Why benefits, retirement and wealth planning are now P&C profit centres

Recent merger deals announced by Canadian commercial P&C brokerages increasingly feature acquisitions of wealth management and employee benefits firms, and this is no accident, brokers tell Canadian Underwriter.

This subset of M&A is about P&C brokerages becoming a type of one-stop shopping for existing commercial and personal clients, adding additional financial services offerings to their P&C mix. It’s changing how broking gets done in Canada, as owners of small- and medium-sized retirement planning, wealth management and employee benefits firms retire by selling to P&C brokerages eager to buy them out.

“The banks in Canada bought a lot of what would be called the Tier-1 wealth advisors,” says Navacord executive chairman T. Marshall Sadd. “There are a lot of smaller wealth and retirement individuals that might be associated with a group retirement business. We’re trying to bring in talent, and train and develop that talent to perpetuate it to be a succession plan for the folks in these businesses.”

The trend, while less prominent than other industry consolidations, has been underway for a few years, notes Yan Charbonneau, president of insurance industry acquisition firm Synex Business Performance.

“P&C firms are looking for products they can cross-sell with their large clients, which essentially [means a] natural fit would be anything related to financial lines,” he tells Canadian Underwriter. “More aggressive consolidators are buying everything to fit their clients’ needs. What is the next natural step? Of course, it’s buying some life and wealth management shops. It’s a natural transition [to] grow in [those] areas, because there aren’t as many buyers within the sector.”

Although Hub International has primarily been a P&C brokerage for 20-plus years, Terri Botosan, regional president, employee benefits and life, notes Hub has entered the arena as well.

“As we have built strategic plans over the last number of years, I wouldn’t say we’ve been actively looking for businesses in the retirement space, per se,” she says. “What I would say is we’ve been actively looking for businesses that would enhance our ability to solve risk issues for clients, regardless of where those risk issues exist.”

Those business lines make sense for commercial P&C customers, Botosan says, due to an evolving employer mindset in North America that recognizes employees are among a company’s most important assets — even though they’re not hard assets. That thinking contributed to a strategic shift at Hub in 2018 to include group benefits and other wealth sectors.

“When you think about protecting employees, you have to take a holistic view,” Botosan says. “I think there’s broader recognition…that you can’t take care of your employees and ignore financial wellness. If you’re not participating in that, then you’re not bringing a holistic solution.”

Last summer, NFP purchased Toronto-based Newport Private Wealth. Newport, with $4.3 billion in assets under management, serves high-net-worth clients with offices in Waterloo and Kingston, Ont., Calgary, Alta., and Kelowna, B.C.

“We certainly believe this is an emerging business model and there is a real client benefit when advisors offer holistic solutions that address clients’ comprehensive insurance and financial needs at both a corporate and individual level,” says Mike Goldman, NFP’s president and chief operating officer.

“NFP has had wealth management capabilities operating alongside our P&C and benefits businesses in the U.S. for more than 20 years. By acquiring Newport Private Wealth, we emulated this business model in Canada, allowing us to integrate and deliver wealth management solutions for our Canadian P&C and benefits clients.”

And, Goodman adds, the door remains open. “Smaller wealth management firms in Canada can definitely expand their succession-planning and retirement opportunities by engaging with P&C brokerages, and NFP actively looks at smaller acquisition targets to complement our existing business.”


Feature image by iStock.com/Warchi