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Scotiabank CEO Rick Waugh picking winners in wealth management race

awillis@globeandmail.com

When he took the top job at Bank of Nova Scotia, Rick Waugh said building a top-tier Canadian wealth management franchise was among his priorities.

That was five years back. Yesterday's release of the latest mutual fund numbers provide an interesting little scorecard on how Scotiabank's CEO and his colleagues are doing.

The top three domestic fund companies in July, measured by net sales, were - drum roll, please - Scotia Securities at No. 1 with $336-million, Dynamic Funds in second place at $218-million and CI Investments in the No. 3 spot with $146-million.

Now, what does the trio have in common? Well, Mr. Waugh's employer owns 100 per cent of Scotia Securities. Courtesy of a lifeline thrown from Scotiabank during the ABCP meltdown in 2007, the bank owns 18 per cent of Dynamic parent DundeeWealth, and has first dibs on the rest. And Mr. Waugh picked up a 37.6-per-cent stake in CI Financial last year, when Sun Life Financial wanted out.

So the three hottest thoroughbreds in Canadian money management this summer are all out of Mr. Waugh's stable. This trio attracted clients with various flavours of products - Scotiabank money market accounts and Dynamic high-yield funds were big sellers - and through all sorts of sales channels. A former also-ran in wealth management, Scotiabank is now pulling up on the pack.

Money managers in Scotiabank's orbit pulled in cash during a month when the big five banks reported total net redemptions of $478-million, according to a report yesterday from BMO Nesbitt Burns. To continue the contraction in performance, July also saw six of the 10 largest domestic mutual fund managers report net outflows.

Now, this all raises the question of just what Mr. Waugh plans to do with those minority stakes in CI Financial and DundeeWealth. Here's a little secret: The CEO is not sure.

He's dead set on where Scotiabank is headed: It wants control of a premier Canadian wealth management platform. That's been the goal from the start. Over time, Mr. Waugh or his successor will own far more of both DundeeWealth and CI Financial.

But just how will this play out? Who knows?

As a shareholder, Scotiabank simply wants DundeeWealth and CI Financial to be as successful as possible. Right now, the two companies are attracting all sorts of assets as independent players. The status quo is working, and when Mr. Waugh weighs the valuation on these companies against their prospects, it makes sense to leave ownership alone.

Over time, that will change: The bank will raise its stakes. The could come due to a cold, hard calculation on Scotiabank's part: That it's cheaper to buy now than wait and end up sharing the upside in DundeeWealth or CI Financial with the rest of their shareholders. Or it could reflect individual issues that see major shareholders at either firm opt to cash in, and the bank step up as a friendly buyer.

Either way, the scorecard on Mr. Waugh could not look much better. Over the long term, he is delivering on the wealth-management promise.

Oil patch pairing

Boutique investment dealer Versant Partners took a big step forward yesterday by joining forces with oil patch brokerage house Petersen Capital.

The merger of these two employee-owned firms under the Versant name gives the combined entity new scope and expertise. Versant has a tech, health care and industrial focus in Montreal and Toronto, but nothing in the West.

Founded in Calgary in 2008, Petersen Capital is run by RBC Dominion and Cormark Securities veteran Brian Petersen. He will be president and head of investment banking at Versant, and plans to build a 12-person team in Calgary.

The take on this union from Calgary rivals is that Versant nailed the timing. The expectation in the patch is that this fall will bring an increase in deal making. And oil patch clients have traditionally supported independent dealers.

Versant also added analyst Mark Friesen. He will be based in Calgary and cover mid- and large-cap oil and gas companies. Mr. Friesen was at TD Securities, FirstEnergy and BMO Nesbitt Burns.

In a nod you don't normally see from investment banks, Versant gave credit to Brent Ludwig, of Ludwig Financial Recruitment in Calgary, for advising on the union and successful courtship of its new analyst.

© 2007 The Globe and Mail. All rights reserved.

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