TORONTO – Canaccord Financial Inc. (TSX:CF) is closing 16 of its wealth management offices across the country and reducing the number of advisers at the remaining locations in a bid to restructure the money-losing business.
The company said Monday the move will cut the number of wealth management offices by half in Canada, however would not say how many people would be losing their job.
“This initiative will allow us to make additional investments in markets where we see the most opportunity for future growth,” John Rothwell, president of Canaccord Wealth Management (Canada), said in the announcement.
“We can better cater to the needs of our clients through an elite team of investment advisers who have demonstrated their abilities to generate meaningful value for our clients, foster long-term client relationships and an enhanced client experience.”
Canaccord will have 180 investment advisory teams across Canada after the cuts compared with 269 at June 30.
The cuts came as Vancouver-based Canaccord announced a deal to acquire the wealth management business of U.K.-based Eden Financial Ltd., a boutique private client investment management business.
Canaccord is paying $20.3 million in cash, including $12.2 million on closing and $8.12 million after 12 months, subject to revenue retention and revenue mix thresholds. Further incentives of up to $6.3 million are also payable if certain targets are reached.
The company said Eden Financial will help provide greater scale to Canaccord’s wealth management business in London and bolster its offerings.
“Our expanded client base will benefit from a wider variety of investment opportunities and the backing of an independent, global financial services company,” said Alexis de Rosnay, CEO of Canaccord’s operations in the U.K. and Europe.
The wealth management business at Canaccord has struggled.
Globally, the division generated $57.2 million in revenue in its most recent quarter, but on an operating basis, after expense allocations, the division recorded a loss of $6.5 million before taxes.
Canaccord’s wealth management business in North America and Australia lost $7.3 million before taxes in what was the company’s first quarter.
Assets under administration in Canada totalled $13.1 billion at June 30, down 11 per cent from $14.8 billion at the end of the previous quarter and down 16 per cent from $15.7 billion the previous year.
The company said Monday it would take $11.5 million in charges in its second quarter report in connection with the Canadian wealth management closures.
Smaller firms like Canaccord have faced increased competition from the country’s large banks which have worked to grow their wealth management business in recent years.
In August, CIBC (TSX:CM) signed a deal to buy the private wealth management business of MFS McLean Budden which manages some $1.4 billion in assets for high net worth individuals families, endowments and foundations.
Canaccord shares closed down 34 cents at $5.76 on the Toronto Stock Exchange on Monday.
Note to readers: This is a corrected story. An earlier version incorrectly named the wealth management company being acquired.