TORONTO (Reuters) - Royal Bank of Canada’s wealth management division has firm targets for growth, aiming to add both advisers and assets every year, but Canada’s biggest player in the high net worth arena is not looking at acquisitions as a source of growth.
“In Canada, we have leading market share and we are not looking at any major acquisitions,” David Agnew, chief executive at RBC Wealth Management Canada, told reporters on Monday.
“However, our strategy since 2005 has been looking for high-quality investment professionals who are looking for a firm to provide the best experience for their clients. So that has been our acquisition strategy -- one by one, high quality people.”
RBC said it has 19 percent of the market share in Canada’s coveted high net worth segment, which serves clients who have more than C$1 million in investible assets, primarily in its RBC Dominion Securities full-service brokerage and RBC PH&N Investment Counsel units.
Wealth management at Canada’s biggest bank brought in C$1.5 billion ($1.36 billion) in revenue and C$235 million in profit in the first quarter of 2014, about 11 percent of the bank’s profit. The wealth management unit has C$412 billion in assets under management.
Agnew was quick to list targeted headcount growth for each service, including adding 25 net new advisers every year at RBC Dominion Securities, which has 1,576 advisers.
The bank also wants to boost the number of advisers at PH&N from 62 to 80 - and ideally 100 - over the next five years, and add two to five private bankers every year to international private banking.
The bank has increased the number of advisers at RBC Wealth Management Services - a separate team of wealth and insurance specialists - to 206 from 185 last year, and Agnew said RBC is continuing to invest in that area.
“The war for talent has been quite aggressive,” he said, but noted that RBC may benefit from looming regulatory change known as the Client Relationship Model 2, which includes more arduous documentation requirements for performance reporting and cost and compensation explanations.
Agnew said the mandated changes, which roll out gradually over the next three years starting in July, will cost the bank more than C$10 million but probably less than C$20 million.
Industry sources have said the cost of the regulatory change to enhance disclosure may benefit big players, because they have the scale to make technological change that smaller wealth managers may find more difficult to afford.
Agnew said RBC is fully supportive of the move towards more transparency, and said many of the changes will not affect its wealthiest clients, who have already chosen a fee-based model of service rather than the commission-based service that will see the biggest changes from the regulation.
Some 56 percent of the C$230 billion of assets at RBC Dominion Securities are fee-based, and Agnew said fee-based business is growing about four times faster than commission-based transactional business, by assets. Between 2012 and 2013, fee-based assets grew 19 percent versus 5 percent for commission-based assets, the bank said.
($1 = 1.1027 Canadian Dollars)
Reporting by Andrea Hopkins; Editing by Diane Craft