois ans, ce qui n’a pas été le cas des petites sociétés spécialisées. De leur côté, les sociétés institutionnelles indépendantes et les petites sociétés de détail ont présenté des résultats variables, même si, en général, leur rendement a été « relativement faible ».
Winnipeg Free Press – April 14, 2017 – A-Spiring to make history
Key passages:
• Ian Russell, CEO of the Investment Industry Association of Canada (IIAC), said over the past eight years, about 30 independent firms across the country have disappeared.
• “Banks have become more dominant. They have grown substantially,” Russell said. “And there is a unique appeal to independents.”
• Russell cited several independents, including Richardson GMP, Canaccord Genuity and Raymond James, among others.
• “They are really very effective competitors in the business,” Russell said. “There is plenty of evidence to show small firms can be very successful in this market and it’s very gratifying to see someone else step up to the plate.”
Investment Executive – March 1, 2017 – Adding advisors
Key passages:
• Edward Jones is on a mission to add 1,000 financial advisors to its ranks by the end of 2020—and that’s just the starting point for the brokerage firm’s aggressive expansion strategy.
• That 2020 deadline will be followed by another push to recruit an additional 1,500 advisors.
• Edward Jones’ determination to grow at this pace demonstrates that the firm is upbeat about the Canadian market and has seen success here, says Ian Russell, president and CEO of the Investment Industry Association of Canada in Toronto.
• The firm has demonstrated an understanding of the need for wealth-management services in Canada, says Russell: “[That need] is really a product of the aging demographic and the demand for more services, [such as] financial planning, retirement advice, estate planning and specialized tax advice.”
• Russell agrees that Edward Jones has an opportunity to expand its client base, especially in the mass-affluent market, which is being affected by shifts in the financial services sector.
• Financial services firms are facing higher costs and some are raising the minimum account thresholds, leaving clients with lower levels of assets to receive commoditized services, he says: “[Edward Jones] sees investors who are looking for a more personalized service and personalized wealth management and they don’t have huge amounts of money.”
Advisor.ca – January 30, 2017 – Investment firm closures in Canada to rise, survey says
Key passages:
• 5 tips for competing as a small, independent dealer.
• The Investment Industry Association of Canada says 36 retail firms have resigned from IIROC since 2011, some through mergers and acquisitions, and an estimated 30 more retail boutiques are under earnings stress.
• Technological disruption and the increasing costs of regulatory compliance have created a new ballgame for smaller dealers as big firms, including the banks, expand through acquisitions and use their scale to compete on costs and pricing.
Financial Post – January 6, 2017 – Investment firm closures in Canada to rise, survey says
Key passages:
• The number of securities firms operating in Canada is likely to shrink further amid competition and escalating costs from technology and regulations, according to a survey from the country’s main industry group.
• But the industry’s own expectation is that the recent shift still won’t be enough to benefit all dealers – particularly the smallest of the bunch.
• “Roughly one-quarter of the small firms in the investment industry will continue to struggle from difficult competitive pressures and the steady escalation in fixed costs from technology and regulatory change,” IIAC chief executive officer Ian Russell said in a speech Thursday in Toronto.
The Globe and Mail – January 6, 2017 – Bay Street’s smallest dealers still under threat despite sunnier outlook
Key passages:
• With commodity prices rebounding and stock markets popping since the U.S. election, Bay Street is finally feeling more optimistic.
• But the industry’s own expectation is that the recent shift still won’t be enough to benefit all dealers – particularly the smallest of the bunch.
• “Even with greater optimism about the coming years’ prospects, we remain concerned that many small firms will not benefit much from the improving outlook,” IIAC head Ian Russell said in a speech to the Empire Club of Canada on Thursday.
• However, IIAC stressed that some smaller dealers have found a way to stay competitive. “We also observe that a core group of smaller firms, a critical mass of some 70 to 80 firms, have built strategic niche businesses, cut operating costs to the bone and adapted technology to compete effectively and compensate for lack of scale,” Mr. Russell said.
Investment Executive – January 5, 2017 – Building a strategic, niche business is critical for securities dealers
Key passages:
• Cutting operating costs and adapting technology to compete effectively and compensate for lack of scale are also key traits of successful firms, says Ian Russell in a speech
Advisor.ca – January 5, 2017 – Another year of challenges, or are things looking up?
Key passages:
• Luckily, according to the IIAC’s 2016 CEO survey, there may be better times ahead. The survey, which was conducted in November, polled 132 investment dealer member firms, and those execs were positive about market performance in the near term.
• Overall, Russell says the CEO survey reveals respondents are more optimistic about economic drivers and less worried about external, global shocks.
• That said, industry changes remain a frontline concern: CEOs expect their revenues to rise faster in 2017, but are watching for more regulatory pressure, increased competition from technology disruptors like robos, and demographics challenges.
Wealth Professional – November 18, 2016 – Cost containment a priority for Canadian wealth managers
Key passages:
• As Canadian wealth firms face increasing regulation and pressure to compete through technology adoption, cost minimization has become a major concern, according to IIAC president Ian C.W. Russell.
• Efforts to minimize expenses in other ways have successfully contained growth of operational costs in 2011-2015 at 2% per year. Some technology investments have resulted in improved efficiencies in operation and rule compliance.
• Firms have also attempted to reduce staff, but could only cut so much given the need for sales staff and compliance personnel among many shops.
Investment Executive – November 17, 2016 – Large securities dealers drive growth in investment industry profits
Key passages:
• Canada’s retail securities industry has proven to be surprisingly profitable over the past several years, with larger firms generally outperforming their smaller competitors.
• As a result, small and mid-sized firms will have to find ways to boost revenue and cut costs, including revising their advisor payouts, if they hope to compete, according to the Investment Industry Association of Canada (IIAC).
• [T]he performance of the wealth-management business has been uneven, with the large firms (both the integrated firms and the independents) benefiting from their superior scale, cost control and investment in technology whereas, some of the smaller firms have struggled, Russell says.
