Industry reaction to RBC’s acquisition of Vancouver’s Phillips, Hager & North continues to reverberate, with many observers noting that it appears to be a win-win situation.
Last week, PH&N announced that it would be integrated into the new Wealth Management arm of RBC at a cost of 27 million RBC shares, changing Royal Bank’s position in the market from absentee to top five player virtually overnight.
While few in the industry saw the deal coming, many insiders weren’t surprised, given the appeal of Canada’s retirement market and the banking sector’s desire to broaden their specialized services. Early reports suggest that PH&N’s clients have little to fear from the deal, as the company’s independence was an attractive trait in the eyes of RBC.
“From what I’ve been told with regards to administration, compliance, and insurance, PH&N will not be influenced by RBC,” explains Greg Malone, Partner at Eckler Ltd. He says that the ability to tap into RBC’s considerable resources in research, credit analysis, and talent recruitment may provide new opportunities for PH&N clients.
Robin Pond, Partner at Morneau Sobeco suggests that clients will probably see no difference in the firm’s short-term performance, but their comfort level may be tested down the road. “This deal means that, for better or for worse, their accounts are now being managed by a large corporation,” he says. “It’s not necessarily good or bad, but there is a belief out there that focused firms can add more value than large institutions.”
Peter Arnold, national practice leader at ACS and Buck Consultants says PH&N’s clients will most likely be skeptical of the deal due to the firm’s self-styled independent history. “Many clients hired them because of their commitment to being an independent investment councilor. Clients will look at this in the context of what their goals are going forward,” he explains.
As PH&N was one of the last remaining independent Canadian money managers, some question whether the deal is indicative of a larger industry trend of banks acquiring money management firms. “It’s not difficult to connect the dots,” says Arnold. “Canada is a large market for retirement assets, within the top five globally. This is evidence of the globalization of the pension industry.” He points to the past 15 years in which most of the major banks have picked up investment management companies at some time or another, with varying degrees of success.
Greg Malone agrees. “This is probably a continuation of existing conditions,” he says. “There’s been lots of activity in the field with foreign firms coming in, and the market requires more in the way of specialized services.” Malone suggests that the deal illustrates the environment that banks and investment management firms find themselves operating in. “It says something about the industry in general when a firm as large as PH&N has to partner with a larger firm,” he explains. “The rest of industry will face similar pressure to adapt and address the issues.”
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