Kurt MacAlpine says desire to be at the forefront of change continues to fuel aggressive acquisition strategy
It’s been a head-spinning year for investors. The global pandemic sent markets into a tailspin before a rebound of epic proportions. But amid the soundbites, trades and portfolio shifts, there was one constant in the wealth management space: CI Financial Corp. was acquiring. Again … and again … and again.
The independent threw off the shackles to embark on arguably the most aggressive growth strategy the industry has ever seen in Canada. Like a metronome, the headlines kept coming as CI took its AUM from $176 billion to $231 billion in a 16-month period as part of an over-arching plan to transform the company.
At the heart of this were acquisitions. In Canada, this was spearheaded by deals for Aligned Capital Partners, robo-advisor WealthBar (now CI Direct Investing), WisdomTree’s Canadian ETF business, and a minority ownership of d1g1t. But it was in the U.S. where the firm’s efforts to blaze a trail were really turbo-charged.
To date, CI has acquired 13 RIAs south of the border, going from zero to $22 billion in just nine months. Kurt MacAlpine, CEO, sat down for a virtual call with WP to reflect on an eye-catching year for his firm and to explain why there will be no let-up in 2021. He said he expects the next 12-13 deals to be easier given the calibre of acquisitions now under his belt.
“If the market dynamics remain the same, so similar high-quality firms coming to market at similar valuations, you could see us growing at a similar pace than last year.”
He added: “We now have a body of work that people can look at; we're not the unknown new entrants in the space. More importantly, we've done deals with only incredibly high-quality firms.
“People look at that and it gives them confidence that we would be a great strategic permanent home for their businesses where their current teams and their next-generation teams can thrive.”
When MacAlpine took over the largest independent asset management and wealth management company in Canada on September 1, 2019, he took on the responsibility of pushing three strategic priorities - modernizing its asset management capabilities, expanding its wealth management division, and globalizing the company.
From being a Canadian-only operation, progress has been swift. In addition to the acquisitions, it is now listed on the New York Stock Exchange and has shifted its bondholders. Through a $700 million bond issuance, and the retirement of three different maturities – 2020, 2021 and, eventually, 2023 – the company now has more debt holders in the U.S. than it does in the Canadian marketplace.
And there was more. The Toronto-based company partnered with private markets investment management firm Adams Street Partners and fixed-income asset manager DoubleLine Capital, led by Jeffrey Gundlach, to bolster its fund line-up.
What’s driven this company-wide, transformative pivot? MacAlpine said it’s a combination of the industry being at an inflection point and of the firm wanting to set the trend, not follow it.
He explained: “The rate and pace of change taking place in our industry, whether it's the asset management industry, or the wealth management industry, and whether it's Canada or other markets, has hit an all-time high. The velocity of change continues to increase and we wanted to make sure we were taking advantage of our great starting point [in Canada] to position ourselves at the forefront of that change.
“Whether it’s the Bitcoin fund that we just launched in December, our unique partnership with Jeffrey Gundlach, Adams Street, or building the fastest-growing wealth platform in Canada and the U.S., we're trying to set the pace for the industry.
“The record growth in AUM that we experienced over the past year is hopefully a proof point that we're moving the business at a different pace than we were before but more importantly, at a very different pace than any of our competitors.”
The central role of the RIA model taps into MacAlpine’s fundamental belief in the role of the advisor, which he told WP is more important today than at any point in history. He said that will remain the case for the next 40 years given the combination of changing demographics, changing pension systems, and people living longer more complex lives.
On a business level, he views wealth management as the perfect complement to an asset management business. While the latter’s flows are linked heavily to market volatility, wealth management’s client relationships are typically sturdy; people might change strategy in a downturn but not their advisor.
Going global, with the required return profile, came down to a straight choice between entering either the European or American market. With its size, relative lack of complexity, and the number of Canadian retirees, the U.S. won comprehensively.
The types of businesses CI have since targeted are fiduciary, fee-based financial advisor relationships – what MacAlpine considers the “best standard of care possible” in the industry.
He added: “In the U.S. marketplace alone, there's over 5,000 RIAs, so there's an incredible opportunity to grow and scale quickly, just through the sheer fragmentation of the industry.
“It’s the single best business model for advice delivery period, globally. We see a lot of excitement around wealth management, and a lot of excitement around the market opportunity, and we just love the RIA business model.
“If we were having this conversation last February, we wouldn't even have done one deal in this space. Fast forward to today, 13 deals in the RIA space alone and we really have a lot of great growth momentum. We went from being a virtual unknown [in the space] to the fastest-growing platform we believe ever, in a very short period of time.”