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 taken a non-controlling, minority stake in SPM Financial, a London, Ontario-based independent financial services firm with over $1 billion (CAD) in assets under management.
The transaction signals the first of what Merchant expects to be multiple deals in Canada, where it sees a big growth opportunity. 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 last two years studying the Canadian market and meeting with advisors on a listening tour. Merchant wanted to make sure that the work it’s been doing for U.S.-based RIAs was also applicable to Canadian firms.
“We’ve wanted to expand in an intelligent way into 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 on a local level was the first step.
“We spent time, we were patient, met the right person to help us understand the market,” Bello said. “That right person helped us do what we do, which is understand all the kinds of inefficiencies, opportunities and things we could do in Canada.”
Merchant saw a need for its services in the Canadian marketplace, where the independent advisor movement is picking up steam. As the market matures, lifecycle equity partnerships are starting to be applied.
“The capital maturity in the RIA marketplace in the United States is where it is,” Bello said. “The rest of the world is now starting to evolve into the same seat the U.S. finds itself in today. Canada is no different.”
The partnership gives SPM access to Merchant’s expertise and services, including succession planning expertise, business asset transition services, and operations and technology.
SPM was founded in 1999 and now has 36 staff members, including 16 financial advisors.
"Their experience in the industry and the capabilities they unlock for us will support the success of our clients, our business and our future,” SPM Financial Partner Tim Faught said in a statement. “We’re 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 was launched about seven years ago, now works with over 100 partner firms. It is currently completing a recapitalization, in which the firm expects to double its balance sheet.
Bello founded the company in a spare bedroom of a rental home while his wife was pregnant with his now-8-year-old daughter. Up until then, few firms, if any at all, were taking minority stakes in wealth management firms, and this was being done in the hedge fund space.
