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Will RBC ever fully digest PH&N?

Friday July 27, 2012

As you might remember, Royal Bank of Canada acquired independent Vancouver-based fund manager Phillips Hager & North Investment Management back in February 2008. Certainly, many loyal PH&N clients remember that fateful day. The acquisition, in line with an industry trend, was meant to generate economies of scale, more investment choice, less paperwork, and increased profit for the financial institutions involved. That’s the theory. Sometimes the reality plays out a bit differently.

Normally what happens is that both companies continue to operate separately for six months to a year before a full merger takes place. so that advisors can offer both groups of investments to their clients and clients will get one set of statements rather than two. In addition the advisor won’t have to duplicate all the transactional documentation which is a win-win for all concerned.

For example, in February 2011 AGF Management Ltd. bought the Acuity funds, and about eight months later the funds were all merged so that advisors and clients could access both companies’ funds. That time frame was pretty standard. Not the best, not the worst.

Now what about that PH&N takeover? Remember, it took place in 2008. I recently was in the process of moving assets to RBC and planned to use both RBC and PH&N funds to take full advantage of the two investment disciplines. To my dismay, I discovered this just wasn’t possible in a client-held account.

In fact, I would have to duplicate all the transfer documents, all the client applications with each company, and the purchase orders with Portfolio Strategies Corporation (the company I work with). More than four years after the purchase (which, incidentally, was a good one), advisors can’t access both fund company products without a needless duplication of paperwork. If the nuts and bolts of this particular transaction were too difficult to amalgamate, perhaps they should have backed off and let an outfit like CI Investments Ltd. or Invesco make the purchase.

This means that independent financial advisors and their clients can’t really benefit from the PH&N purchase four years after the fact. The only benefit thus far is derived by synergies behind the scenes (many less operational duplication). Does this mean the biggest bank in Canada doesn’t have the wherewithal to bring the companies together as one operating unit with two (or more) distinct investment fund platforms? It seems so.

When I call RBC, they answer as RBC/PH&N. I get a quarterly booklet with RBC funds and PH&N funds lumped together. My wholesaler (the representative from RBC who periodically visits me to update me on what’s happening with RBC) doesn’t say, “By the way, you can’t offer both fund companies together because they operate as two different entities.” All this would lead me to believe they are operating as one unit, which I would expect after four-plus years. Wrong. “Never assume” is the old adage that comes to mind.

My advice to RBC is to get your act together, and fix this problem so the little guy (millions of us retail investors and advisors) can benefit from your acquisition of PH&N. I still believe RBC has a lot to offer. It’s one of the best-performing and lower-cost mutual fund platforms in the country and a solid, reliable brand that ranks as one of the strongest in Canada – if not the strongest.



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