INTERVIEW: Canada's RBC Wealth Management Has Risen Far, But It Ain't Over Yet

Tom Burroughes

28 September 2012

RBC Wealth Management is a business that has in its own unpretentious way risen up the rankings, but as far as one of the top men at the Canadian firm is concerned, the ascent is far from over.

The firm, part of Royal Bank of Canada, with C$562 billion ($571.7 billion) of client assets, has been on a branding and marketing drive, hired more managers and recently taken over the closely-read Capgemini World Wealth Report, previously produced in association with Bank of America Merrill Lynch. RBC is certainly putting itself about.

And unlike many of its global peers, RBC has avoided most – if not all – of the bullets from the 2008 credit market meltdown and also avoided damaging tax and regulatory fights in the US and elsewhere. But as far as George Lewis, RBC Wealth Management group head is concerned, there is still plenty of work ahead in markets such as the UK, the rest of Europe and Asia, as well as the home hunting grounds in North America.

“In Asia, we are under-represented and we realized that fact about 18 to 24 months ago. We looked to build scale in Singapore and Hong Kong and that remains our focus, serving high net worth and ultra high net worth clients,” Lewis told this publication in a recent interview.

“The challenge in the region is that it is a relatively new source of wealth where clients are becoming more experienced; we are moving into the second generation of wealth creation and the role that a wealth manager can provide,” he said.

Lewis and colleagues have been busy. In late August, Toronto-headquartered RBC changed its senior leadership team. Paul Patterson, currently head of global trust, was appointed as deputy chair, RBC Wealth Management, for ultra high net worth - international. He is based in London. That move follows Michael Lagopoulos’ decision to retire from RBC after 26 years’ service at the end of next month; Stuart Rutledge, who is currently head, global wealth services, strategy and transformation, was named head, global trust, RBC Wealth Management. He is based in Jersey. As chair of RBC's global trust advisory board, he will also oversee RBC Wealth Management’s trust business internationally.

In September, RBC appointed Steve Sokić as head of UHNW, trust, fiduciary and tax - a newly-created role for which Sokić has relocated from Jersey to Toronto; he reports to Patterson. Meanwhile, the firm appointed Shehreen Quayyum and Jaime Zuloaga as directors for the Americas desk at the firm’s London-based UK private client wealth management team. The latter moves highlight how RBC, unlike some of its global peers, is continuing to prospect for business from expat US clients, for example, despite the rising compliance burdens of the US FATCA Act.

There have been some headwinds to contend with in tough markets, however. At the end of August, RBC reported that net income at its wealth arm fell by C$36 million to C$156 million for the quarter ended 31 July compared with the same period a year ago. Excluding the negative effect of C$29 million ($21 million after tax) related to certain regulatory and legal matters in the current quarter, net income fell by C$15 million or 8 per cent, largely due to lower transaction volumes reflecting continued investor uncertainty, partially offset by higher average fee-based client assets. In general, however, the bank is in relatively robust shape. Wealth management still has plenty of upside potential to grow its share of overall bank revenues and profits; at present, revenues and profits account for 7 per cent and 10 per cent of the totals, respectively.

Recruitment drive

In the UK, a key market for RBC Wealth Management, Lewis said the firm was ahead of schedule in hiring 100 relationship managers by 2015. “We are looking for high-performing, experienced talent at competitors; we look for people who are attracted by the value proposition at RBC. We make sure the first question they ask is 'why would moving to RBC benefit my client?',” Lewis continued.

“In wealth management, the importance of an individual representing an organization in terms of safeguarding its reputation and building the business is absolutely critical. We are looking for people who have built their career with one or two institutions and looking at us for what might be their last career move,” he said. Of course, Lewis noted, the 2008 crisis has forced many high-caliber individuals out of some institutions at short notice.

Lewis talked about the three elements of what RBC sees as its international wealth strategy: its leading position as a financial services business in Canada; secondly, its aim to be a global provider of capital markets and wealth management solutions centers of business,” he said. “We are very much focused on the international financial centers of Geneva, Hong Kong, London and Singapore,” he said.

Although Lewis is confident, it was necessary to ask him about near-term problems and risks, such as that of a hard landing by the Chinese economy – hardly a phantom menace given the pumped up nature of its real estate market.

In the longer run, RBC remains convinced that Asia is a vital growth region, regardless of any speed bumps, Lewis said.

In Asia, RBC Wealth Management, which currently oversees about $10 billion (US dollars) of client money, aims to reach $25 billion in 2015.

The RBC brand

The firm does not have the flashiest image, but one gets the impression that this Canadian firm likes it that way at a time when investors look for solidity.

“When we started the wealth management segment in 2007 we experienced faster growth than in other sectors. Wealth management is a great complement for our banking clients. The biggest change since 2007 has been the relative outperformance of the Canadian financial system in general,” he said.

The Canadian side of the bank remains its bedrock. The firm has over 2,000 advisors in the US, managing around $185 billion (US dollars) of client money; in Canada, RBC accounts for 22 per cent of the country’s wealth management market by assets.

Finally, this publication asked the familiar question about any ambitions in terms of mergers and acquisitions. “There may be merger and acquisition opportunities; we think there is considerable opportunity to grow organically,” he added.