Despite the country’s flagging economy, more Canadians are expected to become high net worth individuals over the next several years. Recognizing the opportunity, banks and independent financial advisors are ramping up their wealth services. If you’ve attained a certain level of net worth, you might be ready to take your money management up a notch. It pays to know what options are available to you.
The definition of high net worth depends on who you ask. For some wealth managers the threshold starts at investible assets of $500,000, while some financial institutions set the bar at $1 million in cash available to invest. Others would suggest that when your investment income alone is enough to support your current lifestyle, you’re considered rich.
Although high net worth clients make up a small portion of the overall investment market in Canada, it’s a fast-growing segment.
“It’s only 3.2 per cent of the Canadian market, but it represents more than 60 per cent of the assets under management,” Eric Bujold, senior vice president and managing director of wealth management at National Bank, recently said in an interview with Investment Executive. “We expect the number of high net-worth clients to double within the next eight years.”
It’s only 3.2 per cent of the Canadian market, but it represents more than 60 per cent of the assets under management. — Eric Bujold, National Bank
Canada is the world’s seventh-largest market for the high net worth and ultra high net worth crowd.
According to National Bank research, there are 471,000 high net worth households across Canada, representing two-thirds of the country’s total wealth. By 2016, the number of wealthy households is expected to exceed one million.
About 50 per cent of high net worth Canadians are or were business owners. As baby boomers start to retire and plan for the future of their businesses, there is going to be a lot of money in motion to manage.
From Canada’s Big Six banks to private wealth managers, more services are being introduced to cater to this lucrative market.
The Royal Bank of Canada is the largest high net worth money manager in the country and has been focused on expanding services to individuals with more than $1-million in liquid assets. With more than 80 people focused on wealth-management services, clients get more than just a diversified portfolio.
“High-net-worth individuals are looking for more than just investment management,” says Anthony Maiorino, vice-president of high-net-worth strategies & services at RBC Wealth Management. “A team forms around each high net worth client that brings tax planning, estate planning and insurance as well.”
The model of providing investors with a full range of services, from investment management to tax planning, is one that other banks are emulating.
In September 2009, National Bank launched Private Wealth 1859, a division designed to meet the needs of clients with investible assets of at least $1-million.
UBS Wealth Management Canada also recently discussed plans to grow, with a goal of increasing its wealth advisory headcount to 100 from the current 43 over the next three to five years. UBS, which defines high net worth clients as those with at least $2 million to invest, sees a lot of wealth coming in to Canada from new immigrants and is adding Mandarin and Cantonese-speaking advisers in Toronto and Vancouver.
For Canadians whose liquid assets don’t quite reach the high net worth hurdle of the banks, there are private wealth advisors.
Bruce Campbell, co-founder of Campbell and Lee Investment Management Inc., previously managed more than $10-billion for pension plans and mutual funds at Royal Trust. His firm accepts clients with $500,000 in investible assets, charging a flat management fee of 1 per cent.
Most of the firm’s clientele are in their mid-40s to 60s when wealthy typically accumulates.
“Going forward, firms like us will become more important,” Mr. Campbell says. “As people move from pensions, they’ll need good high net worth money managers to keep them on track.”
Mr. Campbell tailors model portfolios with different asset mixes to fit his clients’ needs. With about 300 clients, his firm prefers to remain small. Unlike large retail mutual funds, “we can get out of markets if we don’t like them and switch around asset classes,” he says.
The firm has been growing in the past year as investors whose sizeable portfolios were trimmed in the market turmoil look for guidance.
“Some of the new clients were trying to do it themselves and didn’t know when to get out of the market, but they also didn’t know how to get back in,” Mr. Campbell says. “It’s been a good money raising environment.”
