RBC's wealth unit sets sights on conquering Europe
Wealth manager is looking to add to its business platform
The Canadians are coming. This is the message from George Lewis, head of RBC Wealth Management, among the 10 biggest wealth managers in North America but hardly a familiar name in the European private client industry.
Few people would be likely to name it as one of the 20 biggest private banks globally by assets under management and administration, for example, and Lewis conceded the business has been something of a well-kept secret in Europe. But he said that with £63bn (€70.5bn) in assets under administration and 1,400 staff in its UK-based wealth business: “We are a larger player than our name might suggest.”
The acquisition of Mourant Private Wealth, a Jersey-based offshore trust business, at the end of last year and last week’s recruitment of a team of four private bankers from Citigroup in London to target wealthy non-resident Indians suggests RBC is serious about developing its European wealth platform.
Lewis said he remains interested in similar deals: “We are always looking for quality teams or for small acquisitions to tuck in to the business.”
The bank added 200 staff to its international wealth management division last year and Lewis said he plans to keep hiring. “I believe we have a unique opportunity to attract clients and client-facing staff.”
RBC saw net new money flows of £2.8bn to its British Isles wealth business last year and its London-based capital markets division, which works closely with wealth management, has also been recruiting aggressively.
While Toronto-based RBC did not emerge without a blemish from last year’s various scandals and crises – it was a small player in the US auction-rate securities market and was an investor in the Reserve Primary money fund through one of its US wealth management subsidiaries – both the bank and Canada’s financial system generally are in better shape than much of the rest of the world.
RBC bolstered its capital position with a $2.3bn (€1.7bn) equity offering last month and Lewis said its relatively strong financial position means it can look to expand abroad while US-based rivals are pulling back to their home market.
The Mourant acquisition is the third Channel Islands-based trust business bought by RBC this decade, following the purchase of Ernst & Young’s Jersey and Guernsey trust arm in 2000 and Abacus Financial Services in 2005. The bank believes it has the biggest offshore trust business globally, with more than 800 staff in the division.
It reflects the focus of the bank’s international wealth business, which operates in 22 countries, on the cross-border needs of clients. But with offshore tax havens coming under increased scrutiny and pressure from authorities in the US, UK and Germany among others, the long-term growth potential of the sector has been cast in doubt.
Lewis shrugs off the threat. He said: “We are very comfortable with the offshore business. It is not just about tax but about security and family succession planning. Our base scenario is for equal growth of the off and onshore businesses, although that said there is certainly the potential to develop more of an onshore business in the UK.”
Half the bank’s 35,000 international wealth management clients are based in the UK and Michael Lagopoulos, head of RBC’s international wealth management division, moved from Toronto to London 18 months ago.
The trust and tax business is one of three, equally important pillars of RBC’s private client business, the others being banking and lending and investment. Lewis said that unlike some rivals, RBC has continued lending to private clients throughout the market crisis. “Our ability to lend against collateral remains strong and our loan book of $5bn remains much smaller than our deposit base,” he added.
The global wealth management division headed by Lewis was formed in February 2007 and includes institutional and retail asset management. Lewis said one of his goals was to get more of RBC’s in-house investment products distributed through its wealth advisers. Only 7% of the assets of the bank’s wealth management clients are invested in RBC products and Lewis said he would like to see that grow to between 20% and 25% over the next few years.
While this seems contrary to the trend of wealth managers depending less on in-house products that may provide inferior performance to external alternatives, Lewis claims the bank’s commitment to open architecture would not be compromised.
He said: “We believe in product-neutral compensation and there will be no differential incentives for selling RBC products.”
In terms of the investment outlook for this year, the bank is advising clients that the time to get back into equities is at hand. David McFadzean, director of manager research, British Isles at RBC Wealth Management, said: “Our view remains that US and global companies are far more valuable than their stock prices currently indicate and while a disconnect may persist for a period, it will eventually correct as a sense of rational behaviour and normality return to capital markets.
“By historical standards, the sell-off is well advanced, and the transition away from a climate of fear and intense risk aversion opens up scope for significant returns in stocks.”
George Lewis: We are always looking for teams or small acquisitions to tuck in to the business
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