CI Private Wealth, Toronto-based CI Financial’s subsidiary U.S. wealth management business, has formed a trust company in South Dakota.
CIPW first applied for a South Dakota trust charter last year after announcing plans to split up its publicly-traded Canadian and U.S. businesses. That announcement came after a three-year stateside buying spree that made the Canadian financial services firm one of the largest RIAs in the U.S., albeit one with growing debt ratios.
“With CIPW Trust, we developed a flexible advice-centered model in which tailored trust solutions are integrated into a client’s overall wealth plan,” CIPW’s Head of Client Solutions Andrew Holmberg said in a statement. An “array” of corporate trustee services will now be available for all CIPW advisors around the country to offer clients.
The trust’s “preferred” approach is to stick to administration while leaving responsibility for investing assets inside the trust up to the advisors, according to the announcement; The corporate trust company can accommodate various trust structures, including investments, business interests and natural resource interests.
Trust companies are often registered and regulated by state banking agencies, and South Dakota's laws are considered most favorable to trust assets; there is no state income or inheritance tax, and, structured correctly, assets are allowed to be passed in perpetuity without taxation. Privacy laws are also robust for South Dakota banking institutions.
Creating a trust company inside the RIA means client assets best suited for a trust remain with the firm and the firm's advisors, instead of being transferred to an outside institution.
Since entering the U.S. wealth management sector in January 2020, CI Financial has acquired dozens of firms in the states. To date, CIPW oversees around $95 billion in assets across almost 80,000 client accounts.
In late 2022, CI Financial filed an S-1 with the SEC to take the U.S. company public and subsequently delisted the Canadian business from the New York Stock Exchange in January. Going forward, CIPW will operate separately as a subsidiary of CI Financial, which will absorb all debt—around $4 billion—and cease spending on U.S. acquisitions.
The firm’s CEO Kurt MacAlpine has said he expects to sell around a fifth of CIPW in the initial public offering later this year but told investors during the last quarterly earnings call that it still remains to be seen.
“We're looking to maximize the value for our Canadian shareholders while allowing CI to retain meaningful ongoing participation in that business,” he said.
CIPW “is not an aggregator,” MacAlpine said. The firm’s goal is to become “the leading integrated ultra-high and high-net-worth manager in the U.S.—period.”