Focus Financial continues expansion into Canada

Wealth management aggregator Focus Financial Partners is set to make its fourth acquisition of a Canadian advisory shop as partner firm Connectus Wealth Advisers adds Toronto-based Gavin Hockey Wealth Specialists.

The deal is unique in that it subtly fires a shot across the bow of Toronto-based CI Financial, which has been among the most aggressive buyers of U.S. advisory firms since entering the market in early 2020.

Asked about the appeal of independent firms in Canada, where much of the wealth management space is still dominated by large financial institutions, Focus co-founder Rajini Kodialam said, “Maybe we’re just a little better and a little smarter” than the Canada-based acquirers.

CI Financial’s chief executive Kurt MacAlpine declined to comment for this story, and Kodialam made it clear the acquisition of Gavin is not a radial shift in Focus’ growth strategy.

Focus first entered the Canadian market in 2015 with the acquisition of Montreal-based Dorchester Wealth Management.

“When we built Focus, we always knew our model would resonate in select international markets,” Kodialam said.

Gavin, which works with professional hockey players both in the U.S. and Canada, represents the ninth firm to join Focus through Connectus, which offers a model of firm independence while providing back- and middle-office support.

The Gavin deal, which is expected to close in the third quarter, represents the first Canadian firm to join Focus through the Connectus model, which also includes firms in Australia and the United Kingdom.

According to Kodialam, Focus Financial is taking the long-view perspective in countries where the independent advisory business is nowhere near as developed as it is in the United States.

“The U.S. is a little ahead of most other countries when it comes to the wealth management space,” she said. “Sixteen years ago, when we started Focus Financial, you could have said the U.S. was dominated by wirehouses. We see the trend toward proliferation of the independent space in other countries.”

Focus has grown to more than 75 partner firms and more than $250 billion in client assets.

“Focus has the scale, interest and momentum for continued expansion into other countries, which is a key differentiator versus other consolidators,” said David DeVoe, managing director at DeVoe & Co.

“Entering new countries is a herculean undertaking,” he added. “The different regulations, business models, client needs, and interests create a complex puzzle for any new entrant to solve. The Canadian wealth management market has degrees of similarities to the US, which bodes well for the Connectus model.”

Alois Pirker, research director at Aite-Novarica Group, also cited unique regulatory challenges as obstacles that could prevent some aggregators from expanding into foreign markets.

“Focus has been quite opportunistic, and I could see this deal as the next step to them making more acquisitions in Canada,” he said.

However, Pirker added, in a country where much of the wealth management business is still concentrated among large financial conglomerates, Canada presents challenges to growing the independent advice channels.

He cited Fidelity Institutional’s expansion into Canada eight years ago as an example of how even a major U.S. firm can get bogged down by the myriad levels of regulatory oversight and a general lack of financial services infrastructure, including custodial support for independent firms.

“Canada’s market is not as mature as the U.S., and Fidelity found a lot of the impediments happen at the province level, which is a real impediment to gaining scale,” Pirker said. “It’s a lot of work to make it happen there for relatively little outcome.”

However, looked at from the perspective of Gavin Hockey Wealth Specialists, the new connection to Focus Financial and the U.S. market is a winning ticket.

"Since our business was founded in 2003, we have been committed to growing and defending our clients' wealth, while expanding and strengthening our leadership in the hockey market," said Stew Gavin, president and co-founder of Gavin.

"Becoming part of Connectus allows us to advance these goals and to focus even more deeply on our clients, while maintaining our highly customized and specialized service model," he added.