Desjardins, provincial credit union centrals form new mega wealth management holding company Aviso | General financial discussion | Discussion forum

Loonie said
Maybe they are trying to set the foundations for handling increased market share?  

I think that's correct, Loonie. I'm not sure what the structure will look like other than Aviso will be the holding company owning the various businesses, majority-owned by Desjardins and a Limited Partnership (LP) owned by each of the named credit union centrals based on their economic interest in either Credential or Qtrade and CUMIS (which is jointly owned by The Cooperators and Central 1 Credit Union).

It might help to understand that there are two types of brokers in Canada: carrying brokers and introducing brokers. All of them can place trades and handle execution but only carrying brokers can custody client accounts and handle things like statement and trade reporting and all of the administrative tasks. For instance, HSBC InvestDirect, through HSBC Securities (Canada) Inc., is a level 1 introducing broker. It has its own web-based trading platform for clients but the underlying accounts are custodied by (called AUA, or assets under administration) by National Bank Correspondent Network (NBCN). NBCN prepares and mails statements and handles tax reporting to the CRA and/or IRS, as applicable. Obviously, there are greater capital and regulatory requirements to being a carrying broker. As such, outside of the "Big 5" bank-owned brokerages, some of which provide third-party carrying broker services to other introducing brokers (not TD and BMO, though, as they each sold those units off), there are NBCN (the biggest), Fidelity Information Services Canada (a unit of Fidelity Canada and the second biggest when it bought the assets of bankrupt Penson Financial Services Canada), Raymond James, Haywood Securities, BBS Securities (which also owns Virtual Brokers), Interactive Brokers and Questrade. There is also Pershing Canada (a unit of Bank of New York Mellon Corp.) that is trying to grow its book of business with independent brokers but it is tough.

Credential Financial has a carrying broker as does Qtrade Financial Group. It would make logical sense to merge the two (a big undertaking, though) to achieve both cost synergies and also lower costs to broker and, as a result, end customers to build market share. Interestingly, Desjardins also owns Disnat Direct, its own carrying broker and self-directed discount brokerage. Will it be merged into Aviso or will it operate independently?

Growing, though, would make them more attractive, potentially, to other independent brokers or, perhaps, even to other carrying brokers (i.e., Odlum Brown, I believe, custodies its own accounts but doesn't provide such services to third-party brokers).

Cheers,
Doug