Advisor.ca – November 17, 2016 – In the advisory world, size matters
Key passages:
• On average, retail revenue rose about 6% annually from 2011 to 2015, outstripping annual operation cost increases, which are only about 2% per year, says Ian Russell, president and CEO of the Investment Industry Association of Canada, in an industry letter.
• Large integrated firms do better, because they can capitalize on scale to spread increased fixed costs over production. Among independent retail firms, profitability varies, with principal-agent models posting good earnings and smaller retailers proving unprofitable the last five years.
• He says small firms that do well have made “herculean efforts” to control costs, as evident in that small 2% annual rate of cost increases, despite substantial outlays for tech and compliance.
• Still, those costs are substantial, and put downward pressure on advisor payout.
• “There may be further attrition among small and mid-sized firms in the investment dealer retail business in coming years, but the many firms that survive will be effective and profitable purveyors of wealth management advisory services, with their clients the big winners,” concludes Russell.
Wealth Professional – November 17, 2016 – Wealth industry sees overall profit, but some firms struggle
Key passages:
• Headwinds faced by the Canadian wealth management sector have not prevented its overall profitability, though they are affecting some segments, according to IIAC President Ian C.W. Russell.
• The sector may have shown solid performance, but it has not been even across firms. The retail business of integrated firms has done well due to their scale, rapid technology adoption, and prudent cost management.
• However, while large independent retail firms have managed to achieve fairly good earnings, small and mid-sized firms have been unprofitable. “The poor performance of these smaller retail franchises suggests difficulties in containing costs and growing revenue,” Russell said.
• “Regulators must slow the pace of future reform to bring a proper cost-benefit assessment to the rule-making process, avoiding unnecessary compliance costs and limiting unintended consequences,” Russell said, calling for efforts to contain or rationalize compliance costs.
Advisor.ca – November 11, 2016 – No sale for Richardson GMP: GMP Capital
Key passages:
• Ian Russell, head of the Investment Industry Association of Canada, told Advisor.ca in an interview before the announcement that a bank purchase of RGMP would have meant losing “a unique firm, a really good franchise.”
• He added that “the bigger firms are going after the high-producing, high-performing brokers to build their business, and investing in their technology. That’s a good strategy.”
BNN – October 31, 2016 – What makes Richardson GMP an attractive takeover target?
Key passages:
• BNN speaks with Ian Russell of the Investment Industry Association of Canada about TD’s reported bid for Richardson GMP and what’s driving consolidation in the space.
Advisor.ca – October 20, 2016 – ‘Death by a thousand cuts’ for independent IIROC firms?
Key passages:
• The number of firms registered to trade securities has continued to fall, reaching 167 this month. And one industry group predicts an additional decline of 50 more investment houses over the next few years.
• “That number’s probably going to go down by another 50 firms in the next two [to three] years,” says Ian Russell, head of Investment Industry Association of Canada, noting that small houses of 10 to 15 people will be most affected.
• Lower commodities and resources prices have affected many boutique firms at the same time as they’re under higher regulatory and technology cost pressures.
Advisor.ca – October 17, 2016 – What’s in store for independent advisors?
Key passage:
• In Canada, the IIAC says 46 investment firms have closed or been taken over since 2012, which represents about a quarter of the industry.
Canadian Business – October 13, 2016 – Why fees will go up
Key passages:
• Many of the small dealers of yore would sell speculative offerings [Ian Russell, IIAC President and CEO] says.
• “Canadians are focusing less on risky investments and more on discretionary managed business,” such as financial and estate planning, he says.
• “As people age, you see this shift away from speculative investments and this move to larger firms that offer a wider array of services.”
Vancouver Sun – September 28, 2016 – Investment Industry Association of Canada’s Vancouver members hit by low commodity prices
Key passages:
• Almost all IIAC’s Vancouver-based members are small and mid-sized dealers whose business has been significantly impacted by the recent collapse of the commodity markets, [IIAC President and CEO Ian] Russell said.
• Those firms, Russell said last week, “have struggled, really, for five consecutive years … First and foremost, economics has played a role —there’s no question, it’s a venture market that’s heavily weighted to commodities.”
• For years, the “traditional model,” Russell said, would see many retail investors put 90 per cent of their investment with a big bank-owned investment firm, and then the final 10 per cent — their “spec money” — with a specialized IIAC dealer investing in small-cap stocks. But as investors age, he said, their tolerance for risk generally decreases, leaving less and less “retail money” for IIAC member dealers to handle.
Financial Post – September 9, 2016 – ‘They’re not safe’: Smaller firms, financial institutions becoming more vulnerable to cyber attacks
Key passages:
• The head of the Investment Industry Association of Canada raised the alarm about cyber crime last year, acknowledging that many Bay Street firms weren’t as prepared as they should be.
• “Our focus, really, is making sure our small and medium sized (dealers) are secure,” says Susan Copland, managing director of the IIAC. “Because a breach at one firm affects everybody, not just through reputation but through the interconnections of the system.”
Business in Vancouver – August 23, 2016 – Regulations, resource markets squeeze B.C. firms
Key passages:
• The long-term weakness of the resource market and an increase in industry regulation are the two biggest concerns facing investment firms in British Columbia, according to the Investment Industry Association of Canada (IIAC).
• Less activity and a poor rate of return on the price of various resources has had a significant impact on smaller issuers in particular. The same issuers are also more likely to struggle to comply with new investment industry regulations that are costly for smaller players to adopt.
• “The regulatory burden disproportionally hits the smaller firms,” said Susan Copland, the IIAC’s Vancouver-based managing director. “We’ve seen a number of smaller brokerage firms in the west, particularly in Vancouver, disappear.”
Financial Post – August 5, 2016 – Securities’ industry mergers continue as GMP Capital buys ‘call option’ on return to better energy days
Key passages:
• [T]he purchase by GMP Capital of Calgary-based FirstEnergy will bring together two largely institutional-focused firms.
