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Richardson has new financial-services stake

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THE Richardson family has re-upped its commitment to the financial services business 10 years after its return to the sector in which it did so well in the past.

Richardson Financial Group, a division of James Richardson & Sons, is one-third owner of the Toronto-based wealth-management firm Richardson GMP Ltd., which this week acquired Macquarie Private Wealth Inc., for $132 million. Richardson Financial Group will be responsible for one-third of that purchase price.

Sandy Riley, president and CEO of Richardson Financial Group, said, "We have really high hopes for the company. Bear in mind it hasn't been 10 years since we opened our wealth-management company with our four or five adviser teams managing about $600 million."

Called Richardson Partners Financial, it opened up shop at the end of 2003 and did well servicing high-net-worth clients with complicated financial needs.

But after the global financial crash in 2008 -- "a seminal year for financial services in the world not just in Canada," Riley said -- the company organized a merger with the smaller GMP Private Client to form Richardson GMP (one-third owned by Richardson, one-third by publicly traded GMP Capital Inc. and one-third by the firm's management and investment advisers.)

That firm grew to $15.5 billion in assets under administration. The addition of the Macquarie book of business will put it up to just under $27 billion.

"We'll be the largest non-bank-owned business of its kind, by some margin, in the country," Riley said.

It's a role the Richardson family enterprise has played in the past. When it sold its former brokerage business, Richardson Greenshields, to the Royal Bank in 1996 for $480 million, it was the second-largest non-bank-owned brokerage business.

"Richardson GMP is positioned well to be competitive with the banks who really dominate the landscape," he said. "It is important to have an alternative for clients and people who want to work in the business and who don't want to work in a bank-owned firm with the inherent challenges and conflicts that come with that."

The move back into financial services in 2003 was well-timed in the sense the markets were on what seemed like an inexorable upward trajectory. In addition to the wealth-management business, a private-equity operation called Richardson Capital was formed. It raised about $1 billion in a couple of funds and was taking advantage of a very active private-equity business.

But business valuations and the credit crunch after the financial collapse made the private-equity business more challenging, and Richardson Capital took the almost unprecedented action of returning investors' funds that had not been deployed.

"Coming out of that time period, we made a couple of decisions," Riley said. "On the private-equity side we determined it was not appropriate for the family business on a long-term basis and we made the decision to wind out of that business, which we are in the process of doing. With respect to Richardson Partners, we realized we needed to get to a bigger scale in order to make sure we could withstand another market event like 2008."

In addition to the partnership in Richardson GMP, at the same time the Winnipeg firm made a sizable equity investment in GMP Capital of about 11 per cent. That stake has increased since then to about 24 per cent -- worth more than $100 million today -- and it could increase its holdings to 33 per cent.

Although wealth-management businesses that rely on transaction commissions for their profits have struggled, Riley said Richardson GMP's fees-based model is strong.

"We feel pretty good about the fact this business will be very profitable and strategically well-positioned," he said. "It allows us to do a lot of things because of our size. We feel very hopeful for the future."

Richardson GMP has a sizable branch office in Winnipeg with a number of wealth-management advisers on hand, but management and administration of the company is based in Toronto.

James Richardson & Sons is one of the five largest privately owned companies in the country.

Republished from the Winnipeg Free Press print edition September 14, 2013 B6

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