Royal Bank of Canada should take Judy Thomson to lunch.
Last week, RBC became the latest Canadian company to boost its presence in China, announcing a partnership with fund management company China Minsheng Banking Corp.
Ms. Thomson could teach RBC a thing or two. She is director of national sales at Bank of Montreal's BMO Investments Inc. and the bank's mutual fund liaison with China. She has visited the country 14 times and, with local partner Fullgoal Fund Management Company Ltd., worked hard to educate the Chinese on mutual fund investing. Bank of Montreal has trade ties with China dating all the way back to 1818 and currently has 103 staff working in the country.
"When it comes to sales, when it comes to marketing, it's like a new frontier," Ms. Thomson said. "Education levels are over the top but when it comes to soft skills, that is the part they [salespeople] need help with."
The bulk of Ms. Thomson's time is spent meeting bankers and investors in large and small cities and towns across mainland China. Mutual funds are a new investment vehicle and financial planning little understood. There are limitations. Chinese mutual funds are bought and sold in local currency, can only hold shares in publicly traded Chinese companies and the fund sales window is a brief four weeks.
Over the past three years, Ms. Thomson has met bankers on horseback, marvelled at the six-day work week, struggled to learn Mandarin and introduced the concept of retirement planning. Hold times of Chinese funds can range from two to six months.
Meal time is not for the faint of heart. Ms. Thomson has dined on deep-fried bumble bees, pigeon and marinated donkey.
"There are not many things I don't like. I just don't want to be told what it is," she said.
In addition to BMO and RBC, China is high on the priority list of some of Canada's largest financial service players. Manulife Financial Corp. and Sun Life Financial Inc. have established beachheads in one of the world's fastest-growing economies. Meanwhile, AGF Management Ltd. has an outpost in China and last month, a team of senior managers visited the country to assess opportunities.
Berkshire Group sale on hold
Michael Lee-Chin's plan to sell a stake of financial advice firm Berkshire Group of Cos. is on hold.
The billionaire money manager has delegated assessing potential deals and partnerships to Berkshire's senior management team. The move shifts the prospect of meaningful negotiations from Mr. Lee-Chin, the controlling shareholder of Berkshire and sister mutual fund company AIC Ltd., to a fledgling management team led by chief executive officer Robert Levis. Mr. Levis was appointed CEO of Burlington, Ont.-based Berkshire in August, and currently oversees the company from Vancouver.
Only four months ago, Mr. Lee-Chin told Berkshire employees via e-mail that "a strategic partnership with one of Canada's leading financial institutions" was in the works. The list of potential bidders included HSBC Bank Canada and Bank of Nova Scotia.
Now the timing of a partnership has shifted to as late as 2008. In an October letter to employees, Mr. Levis detailed changes to the 2005 advisers' share option plan and a "commitment to ensure a very attractive liquidity event for your shares in the next 24 months."
"We are still in discussions with several parties, albeit from a more advantageous position as we set the business on a new course for growth," Mr. Levis said in the 16-page letter. The new CEO proposes the "rebirth of the firm" with the goal of becoming Canada's top advisory firm within 12 to 24 months. The detailed plan includes retaining key financial advisers, boosting the firm's brand name and increasing market share in the insurance industry, the letter said.
So why is a Berkshire deal now on the back-burner?
Mr. Lee-Chin and Mr. Levis declined to comment.
Nevertheless, there are two theories from a number of industry sources, including former Berkshire advisers. First, cutting a palatable deal with Mr. Lee-Chin can be a formidable task. Executives who have negotiated with him in the past agree that he is a willing seller -- as long as he maintains voting control.
And second, there's some speculation, according to a source close to the company, that a Berkshire deal was never very close to fruition and was simply a means to keep anxious advisers on side.
A number of issues have kept the Berkshire crew under the gun for several years, sources said. The regulatory burden has increased dramatically, as a result of the firm's sales ties to collapsed hedge fund company Portus Alternative Asset Management Inc. There's some pressure to keep clients committed to the mutual funds of shrinking sister company AIC. Kris Astaphan, a former key lieutenant and confidant of Mr. Lee-Chin, left Berkshire's corner office in 2001 and there have been concerns about the strategic direction of the firm ever since.
As a result, the best and brightest have been jumping ship to rivals, including Dundee Wealth Management Inc., Assante Wealth Management Ltd. and Investment Planning Counsel Inc. Over the past two years, the adviser head count has fallen to 800 from about 1,100.
Berkshire's proposed sale or partnership was the carrot to keep advisers loyal and their hopes up, observers said. That carrot now may be many, many months away.
© 2007 The Globe and Mail. All rights reserved.
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