• That sector, as numbers produced by the Investment Industry Association of Canada reveal, has not been doing that well, in large part because of the prolonged decline in the commodities and natural resources business.
• • The slowdown in investment banking activity, combined with the bank-owned dealers keeping a higher percentage of the underwriting liability and the hyper-competitive equity-trading environment, have added to the slim pickings for the independents.
The Globe and Mail – July 29, 2016 – Big banks, small dealers and the growing underwriting divide
Key passages:
• The Investment Industry Association of Canada (IIAC), an industry advocacy group for the independent dealers, noted the inexorable rise of the integrated (bank-owned) dealers, in a letter released Thursday.
• The share of new equity issuance in 2015 by bank-owned dealers was 73 per cent, according to IIAC. Five years ago, it was running at under 60 per cent. Independents saw their share fall to just under 27 per cent from 41 per cent in the same period.
• IIAC CEO Ian Russell put the multiyear shift down to the “greater incidence of large corporate financings” and “successful penetration by the integrated firms into the mid-cap underwriting market.
• Encouragingly for the boutiques, IIAC points out that they are doing many things right – including aggressively cutting costs, slimming operations where appropriate and honing in on areas where they have a competitive edge, including “effective research on mid-cap companies” and “strong institutional and corporate relationships.”
Advisor.ca – July 28, 2016 – Are smaller investors getting the boot?
Key passages:
• Over the last few years, “wealth-management business expenses have escalated dramatically for both small and large investment dealers,” says Ian Russell, president and CEO of the IIAC, in his latest letter.
• And, these costs will largely be passed on to consumers via higher commissions, fees and charges, he adds, noting, “The higher-end client will pay more for customized and value-added products and services, [while] the small investor will pay higher charges and face more limited advice options.”
Financial Post – May 28, 2016 – The mysterious decline of the Canadian public company
Key passages:
• [T]the incredible shrinking equity market has massive implications for entrepreneurs used to tapping public equity, as well as for the securities lawyers, investment bankers, accountants and stock exchanges who depend on serving that market.
• No fewer than 50 boutique investment firms — some 25 per cent of the market — have disappeared, merged or changed their business models over the past three years, according to the Investment Industry Association of Canada.
• “That’s a big issue for Canada because our market is just dominated by small issuers,” said Bryce Tingle, who holds the N. Murray Edwards Chair in business law at the University of Calgary.
Bloomberg – May 26, 2016 – Raymond James Buys Canada’s MacDougall MacDougall & MacTier
Key passages:
• “It’s a good merger,” Ian Russell, CEO of the Investment Industry Association of Canada, said Thursday in an interview. “You’ve just created a very strong, independent firm that will add significant competitive pressures and choice into the market.”
Investment Executive – May 1, 2016 – Raising the bar on “best execution”
Key passages:
• IIAC’s comment argues that best execution data is not the sort of disclosure that most retail investors want or need. Adding this routing and execution data on top of the expanded disclosure about cost and performance mandated under the second phase of the client relationship model is likely to just burden many clients with unwanted information, the IIAC comment states.
• Moreover, the IIAC comment raises concerns that the proposed rules will be too costly for smaller, independent firms that don’t have the resources to analyze detailed trade execution data closely.
• Many smaller firms are struggling already in the current market environment. The IIAC comment warns that “imposing another expensive and time-consuming regulatory requirement on these dealers” may help to push some of these firms out of business.
Master Metals Blog – March 29, 2016 – #Canada: number resource-focused #brokerages Shrinks again, from @MiningMavenGwen
Key passages:
• News a few days ago that PI Financial is acquiring Wolverton Securities and Global Securities. In other words, three of the few remaining independent Vancouver-based dealers are becoming one, shortening what in the last few years has become a short list of small, resource-focused brokerage shops.
• Declining commodity prices did not only hurt miners and explorers: the small banks that advised their transactions, led their financings, and told their stories also took a beating.
• In fact, the Investment Industry Association of Canada says 50 small houses, representing a quarter of the banks in the business, have either folded or been acquired in the last three years.
Financial Post – March 22, 2016 – PI Financial acquires two independent dealers as consolidation heats up in brokerage business
Key passages:
• PI’s acquisition plans were announced the same day the Investment Industry Association of Canada (IIAC) released it’s presidential letter and the brokerage industry’s financial performance for 2015.
• In the letter, Ian Russell referred to the challenges faced by the retail firms, particularly the client relationship model (CRM) and “rising regulatory costs,” adding that the country “can ill-afford the loss of the boutique sector.”
• Russell said that 10 per cent hike in operating costs for the self-clearing retail boutiques occurred because the firms hired “compliance specialists and consultants and (adopted) the necessary technology and systems to comply with the new CRM rule framework.”
• Russell also requested that the Ontario Securities Commission undertake a cost-benefit analysis of plans to further reform the client-advisor relationship and create a “best interest” standard.
Investment Executive – March 21, 2016 – • Securities firms battered in 2015: IIAC
Key passages:
• Rising regulatory costs are the main reason for the increase in operating expenses at retail firms.
• The IIAC acknowledges that these reforms have improved industry transparency and conduct standards, but it calls on securities regulators to carry out cost-benefit analysis before launching any major new rule proposals, such as the possible introduction of a proposed “best interest” duty on financial advisors.
• Indeed, the IIAC suggests that regulators carry out a cost-benefit analysis even before launching any consultations on further reforms, “to confirm that the benefits of these reforms — incremental to the comprehensive CRM rule framework — justify the additional costs imposed on registered firms and advisors, and on clients,” the Russell letter says.
Advisor.ca – March 21, 2016 – Will the carnage end for boutique firms?
Key passages:
• In his latest industry letter, Ian Russell, president and CEO of the Investment Industry Association of Canada (IIAC), explains just how bad it’s been, and why he’s still optimistic the boutiques’ fortunes could turn around.
