BUSINESS

THE RISE OF FELL

CANADA’S LARGEST AND MOST PROFITABLE BROKERAGE FIRM IS WIDENING ITS LEAD OVER ITS RIVALS

DEIRDRE McMURDY October 21 1991
BUSINESS

THE RISE OF FELL

CANADA’S LARGEST AND MOST PROFITABLE BROKERAGE FIRM IS WIDENING ITS LEAD OVER ITS RIVALS

DEIRDRE McMURDY October 21 1991

THE RISE OF FELL

CANADA’S LARGEST AND MOST PROFITABLE BROKERAGE FIRM IS WIDENING ITS LEAD OVER ITS RIVALS

BUSINESS

Just before Anthony (Tony) Fell, president and chief executive officer of Canada’s largest and most profitable brokerage firm, flew to his company’s London office last March, the managing director of the branch sent a memo to his staff urging them to tidy up their desks and place all extra pens and pencils out of sight. In an industry still generally known for its lavish expense accounts and opulent premises, the 52-year-old head of Toronto-based RBC Dominion Securities Inc. is legendary for chastising employees for the slightest sign of excess. In fact,

Dominion brokers have nicknamed Fell “the Hawk” because of his relentless attention to detail. But Paul Taylor, executive vice-president of the Royal Bank of Canada, which bought control of Dominion Securities Ltd. in 1988, attributes much of the firm’s growing domination of Bay Street in the midst of an industrywide slump to Fell’s cost-cutting. Said Taylor: “Those guys can count paper clips better than anyone I have ever seen.”

But just as Fell zealously keeps an eye on costs, he is equally aggressive in expanding Dominion’s already unrivalled list of major corporate clients and in winning over individual investors. Fell joined Dominion Securities straight out of St. Andrew’s College, a private school near Toronto, in 1959, and in 1973, at age 34, he became one of the youngest presidents ever of a major Bay Street investment dealer.

Under his direction, Dominion has gained momentum while its rivals have faltered in the aftermath of the stock market crashes in 1987 and 1989. Indeed, of all the Bay Street brokerage firms acquired by banks following financial-services deregulation in 1987, Dominion is one of the few that has produced steady profits for its owners. As well, even though Dominion has swallowed Vancouver-based Pemberton Securities Inc. and McNeil Mantha Inc. of Montreal in the past three years, the

firm is preparing for more expansion. Declared Taylor: “There may be an ideal size for a brokerage firm—but we’re not anywhere near there yet.”

The tall, lean Fell is seldom seen on Toronto’s fashionable charity and party circuit, but he is a fixture at corporate annual meetings. Married, with three children, he is a neighbor of Conrad Black and Robert Campeau in the affluent Bridle Path district of suburban Toronto. Although Fell followed his father, Charles, in a career at Dominion Securities, his older brother, Fraser, studied law before joining Placer Dome Inc., a gold-mining company, where he was appointed chairman in 1987. According to colleagues at Dominion Securities, Tony Fell’s commitment to the firm is complete. Said a Dominion executive, on condition of anonymity: “His idea of a good time is to come into the office on a weekend.”

The financial backing of the Royal, Canada’s largest bank, has allowed Fell and his executives to seize the initiative amid the disarray that has prevailed on Bay Street since 1987. Many of Dominion’s rivals have been critically weakened or forced to merge in order to survive. Last year, only 27 of the 73 Toronto Stock Exchange member firms earned a profit, and the industry overall posted a $ 175.5-million loss for the first nine months of the year. By contrast, Dominion earned $22.3 million on revenues of $559 million for its fiscal year ended Sept. 30, 1990. And Taylor said that the firm’s unreleased profit for the year ended Sept. 30, 1991, is an all-time record.

Even before the Royal took Dominion over, the brokerage firm had a tradition of growing through acquisitions, and industry executives say that that experience has given the firm a key advantage over its competitors. _ Since 1970, Dominion has taken over 2 six of its rivals. In the process, it has 5 developed a team of half a dozen exec| utives who specialize in the swift kite's gration of new operations and employ2 ees. While other merged dealers have § struggled for months with expensive u employee severance packages and the gradual combination of duplicate computer systems, it took Dominion only six weeks to completely absorb Pemberton in 1989.

Fell and his senior managers have also learned how to keep the most promising executives from the firms that Dominion has acquired—and how to swiftly discard others. Dominion’s senior management team now includes representatives from almost every past takeover. But it has also reduced its overall workforce by 800, to 2100, since 1988. Said one former employee, who asked not to be identified: “They are accomplished at picking over the best bodies

and disposing of what they don’t want. Loyalties don’t count.”

By acquiring Pemberton and McNeil Mantha, with their extensive branch-office networks in Western Canada and Quebec, Fell is also plunging into the retail sector of the market. Shaken by the two stock market crashes, small investors have drastically curtailed their trading in recent years. But the retail sector is still a potentially lucrative one. According to John Bart, the president of the Canadian Shareowners Association, based in Windsor, Ont.,

individual Canadians own about $250 billion worth of stocks and bonds compared with the $200 billion owned by institutions.

The most obvious source of Dominion’s strength, however, is its growing dominance of the sale of new issues of securities by governments and large corporations. In total, those groups issued $34.3 billion worth of bonds, stocks and other financing instruments in Canada during the first six months of 1991, and Dominion was the leading underwriter of large new issues by several companies, including Petro-Canada. The firm has now clearly displaced secretive Gordon Capital Corp. of Toronto, which long enjoyed a reputation as the most aggressive Canadian corporate financier. To achieve that end, Fell has tirelessly courted the corporate executives whose companies issue shares. Said one competitor at a rival firm: “No matter where you go calling, Fell has been there just ahead of you.”

The strong performance of Dominion Securities contrasts with that of the three other investment dealers controlled by other major banks at about the same time: Wood Gundy Inc., owned by the Canadian Imperial Bank of Commerce; Nesbitt Thomson Deacon Inc., owned by the Bank of Montreal; and ScotiaMcLeod Inc., owned by the Bank of Nova Scotia. One key difference that sets Dominion above the pack is that its nine-member senior management team has remained largely intact and has maintained a 25-percent ownership stake in the firm. At the other bankowned dealers, many of the key executives who were in place at the time of the acquisition have departed. Those who have remained on staff, industry executives say privately, have lost their edge.

But although Dominion’s competitors still appear to be having difficulty finding their feet, Dominion is forging ahead with its expansion plans. Tony Fell is clearly confident that there will be new profits—as well as paper clips—to count in his future.

DEIRDRE McMURDY