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Mutual Fund News

CI eyes banking, trust business

CI Financial Income Fund, which operates Canada's third-largest mutual fund company, is considering a foray into the banking and trust business.

"It is possible that we will have a bank or banking services at some point in the relatively near future," CI Financial chief executive officer Bill Holland said after yesterday's annual meeting.

"The banks are becoming dominant distributors of mutual funds," Mr. Holland said. "We have to be in most of the business lines that the banks do to become competitive."

Toronto-based CI Financial expanded into the financial planning business with its acquisition of Assante Corp. in 2003, and into the brokerage arena with the recent purchase of Rockwater Capital Corp., parent of Blackmont Capital Inc.

"Our advisers are asking us to come up with services so that their clients don't have to go to the bank," Mr. Holland said. "If every client has a banking relationship, then ultimately those banking relationships morph into mutual fund clients."

CI Financial, which could offer banking services by creating its own bank or through an acquisition - is looking at offering services like credit cards, mortgages, small consumer loans and chequing accounts, Mr. Holland added.

"Ultimately, we are going to have to offer both - trust services for the high net worth and financial planning business at Assante ... and banking services."

Toronto-based Dundee Wealth Management Inc., which operates a fund company, was granted a federal charter in 2005 to operate a Schedule A bank known as Dundee Bank of Canada.

Dundee Bank, which does not have bricks-and-mortar branches, tailors its services to clients of advisers of its related financial planning unit.

"I think we would look at doing it differently," but CI Financial would "in all likelihood" have a virtual bank, Mr. Holland added.

"Our best chance of growth is not in the mutual funds business, but in the periphery of the investment management business."

But the brokerage side offers the best growth prospects, and the goal is to increase Blackmont Capital's brokers to 300 from 183, he added.

CI Financial, which has about $69-billion in assets under management, will continue looking for acquisitions in all of its business lines, including mutual fund companies, Mr. Holland said.

The target is fund companies with about $10-billion-to-$15-billion in assets, he said. "The middle ground is ultimately where they are going to feel pressure the most. They are too big to be boutiques, and too small to compete with companies like ours."

Earlier, he told unitholders that CI, which became an income trust last year, plans to convert back to a corporation on Jan. 1, 2011.

"We might as well maximize the benefit of it as long as we can," Mr. Holland said.

CI Financial

Close: $29.95 (Canadian), unchanged

© 2007 The Globe and Mail. All rights reserved.

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