Merchant Investment Management, a New York-based private partnership that provides growth capital and other support to independent financial services firms, has announced its first partnership in Canada. The firm has acquired a non-controlling minority interest in SPM Financial, an independent financial services firm based in London, Ontario, with over $1 billion (CAD) in assets under management.
The transaction signals the first of what Merchant expects to be many deals in Canada, where it sees a huge opportunity for growth. The firm has hired Todd Fithian, who is based in Massachusetts but has spent decades working with Canadian RIAs through his training and coaching business, The Legacy Companies. Fithian will lead Merchant's Canadian expansion efforts.
Tim Bello, co-founder and managing partner at Merchant, said his firm spent the past two years studying the Canadian market and meeting with advisers on a listening tour. Merchant wanted to make sure the work he was doing for US-based RIAs was also applicable to Canadian firms.
“We've wanted to expand in a smart way in Canada for some time,” Bello said. “We didn't just rush into the market with a checkbook and say, 'Here's what we're paying; if you want money, come find us.”
Finding someone who understood the Canadian community locally was the first step.
“We've spent time, we've been patient, we've met the right person to help us understand the market,” Bello said. “The right person helped us do what we do, which is to understand all kinds of inefficiencies and opportunities and things we could do in Canada.”
Merchant saw a need for his services in the Canadian market, where the independent advisor movement is gaining steam. As the market matures, life cycle equity partnerships are beginning to apply.
“Capital maturity in the RIA market in the United States is where it's at,” Bello said. “The rest of the world is now starting to evolve into the same place the US is today. Canada is no different.”
The partnership gives SPM access to the Merchant's expertise and services, including succession planning expertise, business asset transition services, and operations and technology.
SPM was established in 1999 and now has 36 staff members, including 16 financial advisors.
“Their industry experience and the capabilities they bring to us will support the success of our customers, our business and our future,” SPM finance partner Tim Faught said in a statement. “We are particularly proud to be Merchant's first Canadian partner, which speaks to the strength of our business and the integrity of our operating model.”
Merchant, which launched about seven years ago, now works with over 100 partner firms. Currently it is completion of the recapitalizationin which the firm expects to double its balance sheet.
Bello founded the company in a spare bedroom of a rented house while his wife was pregnant with his now 8-year-old daughter. Until then, few, if any, firms were taking minority stakes in wealth management firms, and this was being done in the hedge fund space.