Is Dain Rauscher the Next Brokerage Buyer?

John Taft, chief executive of RBC Dain Rauscher, is aiming to have to 2,500 brokers within five years, and sees acquiring another brokerage unit as one of the way to reach his goal.

John Taft, chief executive of RBC Dain Rauscher, is aiming to have to 2,500 brokers within five years, and sees acquiring another brokerage unit as one way to reach his goal.

“If we get there through organic growth, recruiting and acquisition over next few years, it would be great,” says Taft. The Minneapolis-based firm currently has 1,650.

Dain has had an uneven track record in building up its brokerage force in recent years, but, according to analysts, including James Bantis of Credit Suisse, the Minneapolis-based full-service brokerage unit is in good position to buy. “Over the past 12 to 18 months, Dain’s focus has been on improving its operations, and it’s made some solid strides,” he says.

Since 2004, revenue per advisor has increased from $390,000 to $430,000, according to Bantis, but the number of reps has slipped about 20 percent since Royal Bank of Canada acquired the firm in 2001. A solution to the loss of reps could be just months away. “At this stage, they will probably purchase small- to medium-sized firms—not greater than their own size,” Bantis says.

This strategy toward growth has been all too familiar within the brokerage industry. The most recent example was UBS’ acquisition of Piper Jaffray’s brokerage unit, which followed the Legg Mason/Citigroup deal and Merrill Lynch’s acquisition of Advest. Of course, Dain Rauscher is a much smaller firm than the other acquirers. Still, it has the backing of its giant parent, which has folded a number of small acquisitions under the Dain banner, and has made no secret of looking for more.

Taft isn’t saying exactly where Dain Rauscher plans on expanding, but there have been reports of the firm spreading out into the southeast region where RBC’s U.S. bank subsidiary, RBC Centura, is located. Taft says his firm is “very flexible and open” to any location, but that the potential candidate would be a regional firm with several hundred reps that Dain Rauscher could “tuck into” its culture.

The growth plan is modest and would by no means put the firm in the same ranks as the top wirehouses, but, as Bantis puts it, “They’re just looking to be one of the largest firms within their second-tier unit of brokerages.”

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