The proposed mergers of Canadas largest bank-owned brokerage houses are unsettling employees and wreaking havoc with the pay scale of firms throughout the country. A feeling of uncertainty among Canadian analysts, traders, branch managers and brokers is driving the turmoil, leading some to conclude that there might be no time like the present to make a move.
In January, the Royal Bank of Canada and the Bank of Montreal announced their intention to merge. In March, the Canadian Imperial Bank of Commerce and Toronto Dominion Bank followed suit. The mergers, if approved by regulators, would combine such firms as RBC Dominion Securities and Nesbitt Burns in the former deal, and CIBC Wood Gundy and TD Securities in the latter.
All told, theres a great deal of uncertainty within the industry, and its being reflected in a hundred different ways from movement to compensation, says Bill Richards, an analyst for Midland Walwyn Securities in Toronto. In June, Merrill Lynch & Co. announced it was acquiring Midland to expand its presence in Canada.
The impending bank mergers have raised fears among branch managers that geographical overlap would make some of their positions redundant. Some reps, particularly younger or lower-producing ones, are expressing concern that with higher production minimums expected at the new, larger firms, their job security could be threatened.
Who knows what the next year is going to bring, says a TD Securities branch manager in Western Canada. If a good situation at an independent firm comes my way, I would have to seriously consider it.
That could happen. Independent dealers such as First Marathon and Gordon Capital Corp. think the proposed mergers create both the need and the means to expand. The Canadian operations of U.S. broker/dealers like CS First Boston in Toronto and the ubiquitous Edward Jones also have added some homegrown Canadian talent. And Merrill Lynchs $855 million pooling-of-interests deal to buy Midland will likely mean some additional changes to the landscape.
Gordon Capital President Terry Shaunessy says the turmoil creates opportunities for firms like his to bring in new blood, but the bank-owned brokerages wont be giving up employees without a fight. There are a lot of talented people who might be induced to move or want to move, but in some cases, to retain them, firms have raised the price of talent beyond our means, Shaunessy says.
Everyones nervous in this environment so we all do what we need to do to keep our people, confirms Donald Wright, president of TD Securities. But I think when the dust settles and people reflect on the benefits of working at a large powerhouse brokerage, the movement out of here will be minimal.
Additional maneuvering might occur later this year when contracts of many top analysts and producers at previously merged firms expire. Key employees, such as those at Burns Fry, which is now part of Nesbitt Burns, and Richardson Greenshields of Canada Ltd., which merged with RBC Dominion Securities, had been bound by golden handcuffs. The bonus agreements encourage them to stay a specified period of time following the acquisitions. Most of those agreements will be completed by the end of the summer.
All told, I think we will see more movement of personnel between firms in the next six months than weve ever seen before, says a trader at RBC Dominion Securities in Montreal.