Canadian Business – March 14, 2016 – Thomas Caldwell on the decline of traditional stock brokerages
Key passages:
• Banks have taken over most of the large investment dealers. As for “boutique” firms, 50 have either merged or folded in just the past four years, according to the Investment Industry Association of Canada.
• “I wouldn’t go into this industry now,” laments the founder of Caldwell Securities, citing shrinking margins and stifling regulation.
Soberlook.com – February 20, 2016 – Canada`s Changing Financial Landscape, Part 1: the Securities Industry
Key passages:
• A series of radical changes has hit the industry simultaneously.
• Compliance and regulatory changes: Ian Russell the President of the Investment Industry Association of Canada (IIAC), estimates these costs have risen by 7% in 2015, on top of a 6% rise in 2014. He believes “the relentless rise in operating costs will squeeze profitably” in 2016.
• The industry features many small independent, boutique -size firms that no longer can compete for capital; the bulk of the firms are capitalized at $10 million or less, precluding them from participating in larger financing deals. Russell expects a further consolidation as firms either merge and/or shut down.
Insurance and Investment Journal – February 9, 2016 – Securities industry faces increasing consolidation
Key passages:
• The securities industry should expect 2016 to see more consolidation and greater regulation as well as bring a larger impact on their businesses caused by demographics, said the president and CEO of the Investment Industry Association of Canada (IIAC).
• In releasing the IIAC’s annual investment outlook at the Empire Club of Canada in Toronto in early January, Ian Russell said the survey follows “another mediocre year” for the Canadian economy.
• The CEOs said they expected costs to increase about 6.8% in 2015, compared to a 6.1% rise in 2014. The biggest culprit was regulation and the increased compliance costs, consulting, technology and staff needed to meet both CRM rules and FATCA reporting, said Russell.
• “So what does this relentless cost escalation mean? It means that most executives expect an even greater ramp up in the regulatory burden [over the] next year,” said Russell.
The Globe and Mail – February 7, 2016 – Bay Street Blues
Key passages:
• Today, of the 100 or so independent dealers left in Canada, 50 post annual revenue of $5-million or less – “a magnitude suggesting insufficient scale to operate under existing conditions,” according to Investment Industry Association of Canada CEO Ian Russell.
• In other words, more shutdowns are inevitable.
• “Independents that are doing well are well managed, have managed their costs well, and are firms that have some diversification on the revenue front,” says IIAC’s Mr. Russell.
• Cormark, FirstEnergy, Peters & Co., Mackie Research, Haywood Securities – it isn’t to say those firms haven’t had their share of difficulty. But they’re doing okay.”
Investment Executive – February 1, 2016 – Markets: Nothing ventured
Key passages:
• The perception of the TSXV, one issuer noted, is that “it’s full of resources companies that are poorly capitalized.”
• Still, other market players cite the ever-growing dominance of the bank-owned dealers as a reason for eroding retail participation.
• According to the IIAC, 34 investment dealers have vanished over the past three years, either through consolidation, closing up shop or shifting to the exempt market.
• As these firms recede, their clients are left in the hands of the larger, integrated firms – particularly the big bank-owned dealers – and there’s a sense within the venture community that investment advisors at these firms increasingly are unable to put their clients into speculative stocks.
Insurance and Investment Journal – January 20, 2016 – Boutique investment dealers under siege
Key passages:
• In his most recent letter to members, Investment Industry Association of Canada (IIAC) president Ian Russell suggested that boutique investment firms are “under siege”.
• He notes that difficult economic conditions and a “remorseless squeeze in operating margins” have already pushed several retail firms to the exits.
• He puts some of the blame on the new Client Relationship Model (CRM), which spawned new regulatory obligations that smaller firms do not have the resources to meet.
The Globe and Mail – January 14, 2016 – GMP’s deep restructuring hits senior employees in Canada
Key passages:
• The Investment Industry Association of Canada recently revealed that 25 per cent of investment dealers — mostly smaller players — have folded or restructured in the past three years as a result of economic conditions and escalating regulatory costs.
Bloomberg – January 13, 2016 – GMP to Cut Jobs, Exit U.K., Australia as Commodities Slump
Key passages:
• Other smaller companies, which depended on the mining and oil-and-gas industries to drive their capital markets businesses, have disappeared.
• In the past four years, 46 Canadian securities firms have closed or been taken over, according to the Investment Industry Association of Canada.
Investor Intel – January 13, 2016 – The TMX’s Role in the Shrinking of Bay Street
Key passages:
• The industry itself expects this consolidation to continue this year. The December, 2015 survey from the Investment Industry Association of Canada found that roughly 51% of investment dealer CEO’s expect their technology expenses to rise in 2016, mainly as a result of higher compliance costs and the cost of the tech itself.
• Weaker economic conditions and those higher costs will, according to the survey, drive further brokerage consolidation in 2016.
• Those themes were echoed in the speech given in early January this year by Mr. Ian Russell, the IIAC’s President and CEO.
• Mr. Russell noted that over 50 boutique firms, or roughly 25% of the industry, had exited the industry over the prior three years. That’s an astonishing rate.
Advisor.ca – January 13, 2016 – How to rescue the Venture Exchange: IIAC
Key passages:
• Boutique dealers have been feeling the heat thanks to the unprecedented rise in operating costs over the past few years.
• This plight of small dealers has coincided with the collapse of the public venture market, says Ian Russell, president and CEO of the Investment Industry Association of Canada (IIAC), in his latest industry letter.
Finance et Investissement – January 12, 2016 – La consolidation va se poursuivre en 2016, selon un sondage de l’ACCVM
Key passages:
• Quarante-huit pour cent des chefs de la direction des sociétés de courtage canadiennes pensent que la consolidation de poursuivra en 2016, due à une hausse croissante des frais d’exploitation.
