Hurdles in the integration of AGF Trust have irked some of B2B Bank’s advisor clients. When the integration wraps up in late October, CEO François Desjardins thinks his company’s image will emerge stronger for it, even if the level of service has declined, he told The Insurance and Investment Journal in a strategic interview.François Desjardins has opted for acquisitions over organic growth. In three years, the CEO of B2B Bank and executive vice-president of Laurentian Bank has made several acquisitions that swelled the ranks of its advisor clientele from about 7,000 pre-2011 to 27,000 today.
B2B Bank acquired AGF trust for $242 million, gleaning a potential network of 4,000 advisor clients and a sizable deposit and loan volume. In 2011, B2B acquired MRS for $165 million, gaining a potential pool of 14,000 advisors and a portfolio of self-directed accounts, a relatively untapped segment. These transactions and smaller ones boosted the loan volume from $1 billion in 2004 to $8.5 billion at the end of 2013, as deposits advanced from about $2 billion to $13 billion over the same period.
AGF Trust will be fully integrated by late October, but some details have not been addressed yet. For one, some manual processes were introduced during the transition to handle changes to the system. “We should also upgrade other processes that are not where we want them to be,” Desjardins says.
AGF Trust’s size and the fact that it was bought out during the integration of MRS created a bottleneck. “Managing a complete integration process can take 12 to 18 months,” Desjardins says. In the case of AGF Trust, the meter has been running for over two years. “That’s the price to pay to combine three companies into one,” he adds.
The challenges of integration include choosing which products to retain, making administrative changes and the possibility of employee and advisor migration in one direction or another, he explains. “We acquired AGF Trust early in the integration of MRS. That was when we had to choose the products to offer and the processes to adopt. We also had to return to the market to publicize our new products to our clients.”
The process seriously bogged down the bank’s everyday operations. “During the integration phase, we had to take charge of the current clients of both the buyer and the acquired company. Many administrative changes affected accounts, systems and processes. The telephone support teams have to do more customer service than pure sales,” Desjardins explains.
Advisor disgruntlement was mounting, which Desjardins says is understandable. “Integration is a difficult time for everyone. Independent advisors who chose the other organization did not want to be told from one day to the next that now only Tide detergent would be offered, not Sunlight,” he says.
Reactions may vary, Desjardins adds. “Independent advisors are paid on commission. They may have to do administrative work that takes time without generating income, like a task they’d rather not have to do. Other advisors told me that these tasks give them an opportunity to meet with clients.”
Mutual learning a must
Desjardins also mentions the difficulty of combining employees from three different organizations into one group, which they did since January 2014. Everyone has to learn from one another, he explained. Otherwise an employee may unwittingly give an advisor obsolete information.
“We have to train employees and advisors again, because processes have changed. From another angle, advisors who got a wrong answer may think the whole experience is negative, but it’s not the case,” he says.
Despite the speed bumps, B2B Bank’s visibility improved during this period, Desjardins says, citing recent client surveys.
“Do we have the same level of service as before? No, it’s a little bit weaker. But the company image is more prominent because of our growth. We’re now striving to rebuild confidence and to offer better products than before. We are investing in our processes to make them more efficient and reduce the administrative load on our products,” he says.
Desjardins adds that he is strongly emphasizing future sales, service and support for advisors’ business development in 2015. “I sleep well at night. This outlook is much more appealing than simply doing integration.”
Still in business
Desjardins adds that B2B Bank has proven its resilience since the crisis of 2008. As players fled credit products, notably by tightening their criteria, B2B’s offering remained intact.
“Our message is that we are still in business. Since the recession of 2009, 30 lenders left the Canadian market,” he points out. One example is First Line (CIBCBANK), which controlled, he claims, 17% to 18% of the mortgage loan brokerage market. “In this period when the offer was shrinking, we grew. We built better products and customer relations. We converted our 35,000 investment account products to the 300,000 MRS products, which we think are better.”
Following the AGF takeover, B2B’s assets ballooned by $3 billion in leverage and mortgage loans. “It let us launch a line of alternative mortgage loans that made the last three months the best in our history,” Desjardins says. These nontraditional products are aimed at consumers affected by tightening mortgage financing.
“Some consumers who could previously obtain an uninsured mortgage covering up to 80% of the value of their home are getting only 65% in some cases. These consumers do not fit the family mold that banks love to see,” Desjardins explains. “For example, they include self-employed workers whose home is partly used for business. Our products can let them obtain up to 80%.”
Cross-selling and higher income
In its quest for efficiency, B2B also hopes to foster advisors’ cross-selling opportunities and thus augment their income, he adds. “It is not necessarily about selling another product to a client. It’s actually getting advisors to see themselves as financial experts who can offer their clients all the products.”
Cross-selling can stimulate several savings products that had not reached the desired maturity, Desjardins continues. “Most Canadians do not contribute as much to their RRSPs as they should. Their advisor can help them realize, for example, that contracting an investment loan is very attractive in a low interest rate environment.”
B2B Bank has offered this product since its founding in 2000, he adds. It has signed more than 60 business-to-business agreements with 33 companies including Manulife Investments and Transamerica Life Canada. These agreements cover distribution to advisors of loans to invest in mutual funds, loans to buy segregated funds or RRSP loans, even all three, as was the case with Standard Life Canada, since acquired by Manulife Financial.
The bank also offers advisors high interest rate investment and savings accounts, self-directed investment accounts, guaranteed investment certificates, non-guaranteed lines of credit and a wide array of mortgage products.