Advisors in Canada may have dodged a bullet with new indications big competitors are staying clear of the Canadian market.
of the top 50 independent broker-dealers in the U.S. reveals that only Raymond James, in the number three position, operates in Canada.
WP went in search of why.
“They’re much bigger than here. The banks control 90% of the assets in Canada,” said Arthur Salzer, CEO of Northland Wealth Management. “The market’s small. The AUM in the U.S. that is managed is 43 times higher than Canada. A firm with $2 billion [AUM] in Canada easily have $20 billion in the U.S.”
Given the immense control of the banks combined with a much more bountiful domestic marketplace, U.S. broker-dealers have very little incentive to expand into Canada. A firm like LPL Securities would have to acquire an independent in Canada to gain any kind of scale here. Unfortunately, there aren’t many independents left.
“… Perhaps it is a matter of they didn’t have the vision to see the opportunity to expand into Canada and create a North American platform like Raymond James did. That was 15 years ago when they purchased our predecessor firm, Goepel McDermid,” Peter Kahnert, Raymond James senior vice president of corporate communication and marketing, told WP Tuesday. “Today, available high quality independent investment dealers are shrinking and there are fewer acquisition opportunities in the Canadian independent space.”
The Canadian marketplace is only so big; any additional competition from U.S. firms would result in the loss of Canadian players meaning only the deck chairs would change but the overall competition would not.
But at the end of the day competition isn’t necessarily a bad thing.
“Competition from US dealer brokers is always welcome. Strange however, how they have for the most part failed with a couple of exceptions,” commented Ottawa advisor Bob Roby when asked by WP about the lack of independent U.S. broker-dealers operating in Canada. “In my opinion competition is good as it provides more consumer awareness. The more consumers are aware then the greater the amount of business for everyone.”
And when it comes to banks Roby is even more matter of fact.
“Banks have never been an issue with me. Their propensity for in house products and lack of service have worked in my favour,” says the Ottawa advisor. “Once consumers know the difference between bank and independents competition becomes a moot point.”