Conseiller.ca – January 12, 2016 – L’ACCVM s’attend à une année 2016 difficile
Key passages:
• En plus du pessimisme ambiant, elle montre que ces responsables anticipent une croissance des frais d’exploitation au cours des 12 prochains mois, ce qui contribuera à la poursuite des fusions dans le secteur.
The Globe and Mail – January 6, 2016 – Dealers see more consolidation coming
Key passages:
• Executives at Canadian investment dealers expect weak economic conditions and higher costs to fuel more consolidation within the industry this year, according to a survey by the Investment Industry Association of Canada.
• About half of chief executive officers polled expect technology expenses to rise more rapidly this year than in 2015, mostly driven by higher compliance and technology costs, the IIAC said.
• Such costs were estimated to have risen 7 per cent in 2015, which was higher than 2014’s 6-per-cent increase.
Financial Post – January 6, 2016 – Tough times, rising costs have chewed up 25% of Canada’s small investment firms: IIAC
Key passages:
• Restructuring and consolidation amid a tough economy and escalating regulatory costs has led to the disappearance or reconstitution of a full 25 per cent of investment firms in Canada over the past three years, according to Ian Russell, chief executive of the Investment Industry Association of Canada.
Financialpost.com – January 6, 2016 – Five things you should know before you start your workday on Jan. 6
Key passages:
• 3. Tough times for Canada’s small investment firms: IIAC
• More than 50 boutique firms are gone, including some that have been overhauled to operate solely in Canada’s less onerous, lower-cost exempt market, Russell said in Toronto.
• Other small and mid-sized firms have folded outright or been amalgamated, Barbara Shecter reports.
• Despite the consolidation that’s taken place, “significant contraction” is expected over the next couple of years, said Russell, who based his view on a recent survey the IIAC conducted by tapping the chief executives of the association’s 144 investment dealer members.
Bloomberg – January 5, 2016 – Canada Investment Dealers See More Consolidation in 2016
Key passages:
• Executives at Canadian investment dealers expect weak economic conditions and higher costs to fuel more consolidation within the industry this year, according to a survey by the Investment Industry Association of Canada.
Investment Executive – January 5, 2016 – Investment dealer CEOs expect more consolidation in 2016
Key passages:
• With more than 50 retail and institutional boutique firms leaving the investment industry over the past three years, most investment dealer CEOs are expecting further consolidation in the industry, said Ian Russell, president and CEO with the Toronto-based Investment Industry Association of Canada (IIAC), at the Empire Club of Canada’s annual investment outlook luncheon in Toronto on Tuesday.
• “This pessimistic view comes as no surprise given that there are more than 50 investment dealers still operating with gross annual revenue of $5 million or less, a magnitude suggesting insufficient scale to operate under existing conditions,” Russell said.
• This will lead to fewer firms, especially in smaller communities, and jobs — although larger firms will absorb the strong financial advisors who would otherwise lose their employment, he suggested.
Advisor.ca – January 5, 2016 – Industry leaders expect weaker economic conditions: IIAC
Key passages:
• Canada’s investment industry leaders expect weak economic conditions to continue in 2016, and ever-rising operating costs to result in continued consolidation in the coming year.
Financial Post – December 18, 2015 – Dear Santa: Independent dealers need a break
Key passages:
• For independent dealers, the group of largely privately owned firms that take on the big banks every day, the ideal Christmas present would be better equity markets, an improvement in commodity prices, an easing of regulations – and greater consideration from the issuers.
• If none of those conditions prevail in 2016, the sector will continue to slide – all of which raises concerns for the employees, investors, issuers and the regulators.
• From 2011 to June 2015, the industry is down by 25 firms, according to the Investment Industry Association of Canada.
The Globe and Mail – December 18, 2015 – Octagon facing shortfall in bankruptcy of as much as $6.1-million
Key passages:
• Many independent brokerages have faced difficulties of late amid a rough resources market, a ragged equities environment and widespread upheaval in investment banking’s business model.
• More than 50 Canadian investment dealers have either gone out of business, merged or been acquired in the past three and a half years.
investmentexecutive.com – December 17, 2015 – TSXV white paper outlines revitalization efforts
Key passage:
• Venture exchange aims to reduce costs for listed companies, expand investor participation and grow and diversify its listings base.
The Globe and Mail – December 1, 2015 – Octagon Capital becomes latest small brokerage to shut down
Key passages:
• Octagon is far from the only small independent brokerage to run into recent difficulties.
• A ragged resources market, a choppy equities environment and widespread secular changes in investment banking have taken a heavy toll on many of the smaller shops on Bay Street, with some being swallowed up by larger competitors and others shutting down entirely.
• Over the past 3 1/2 years, more than 50 Canadian investment dealers have either gone out of business, merged or been acquired, according to data from the Investment Industry Association of Canada.
investmentexecutive.com – December 1, 2015 – TMX Group aims to rejuvenate the TSXV
Key passages:
• Although the firm has yet to reveal the strategy, it has signalled that it intends to shift the market away from resources and toward technology.
• The demise of the venture industry in Canada has been a key concern for the investment industry, particularly for smaller dealers, which have suffered from the decline in financing activity and trading action in that end of the market.
• According to data published earlier this year by the Investment Industry Association of Canada (IIAC), small-cap equity financings are down by about 50% since the financial crisis and trading in venture shares is down by about one third.
Globeandmail.com – September 30, 2015 – Bay Street’s smaller dealers are not suffering so badly
Key passages:
• These are tough times for independent investment dealers because commodity prices have plummeted, but they should find some solace in knowing it has been worse.
• As painful as this market can be for boutique investment banks, with most underwriting and advisory work flowing to the large bank-owned dealers, their situation is not nearly as dire as it was three years ago.
• While profits are much higher than during 2012’s commodity rout, it does not mean all firms are faring the same. Earlier this year, for instance, Edgecrest Capital shut down. Venerable dealers such as Canaccord Genuity and FirstEnergy have had layoffs.
