How Guardian Capital helped solve a succession-planning problem

Majority investment in storied Ontario-based investment management firm offers possible roadmap for others

How Guardian Capital helped solve a succession-planning problem

With an established reputation of success and client-centric service in the Waterloo region for the last 33 years, Rae & Lipskie Investment Counsel – otherwise known as The RaeLipskie Partnership – was facing an existential challenge.

“Our founding partner Ken Rae started in the investment business in 1964, and founded our company in 1988,” says Brian Lipskie, President & COO, The RaeLipskie Partnership. “We've been working on a succession plan for the last several years.”

Lipskie says the original plan for the investment management firm – he estimates 75% of the firm’s $1.1-billion AUM is private-client (individuals and families), with the balance toward institutions – was to do an internal succession plan that involved only its employees.

But over time and with the encouragement of its consultants and advisory board, the firm decided to look outside and consider a broader goal. Aside from planning for succession, it sought to create a strategic partnership with a third party.

That ultimately led to an arrangement with Guardian Capital, a $53-billion AUM institution, which has agreed to acquire a majority stake of The RaeLipskie Partnership.

“I think from a strategic point of view, we see an opportunity in Canada where there are investment counselling and management firms that are going through succession,” says Doce Tomic, Head of Wealth Management at Guardian Capital. “Wealth firms, in turn, are looking for an organization to work with them so that they can be part of the puzzle for the future.”

Under the agreement, Guardian will acquire a 60% ownership interest in The RaeLipskie Partnership; Lipskie will retain a significant ownership in the company and continue on as president. A group of senior staff and portfolio managers at RaeLipskie will also acquire a stake in the firm. The transaction is expected to close in the third quarter.

During RaeLipskie’s search for potential partners, Lipskie says Guardian stood out as one of Canada’s highest-quality investment managers “with an impeccable reputation for integrity and fairness.” Tomic, meanwhile, highlighted his firm’s desire to depart from what some other acquirers do, which is to swallow up smaller organizations and assimilate them into a larger group.

“The idea for us is to help the organization leverage capabilities in infrastructure, administration, and so on, while still allowing them to maintain their brand and culture,” Tomic says.

“We really felt it could be a symbiotic relationship where both firms would benefit and we were honoured to have Guardian extend an offer to take a majority interest in our in our business,” Lipskie adds.

By having access to the investment products available under the Guardian umbrella, RaeLipskie’s investment advisors have an added opportunity to improve their investment strategies for clients. Importantly, they’ll retain independence and control over their investment recommendations, which means they can continue to adhere to their fiduciary responsibilities, offering discretionary investment management that they feel is in their clients’ best interest.

Through the arrangement, Lipskie and Tomic agree that the firms will have an added opportunity to capitalize on trends in the private client industry. For one, there’s the shift beyond investment management of stock and bond portfolios, to include a more holistic approach to wealth management.

“Private clients are looking more for financial planning, estate planning and philanthropic guidance, especially for high-net-worth individuals,” Lipskie says. “We've been developing our expertise in various ancillary areas beyond investment management, which will continue to be our bread and butter, but we look forward to our partnership with Guardian to expand even more in in those areas.”

From Tomic’s perspective, there are also opportunities developing around the notion of governance within families, as well as a rising trend of longevity-based investing amid changes in the timing retirement and people living longer. Beyond that, there’s the rising attraction to services and products in the private space, which may not have the same correlation to market volatility that public offerings have.

“When a quality firm such as Rae Lipskie views us as the top choice for a partner, and we demonstrate our ability to succeed together, this will present more organizations with the view that this is the right choice, and it’s possible to do this,” Tomic says.