Canaccord Wealth Management

Over the past two fiscal years, the Canaccord Wealth Management team has focused on building a stronger, more profitable business that creates outstanding value for clients and sustainable returns for shareholders. Our efforts have produced solid progress. We have reduced operating costs, strengthened Advisory Teams and created a suite of easy-to-understand products that meet Canadians' growing need for solutions that address the creation, preservation and estate-transfer of their wealth. These initiatives, combined with improved market conditions, have returned Canaccord Wealth Management to profitability.

The slowdown in market activity during the first half of Canaccord's fiscal year gave us an opportunity to work more aggressively on two key priorities for Canaccord Wealth Management during fiscal 2011 – to identify and target opportunities to operate more efficiently and to generate profitable returns to Canaccord. Over the past two fiscal years the division has made substantial progress in increasing its margins, largely due to our cost containment initiatives and efforts to build our assets under administration. During fiscal 2011, Canaccord Wealth Management successfully enhanced its efficiency ratio to 79%, the lowest it's been since fiscal 2007, and grew assets under administration by more than 31%. These achievements, combined with a surge in client activity in the last half of the year, resulted in net income before taxes of $12.4 million in fiscal 2011 – the division's first profitable year since the global financial crisis.

Many factors are contributing to the turnaround that is gaining momentum in Canaccord Wealth Management. No less important than our focus on productivity, is the stronger value proposition we are offering to clients. We are experiencing excellent adoption of our proprietary Complete Canaccord solutions. This financial planning framework offers affluent Canadians credible, easy-to-understand advice and products to help assess, plan, implement and monitor their investable assets. These all-inclusive, fee-based services not only provide more value to clients, they build recurring revenues and assets for Canaccord and have contributed to a growing proportion of fee-based client accounts. In fact, in calendar 2010 Canaccord Wealth Management ranked first for asset growth in fee-based accounts among all Canadian investment dealers, according to Investor Economics.

During the past two years, we have also made excellent progress in enhancing the overall productivity of our Investment Advisors. We have invested in quality over scale to ensure client assets are being handled by experienced, well-trained Advisors who share our commitment to meeting our clients' expectations for comprehensive wealth management services. This strategy, combined with improved equity markets, has led to a doubling of average book size over the past two years. AUA per Advisory Team now averages $63 million, the highest it has ever been in Canaccord's history.

Our national network of Wealth Management branches continues to grow through our Independent Wealth Management (IWM) platform. We continue to be pleased with this operating model, through which independent agents operate under the Canaccord brand but take on a larger share of the costs and risks associated with operating a branch office. During fiscal 2011, we transferred four corporate branches to the IWM network and opened new IWM branches in Ottawa, Burlington and Cobourg, Ontario, and Calgary, Alberta. Canaccord Wealth Management now has 32 locations across Canada, including 18 on the IWM platform.