• As the commodity rout drags on, Canada continues to lose independent dealers. Since 2012, the total industry has shrunk by 11 per cent to 174 firms, according to IIAC.
investmentexecutive.com – August 28, 2015 – Beacon Securities to divest its retail operations next week
Key passages:
• “What you’re witnessing is a boutique that is rolling out a well-developed and coherent plan,” says Ian Russell, president and CEO of the Investment Industry Association of Canada in Toronto.
• “It’s one thing to offer a very specific retail service, but in the current environment, you need a lot of scale and size. Most clients are looking for a much broader suite of products and services.”
Financial Post – October 9, 2014 – E.F. Hutton quietly shelves plans to open brokerage in Canada
Key passages:
• It comes a short time after the Investment Industry Association of Canada released its update on the financial condition of the industry participants.
• That seven-page report painted a bleak picture for the already existing boutique firms despite the rebound over the past two years.
• “The boutique firms, battered by the extended weakness in retail and institutional market conditions and the relentless cost increases from technology outlays and compliance requirements, welcomed the recent earnings rebound. But doubts remain about their long-term future,” said the report that was written by Ian Russell, IIAC’s chief executive.
• How large are those doubts? In his report, Russell said that based on IIAC’s projections, operating profit of the boutique firms, “even with the positive results this year, will still remain well below 2006-07 profit levels.”
• And that outlook continues a recent trend: Russell noted that in the past two years that 23 boutiques have disappeared through wind-up, mergers or acquisitions. The integrated firms, a number of which are bank owned “provide them with a competitive edge in the markets.”
Globeandmail.com – October 6, 2014 – Why boutique dealers are still struggling
Key passages:
• Canada’s boutique investment dealers can’t catch a break. This is the best year for equity and acquisition fees since 2007, yet many of the country’s smaller investment banks are still struggling to scrape by.
• The situation is so severe that the Investment Industry Association of Canada recently suggested between 30 and 40 smaller dealers could vanish in the next two years by either closing or merging.
• There are the obvious reasons for the sustained struggle. Deal flow in key sectors such as mining is still weak. Many of the smaller players rely on financing resource-related companies listed on the Venture Exchange.
• IIAC head Ian Russell also told The Globe and Mail that regulatory costs keep rising, and that puts pressure on smaller dealers who are already suffering from soft revenues.
Finance et Investissement – September 25, 2014 – Le secteur des valeurs mobilières n’en a pas fini avec les fusions et acquisitions
Key passages:
• « Le rythme des regroupements de sociétés spécialisées (en valeurs mobilières) se poursuivra et même augmentera », selon le président et chef de la direction de l’Association canadienne du commerce des valeurs mobilières (ACCVM), Ian C. W. Russell.
Globeandmail.com (subscription required) – September 24, 2014 – Boutique investment firms feel the pressure even as markets rebound
Key passages:
• The strong are getting stronger in Canada’s investment industry as the benefits of rebounding markets flow increasingly to the largest firms. The result is that firms that are left behind will continue to vanish.
• Projections from the Investment Industry Association of Canada (IIAC) show that profits are on the rise across the brokerage and securities industry. But it is very much a business of haves and have-nots.
• Said Ian Russell, IIAC president and CEO: “The better boutiques will get bigger and they are also getting better. We’ll have a stronger boutique sector but a smaller one.”
Financialpost.com – September 24, 2014 – Canadian investment dealers rebound from financial crisis, but boutique firms fall behind
Key passages:
• Things are looking up for Canada’s investment dealers, with integrated firms on track to exceed pre-crisis earnings this year for the second year in a row. Returns are also improving for boutique dealers, but they still trail far below pre-crisis levels, according to the Investment Industry Association of Canada.
• “The boutique firms, battered by the extended weakness in retail and institutional market conditions and the relentless cost increases from technology outlays and compliance requirements, welcomed the recent earnings rebound. But doubts remain about their long-term future,” said Ian Russell, the chief executive of the IIAC, in a letter to the association’s members on Wednesday.
investmentexecutive.com – September 24, 2014 – Boutique firms still struggling
Key passages:
• Investment industry performance improves, but the outlook for smaller firms remains uncertain.
• Operating profits in the Canadian brokerage industry are forecast to rise by more than 30% this year, but many boutique firms are still struggling, according to the Investment Industry Association of Canada (IIAC).
• It has advice for both firms and regulators to shore up the boutique end of the business.
Advisor.ca – September 24, 2014 – Salman Partners acquires Woodstone Capital
Key passages:
• Boutique firms should buy out their integrated competitors or poach independent competitors’ customers, writes IIAC President and CEO Ian Russell.
• The suggestions are part of a list of ideas for strengthening boutique investment firms published by the Investment Industry Association of Canada in a letter from the president.
investmentexecutive.com – September 23, 2014 – Tempest Capital to resign from IIROC
Key passages:
• The Investment Industry Association of Canada (IIAC) has warned that the small cap market generally, and the resource sector in particular, is suffering from an increasingly severe shortage of equity capital; and, that this is impacting the brokerage firms that focus on this market segment.
• The IIAC has repeatedly called on the federal government to help stimulate the flow of start-up capital through targeted tax measures.
Globeandmail.com (subscription required) – July 29, 2014 – Salman Partners acquires Woodstone Capital
Key passages:
• Two struggling independent broker-dealers have merged, joining forces to compete with larger firms in a challenging market for boutique shops.
• The head of the Investment Industry Association of Canada said in January that boutique dealers face an “existential” crisis. Salman Partners is no exception. Several senior staff have resigned over the past year as revenues across the industry have been squeezed.
Globeandmail.com (subscription required) – July 29, 2014 – Salman Partners acquires Woodstone Capital
Key passages:
• Two struggling independent broker-dealers have merged, joining forces to compete with larger firms in a challenging market for boutique shops.
• The head of the Investment Industry Association of Canada said in January that boutique dealers face an “existential” crisis. Salman Partners is no exception. Several senior staff have resigned over the past year as revenues across the industry have been squeezed.
