The Canadian wealth market, solidly in post-recession mode, has seen its fair share of moving and shaking in recent months. Charles Davis talks to two of Canada’s big wealth managers, Royal Bank of Canada and Canadian Imperial Bank of Commerce, about how stability has them well-placed for continued expansion.
Canada’s financial services firms have been some of the shining examples of the benefits of prudent stewardship. This has given them ready capital to help fund expansion drives.
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Two purchases in a year for CIBC
Canadian Imperial Bank of Commerce’s (CIBC) recent purchase of McLean Budden adds some $1.4bn in private banking assets, mainly concentrated among high net worth (HNW) families and foundations.
It’s the second major purchase in wealth management for CIBC in less than year, as the bank took a 41% equity stake in US investment management firm American Century Investments for $848m in July 2011.
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By GlobalDataThe McLean Budden deal is much smaller than the American Century investment, but completely concentrated on the HNW market.
A unit of Sun Life, the firm has made quite a name for itself as a white-glove private bank. And it adds a sizeable chunk to the $12.8bn in private wealth management assets already under management at CIBC as of yearend 2011.
"The addition of MFS McLean Budden’s Private Wealth business aligns with CIBC Wealth Management’s strategic priority to strengthen relationships with HNW clients and enhances our distribution capabilities while delivering attractive returns," said Gary Whitfield, managing director and head of private wealth management at CIBC.
"The transaction further solidifies CIBC’s position as one of Canada’s fastest-growing investment managers and illustrates our commitment to serving the unique needs of HNW clients."
Counselling rise
Whitfield said that the deal also adds depth to CIBC’s rapidly growing investment counselling business.
"This acquisition provides us with added capabilities and strong relationships with foundations and intermediaries, creating further potential for growth and new client acquisition," Whitfield said.
"It enhances our distribution capabilities and grows our fee-based business, and it further solidifies our position as one of Canada’s fastest-growing investment counselors."
CIBC: Looking for more deals
Whitfield added that CIBC may be looking for other deals in the wealth management space.
"Over the past six years, CIBC has built one of the strongest capital positions of any bank in the world," he said.
"Going forward, we will look to deploy excess capital to pursue growth opportunities and are committed to growing our wealth management business. To this end, we will continue to seek out opportunities to diversify our distribution business towards greater recurring, fee-based revenue streams for our HNW clients, as well as opportunities that will enhance our investment capabilities to meet client demand."
The Canadian wealth management market provides the launching pad for one of the industry’s largest global players as well. Royal Bank of Canada has used its home nation’s stable banking environment — the World Economic Forum recently ranked Canadian banks the soundest in the world for the fifth consecutive year – to build an impressive international private banking operation.
It recently added to that footprint with the purchase earlier this year of the Latin American, Caribbean, and African private banking clientele of Coutts, the private bank of RBS Group.
CAD$324bn of AuM
The acquisition included the clients who reside in these regions and private banking staff based in Switzerland and the Cayman Islands and added more than CAD$2bn in client assets, boosting RBC’s private banking client assets to than CAD$562bn of assets under administration and more than CAD$324bn of assets under management, according to George Lewis, group head of RBC Wealth Management.
Lewis said that the Coutts acquisition is emblematic of RBC’s global wealth strategy to service key trans-border markets while looking for opportunities to expand as players in more challenging financial condition seek to shed assets.
"We decided in 2007 to bring all of our wealth management businesses into a single global division, RBC Wealth Management, and in 2008 and 2009 the market crisis had us focused on strengthening our businesses internally," Lewis said.
"So we used the crisis to really solidify out internal strengths and that enables us to look for opportunities from competitors whose parent organisations were in greater trouble and needed to exit the business, and we saw the chance to grow."
Big ambitions
The Coutts acquisition was but the latest of a series of international private banking deals by RBC.
The bank acquired Hong Kong-based Fortis Wealth Management and BlueBay Asset Management in Europe in 2010, and J.P. Morgan’s Third Party Registered Investment Advisor Servicing Business in 2009 in the US.
And as far back as 2008, RBC expanded its presence in Dubai and the Cayman Islands through the acquisition of Mourant Private Wealth, which is based in Jersey.
"Outside of North America, we’re focused on HNW and ultra-HNW clients exclusively," Lewis said. "We’re adding credit and investment on to our trust and private banking offerings and staying extremely high end, in major international centres, where our clients need cross-border transactional expertise."
Lam Am, a key player
The Coutts franchise gives RBC greater access to South America, where it operates wealth management offices in Brazil, Chile, and Uruguay, Lewis said, and gives it a new base of attractive client assets in a key region.
"We want to grow wealth management significantly because this business is not as capital-intensive as capital markets or retail banking," he said.
"Our wealth grows as the customer’s wealth grows, and it really is an attractive margin business. Asset management is about half our wealth business, and that means attracting and retaining talent is a primary focus for us."
RBC has set a target of 100 relationship managers by 2015 in the UK, and already are over 50 at the moment.
The wealth management unit has 1700 client-facing advisers in Canada, having added 300 in last five years, and now has 2000 advisers in the United States.
"The turmoil of the past few years has allowed us to pick up a lot of great investment talent," Lewis said.
"We’re always on the lookout for opportunities to strengthen our advising ranks."
