U.S. wealth management growth pushes CI Financial to record Q3 earnings

Much as it did this summer, CI Financial is celebrating another record quarter powered by a rapid stateside expansion.

The Toronto-based firm reached new all-time highs for asset levels and the best net flows in its asset management business in more than six years, CI Financial CEO Kurt MacAlpine said in the firm’s third-quarter earnings statement released Nov. 11.

MacAlpine credits much of the growth to a company transformation focused on American RIA M&A moves. Last quarter, the firm completed two transactions and agreed to four additional acquisitions that will bolster its business by billions of dollars.

CI’s U.S. wealth management assets will exceed U.S. $98 billion, up from zero at the start of 2020, according to MacAlpine.

“CI is $126 billion larger, much more diversified by business line, geography, and product category and more competitive than it was just one year ago,” MacAlpine said in a statement. “In U.S. wealth management, we are seeing many of the country’s largest and most successful registered investment advisors choosing to join CI, attracted by the exceptional businesses we have in place and our vision for a national platform.”

CI Financial posted record assets of $320.4 billion, an increase of 65% year-over-year. Asset management net sales reached $821 million, the highest level since the second quarter of 2015.

Note: CI Financial discloses its quarterly returns in Canadian dollars. Unless otherwise mentioned, all figures are in Canadian rather than U.S. dollars.

M&A action: In the third quarter, the firm completed the acquisitions of Radnor Financial Advisors, a Pennsylvania firm with $3.4 billion in assets; and California’s Portola Partners Group LLC, a firm that manages $6.7 billion on behalf of ultra-high-net-worth clients. Following the end of the quarter, CI wrapped its deal to acquire Budros, Ruhlin & Roe, Inc., an Ohio wealth management firm with $4.4 billion in assets. Agreements to acquire RIAs with offices in Washington, Michigan, New York and Illinois will add another $18.8 billion in combined client assets by year’s end. When asked about the pace of their acquisitions in a call with analysts after disclosing its earnings, MacAlpine said he believes CI is still in the early stages of consolidation, noting the large number of RIAs that remain independent and the opportunities that still exist in the marketplace. According to a transcript of the earnings call by Seeking Alpha, the CEO said uncertainty around looming tax proposals have motivated some RIAs interested in selling or partnering to pull their plans forward into 2021. “I do think there will probably be a slight slowing in 2022 of activity, as I mentioned, just because some people who are planning to transact next year have moved it forward to help avoid tax related uncertainty,” he said.

New U.S. headquarters:The third quarter also saw CI find its stateside home. In September they announced the establishment of a U.S. base of operations in Miami. The office oversees the development of CI Private Wealth, the brand name for the firm’s U.S. platform. “The decision reflects the importance of our U.S. expansion and the considerable scale we have built since launching our new strategic priorities,” MacAlpine said. “Just 18 months ago, CI was an entirely Canadian company. And as we sit today, our U.S. wealth business is well on its way to being CI's largest business based on assets.” The moment the firm moved into the city’s Brickell district, CI became the largest financial institution to ever place a headquarters in South Florida, according to Miami Mayor Francis Suarez.

Alternative investments: Just before the firm unveiled its earnings, CI Financial announced a strategic minority investment in GLASfunds, an alternative investment platform and alternative asset management firm based in Cleveland. Founded in 2009, GLASfunds gives investors digital access to institutional-quality alternative investment opportunities and asset management oversight. It has approximately U.S. $1.1 billion in combined assets under management and assets under contract. MacAlpine said the plan is to become majority owner of GLASfunds over the next four years. “Alternative assets are an increasingly important part of high net worth and ultra-high net worth portfolios. And having a platform like GLASfunds is a critical foundational component to our strategy in the space,” he said during Thursday’s earnings call. “These are the types of strategic investments that will maintain CI’s position as the industry consolidator of choice for the highest quality RIAs, and will help us collectively enhance our offering to clients and achieve our objective of becoming the leading high net worth and ultra-high net worth platform in the U.S.”