Globeandmail.com (subscription required) – February 7, 2014 – At Jennings, a boutique is rebuilt for the times
Key passages:
• The trials of small resource-focused boutiques have been well documented.
• The head of the industry association for securities dealers recently termed it an “existential” struggle for firms in Jennings’ line of work. Some rivals of Jennings have already closed up shop.
Business in Vancouver – January 28, 2014 – Regulatory burden sinking junior capital market; Better enforcement of existing regulations rather than new rules needed, brokers say
Key passage:
• According to Investment Industry Association of Canada (IIAC) data, retail investment brokerage firms in the country have continued to lose money.
Financial Post – January 27, 2014 – Boutique investment dealers in Canada struggle to survive
Key passages:
• The IIAC and other industry watchers have been warning for a couple of years that many of Canada’s smaller firms are on precarious ground and many could cease to exist without a significant recovery in the small-cap trading and underwriting business.
• In a report last week, IIAC described the divide between the large and small players as a “feast or famine” situation.
Wall Street Journal – January 27, 2014 – Canada’s Small Investment Banks Struggle, Spurring Consolidation
Key passage:
• Over the last five years, profit for Canada’s 58 small institutional Canadian investment banks fell 67% as many investors sought safety from market volatility in larger-cap stocks and yield products, according to industry group Investment Industry Association of Canada.
Globeandmail.com (subscription required) – January 27, 2014 – Edgecrest acquires Stonecap, adds 10 to boutique team
Key passage:
• Many boutique dealers are struggling for survival after a third straight year of declining profits, with the head of the Investment Industry Association of Canada (IIAC) saying the sector is facing an “existential” crisis.
Wall Street Journal (subscription required) – January 27, 2014 – Canada’s Edgecrest Capital to Acquire Stonecap Securities; Deal Comes as Canada’s Smaller Dealers Face Increasing Pressure to Consolidate
Key passages:
• Canada’s big integrated dealers, most of which are owned by the country’s large banks, increased operating profit 43% on average over the past five years.
• But for the 58 small institutional Canadian investment banks, profit fell 67% over that period as many investors sought safety from market volatility in larger-cap stocks and yield products, according to industry group Investment Industry Association of Canada.
Bloomberg – January 27, 2014 – Edgecrest Buys Stonecap to Expand Mining and Energy Banking
Key passage:
• Boutique securities firms in Canada are facing a downturn as chronic weak business, increased regulation, and rising competition weakened earnings, according to a Jan. 23 note from IIAC.
Financial Post – January 23, 2014 – ‘Feast or famine’ for Canada’s investment firms: IIAC
Key passage:
• But Canada’s roughly 180 boutique firms remained “saddled with chronic weak business conditions and poor earnings” as well as a “tough competitive landscape and heavy, accumulating regulatory burden,” Ian Russell, president of the Investment Industry Association of Canada, said in a letter to members
Globeandmail.com (subscribers only) – January 23, 2014 – Small Canadian investment dealers face ‘existential’ crisis
Key passage:
• Small brokerage firms in Canada face a struggle for survival after a third straight year of falling earnings, says the head of the Investment Industry Association of Canada (IIAC).
Investment Executive – January 23, 2014 – Boutique dealers still struggling: IIAC; Overall industry profits up 27% in 2013
Key passage:
• The Canadian securities industry banked an estimated $4.8 billion in operating profits last year, up about 27% from 2012, but the vast majority of those profits are going to the large, integrated dealers. The industry’s boutiques are still struggling to get by.
Advisor.ca – January 23, 2014 – Big firms shine as boutiques suffer: IIAC
Key passage:
• Highlights of the letter include:
- Integrated firm operating profit rose on average 43% in the last five years, with steady gains for most of the period.
- Operating profit in the retail sector declined 39% in the same period, with steep losses in 2012 accounting for much of the earnings fall-off.
- Causes of the earnings collapse in the boutique sector include: depressed market conditions; cautious investors; predatory algorithmic trading; compliance costs of the mounting regulatory burden; and rising costs of technology and systems for securities execution and clearing/settlement.
Canadianinvestor.com – November 19, 2013 – Independent brokers squeezed
Key passages:
• Canada’s securities industry is shrinking. Consolidation – as a result of over-regulation and escalating operating costs, is especially squeezing small dealerships as their margins are tighter. That means fewer choices for Canadian investors and entrepreneurs seeking capital.
• As of 2012, operating cost per dollar value has sky rocketed to 61 per cent for independent brokerages as opposed to 18 per cent for integrated firms. And small firms that generate most of their revenue from advising retail investors collectively lost $99 million last year. Investment Industry Association of Canada (IIAC) estimates suggest about 30 small-and mid-sized dealers have disappeared over the last four years since the financial crisis.
Canadianinvestor.com – November 18, 2013 – Overregulation crushing brokerages?
Key passages:
• According to estimates from the Investment Industry Association of Canada (IIAC), about 30 small-and mid-sized dealers have disappeared over the years since the financial crisis of 2008. And a number of firms have handed in their resignations with the industry’s self-regulator. In recent years, that has averaged about 10 a year. In 2013, there were 11 in the first quarter.
• If independent firms continue to die, there will be less financing opportunities for entrepreneurs in Canada looking to set-up small and mid-sized businesses. This is particularly relevant to B.C.’s junior mining companies that have traditionally relied on independent brokerages to raise capital.
Vancouver Sun – October 27, 2013 – Opinion: Red tape bleeding life from B.C.’s resource opportunities; Cost of compliance: Growing regulatory burden is moving the industry unnecessarily toward a bleak future
Key passages:
• According to the Investment Industry Association Of Canada, as of 2012, operating cost per dollar for service offerings at boutique firms has skyrocketed by more than 60 per cent to 61 cents over the last several years. By comparison, the overall operating cost per dollar for big banks, subsidized by more profitable and diversified business streams, has risen 18 per cent to 41 cents.
