One of Canada’s largest asset managers is stepping into the financial advice business after receiving regulatory approval to open a full-service wealth-management dealer.
On Thursday, Fidelity Investments Canada ULC will announce the launch of Fidelity Wealth, a dual-licensed investment dealer that has been approved by the Canadian Investment Regulatory Organization to sell both securities and mutual-fund investment products.
The move is a major shift for a company that primarily manages and sells more than 239 mutual funds and exchange-traded funds, and will create a new independent competitor in the Canadian market for financial advice where the big banks are dominant players. Currently, the big six banks control 63 per cent of Canada’s household financial wealth, according to data by Investor Economics, an ISS Market Intelligence business.
Fidelity Wealth managing director Eugene Boakye said in an interview that the new business will be built entirely by recruiting individual advisers – predominantly people who are nearing retirement and want to transition their books of business to an independent brokerage.
“Truthfully, we are probably a little late to the party but we have always been patient and we take a lot of time to do our due diligence,” Mr. Boakye told The Globe and Mail. “But now we are at an inflection point with more than 16,000 advisers who are looking to retire over the next decade.
“We also know there’s a lot of advisers out there that haven’t necessarily found the dealer or the adviser that they want to transition their business to. And so for us, we think there’s an opportunity there.”
Fidelity’s entrance into the wealth-management industry comes at a time when adviser recruitment has become a frenzy among competitors. Larger independents such as Richardson Wealth, Wellington Altus and Canaccord Capital have been actively competing to recruit books of business using cash and equity bonuses that can range into the millions.
However, Fidelity’s recruitment will be “slow and steady,” Mr. Boakye said, as the company also looks to hire wealth advisers that are strong in financial planning who will be available to take on new clients once an older adviser is ready to transition out of their business.
Fidelity Investments first entered Canada in 1987 on Black Monday. Over the years, the company has flourished among retail and institutional investors who were drawn to its actively managed funds and lineup of star portfolio mangers. Today, Fidelity is ranked the second-largest asset manager in Canada, with more than $248-billion in assets under management, surpassing most of the investment arms of the country’s largest banks.
In 2008, the company expanded its operations with the launch of Fidelity Clearing Canada – a custody, clearing and trade-settlement service that now has about $133-billion in assets under administration, and in 2018 entered the exchange-traded-funds business.
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But unlike many of its competitors in the independent space who scooped up distribution networks, Fidelity hadn’t actively looked to acquire – or build – its own distribution channel of advisers. That changed a year ago as it began to plan Fidelity Wealth.
Mr. Boakye is quick to point out that Fidelity Wealth’s motive is not to promote its own investment funds but rather to fill a void that the company has been hearing about persistently from investment advisers who are looking for a place to transition out of the business.
“We’re not just Fidelity agnostic, but we’re product and vehicle agnostic,” he added. “So whether a client wants an exchange-traded fund, an individual security or a mutual fund, we are going to figure out what’s important to the client and do what is best for them.”
Despite having a large shelf of proprietary products, Mr. Boakye says Fidelity will continue to be a strong advocate for product shelves that do not limit an investor’s choice on where they want to invest.
In 2021, regulatory changes around know-your-product and conflict-of-interest rules led to severe unintended consequences for independent asset managers when several of Canada’s largest banks halted the sale of third-party funds in their financial-planning divisions.
Although Ontario Finance Minister Peter Bethlenfalvy asked the Ontario Securities Commission to study the banks’ behaviour, neither the OSC nor Mr. Bethlenfalvy have publicly revealed the outcome of the review since it was completed in 2022.
The banks’ push to use their own proprietary products led to hundreds of financial planners looking to relocate their clients to brokerages that would continue to allow advisers the freedom to sell any products that were suitable for a client’s portfolio.
“We are going to be very clear that we are not sending out our wholesalers to try and recruit masses of advisers from other dealers in any way shape or form,” Mr. Boakye said. “Rather, we are here for the advisers who are looking to make a move and are open to having a conversation.”