• This trend is spelling the end of the independent brokerage that has historically served B.C.’s 800-plus junior mining companies. The loss of independent brokerage firms that have built substantial managerial expertise and operations infrastructure to advise retail and institutional investors will be a blow to investors, regional economies and venture markets. If independent firms continue to close down, there will be fewer financing avenues for entrepreneurs in Canada looking to set up small to mid-sized businesses.
Wealth Professional – September 10, 2013 – Consolidation continues as Richardson GMP buys Macquarie Canada
Key passage:
• Quote from IIAC President and CEO Ian Russell: “These were two dynamic mid-sized firms in the retail space and they contributed to a good competitive tone in the market and to consumer choice and pricing in the marketplace. So, when you see one of those firms go, this is not a good thing for the market.”
The Globe and Mail – September 9, 2013 – Richardson GMP buys Macquarie’s Canadian wealth management unit
Key passage:
• “The takeover comes at a time when independent retail brokerages are battling against the big Canadian banks for business. The small firms that rely on advising retail investors for most of their income lost a collective $99-million last year, Investment Industry Association of Canada data suggest.”
Advisor.ca – September 9, 2013 – Richardson GMP buys Macquarie Private Wealth
Key passage:
• “Since 2006/2007, boutique firm revenues have fallen about a third, or $1.7 billion, says a March 2013 report from IIAC. Most of that loss happened in the last two years. ‘The viability of the smaller boutique firms is threatened,’ wrote CEO Ian Russell, ‘unless a market turnaround occurs in the near term.’”
Advisor.ca – September 4, 2013 – What’s up in the boutique sector?
Key passage:
• “A March 2013 assessment from the IIAC paints a bleak picture. ‘While all firms face weak equity markets, the impact is keenly felt among boutique firms,’ wrote chief executive Ian Russell in a letter to members. ‘The viability of the smaller boutique firms is threatened, unless a market turnaround occurs in the near term.’”
Advisor.ca – August 26, 2013 – 6 ways regulators can boost the financial industry: IIAC
Key passages:
• Financial professionals likely thought their books and bottom lines couldn’t be hit harder than they were following the recession, says Ian Russell, president and CEO of IIAC in a recent letter.
• But in 2013, the “operating revenues and earnings for…domestic institutional [advisory] boutiques fell to their second lowest quarterly levels, reflecting declining equity investment banking and trading businesses.”
Calgary Herald – August 23, 2013 – Pipeline delays costing investment banking jobs
Key passage:
• [IIAC president and CEO Ian] Russell said his association estimates that about half to two-thirds of Canada’s small investment boutiques are losing money in today’s sluggish environment. Many are forced to choose between closing their doors or continuing to erode their capital while waiting for activity to pick up.
Globeandmail.com (subscription required) – August 22, 2013 – Letter from the IIAC: Why it matters when small brokers fold
Key passage:
• Ian Russell, the head of the Investment Industry Association of Canada, is calling on securities industry regulators to make changes that will reduce the stress for smaller players who face a difficult operating environment of weak resource markets and fewer new listings without the benefits of scale. Mr. Russell says these brokerages will be difficult to replace because of several barriers to entry that have fallen into place in the past few years.
The Globe and Mail – August 22, 2013 – Mining slowdown begins to hurt as Bay Street sheds jobs, firms
Key passage:
• “If small dealers…continue to fall away, Canadian capital markets will suffer serious consequences, both in terms of reduced competitive stimulus in retail and institutional markets, and less financing opportunities for small Canadian businesses,” said IIAC head Ian Russell in a letter to the brokerage industry.
Bloomberg – August 22, 2014 – Stifel Said to Plan Closing Canada Offices With About 70 Workers
Key passage:
• The number of employees at securities firms in Canada fell in the first quarter to the lowest level since 2006, according to Investment Industry Association of Canada.
St. Louis Business Journal – August 22, 2014 – Stifel closing Canadian operations
Key passage:
• In the first quarter, the worker head count at securities firms in Canada fell to its lowest point since 2006, according to the Investment Industry Association of Canada, the news agency reported. Financial firms that earn fees from stock sales are feeling pressure from the downturn in Canada’s mining industry.
Investment Executive – August 6, 2013 – IIAC calls on Ottawa to boost small business investment, assist small dealers
Key passage:
• The Investment Industry Association of Canada (IIAC) says that government action is needed to help boost productivity and stoke investment, which would also boost the fortunes of Canada’s floundering small dealers.
The Globe and Mail – July 27, 2013 – How the Big Six banks won the battle for Canadians’ wealth
Key passage:
• Small firms that generate most of their revenue from advising retail investors collectively lost $99-million last year, according to the Investment Industry Association of Canada.
Bloomberg – July 25, 2013 – Toronto Bankers Feel Pain From Mining Slowdown: Corporate Canada
Key passages:
• “The number of employees at securities firms in Canada fell in the first quarter to its lowest level since 2006,” according to IIAC data. Ian Russell said in April that “more than a third of Canada’s 185 boutique firms had lost money in the last two years.”
• “You’ve just seen a complete collapse in expansion, project development, [and] capital raising,” Mr. Russell said.
Bloomberg – July 4, 2013 – Number of Canadian Securities Firms Lowest in 7 Years
Key passage:
• “The industry has gone through a period of sustained weakness, which means firms are retrenching operations or actually restructuring,” Ian Russell, the association’s chief executive officer, said today in a telephone interview. “We’re going to see a continuation of that trend, probably through much of the remainder of the year.”
Financial Post – July 4, 2013 – IIAC: Tough first quarter for Canada’s investment dealers
Key passages:
• Buffeted by volatile markets and a fragile economy, Canadian investment firms continued to struggle for the first three months of 2013.
• The Investment Industry Association of Canada reported that its members had a collective profit of $515-million for the first quarter, down nearly 14% from the prior quarter and down 26.5% from the same period last year.
