Banner Ad

Home / News / The Big Picture Video / About Us / Advertise / Contact Us

BANKS STEPPING UP SERVICES FOR THE AFFLUENT MARKET

By: George Di Falco
October 2008

High net worth individuals represent a strong and growing sector in Canada – one which banks are closely watching and trying to attract as customers. Various financial institutions say this rising force of affluent individuals and families, especially those of the baby boomer generation, represent vast amounts of wealth that should be serviced. To meet the unique needs of this group, banks say they’re making services more personal and customizable.

Mark Cevey, CEO of HSBC private banking, believes that delivering enhanced banking services to this part of the market in Canada is of utmost importance. He points to statistics by Investor Economics which show 63 per cent of financial wealth in Canada is currently in the hands of millionaires and this is expected to reach 74 per cent within 10 years. Much of this wealth will be in the hands of aging boomers, Cevey says, who will need to manage it wisely and pass it onto their children. As a result, these individuals will look to banks that offer specialized services that cater to unique needs.

Affluent MarketTHE RIGHT PEOPLE

To reach the affluent market, Cevey says a banking service must, above all, hold distinct advantages over the more typical services out there. It’s important, he says, to offer these clients specialists who are able to execute “high level needs-based analyses,” rather than generalists whose abilities are limited.

To achieve this level of service, HSBC private banking offers wealth planners, often as the first point of contact. Wealth planners have a robust set of money management skills, including domestic or overseas investment and planning knowledge. Most importantly, they attempt to deliver their services in a fair, impartial way.

“To give these clients a good experience, we need to make sure they interface with someone who doesn’t have bias as soon as possible. it ensures that we don’t have product pushers in front of our clients, but individuals who can think holistically on the basis of client need.”

For TD Waterhouse’s Private Investment Counsel, one of Canada’s largest private client money management firms, it’s also about providing the right people and fostering close relationships. Through an extensive network of portfolio managers, this division of the TD Bank Financial Group delivers discretionary investment management services to high net worth individuals and their families.

It takes a personal approach to investment management for its affluent clients. Its portfolio managers take the time to thoroughly develop close relationships with these clients, and carefully document their personal profiles of financial and investment goals, objectives, and risk constraints through Investment Policy Statements (IPS).

PORTFOLIOS CUSTOMIZED

In addition, TD Waterhouse Private Investment Counsel portfolios are customized as assets grow. These portfolios are developed using appropriate investment solutions based on personal objectives, risk tolerance, income needs, and tax requirements. It helps these clients manage risk in two important ways:

  • Carefully diversifying portfolios to reduce overall volatility
  • Comprehensive research into the securities selected

Another one of the ‘big banks,’ Scotiabank, has also taken steps to recognize the importance of banking to this sector in Canada. In May of 2006, it bought a 51 per cent interest in Corporate Planning Associates Inc. (CPA), a financial planning firm that has catered to the ultra wealthy for 35 years. Jamie Purves, senior vice-president, CPA Financial Services, says the move allows Scotiabank to gain access to this ultra-high net worth layer of the population, individually worth anywhere from $5 million and up. For CPA, it allows it to continue its specialized services with the added perks of Scotiabank-owned products and services.

SIMPLIFYING LIVES

CPA had its start in 1974, when its founders were approached by a major Canadian company keen on keeping its top executives focused on their jobs rather than their portfolios. The notion hasn’t changed greatly over the years, Purves says, as highly affluent individuals continue to turn to them to handle the complexities their wealth brings.

“As complexity increases, we become more and more relevant in the lives of our clients. It is really important when you start getting up into that ultra-high net worth. The issues that they’re facing, or the planning opportunities that they’re able to take advantage of, increase,” Purves says.

Natasha Fauque, private wealth manager, Desjardins Group, agrees that high net worth clients, above all, want their lives simplified. That’s precisely why these individuals and families turn to specialized banking services.

With more than 2,000 client/family group accounts, Fauque says its focus is on making high net worth families’ lives easier by providing access to a wide range of experts. She says its inhouse specialists – notaries, tax specialists, and financial planners – are on hand, exclusively, to perform high-level assessments on matters such as real estate issues, liquidation of assets, and selling or passing on a family business.

“A lot of people really want to save time and they don’t want to dedicate a lot of time to the process of managing their portfolios,” Fauque says. “It gets more complex the more assets you have and I think they want someone to help simplify the process.”

Indeed, these specialized services address more complex issues and go beyond basic ‘cookie-cutter’ solutions found with typical financial services. Clients often come to their banks with a serious crisis, such as how to go about buying or selling a very large business, or what to do about a child spending too much money, perhaps because of a drug addiction. For these types of problems, chartered accountants, chartered financial analysts, lawyers, and the most senior bankers in the bank are available immediately to provide effective solutions.

EDUCATING CLIENTS

Effectively supplying advice to clients is an important element to CPA’s business as well. When dealing with great amounts of wealth, Purves says it’s imperative to ensure all levels of the family are given the opportunity to learn about their banking options, instead of simply abdicating control over to advisors.

“That’s really where I think we have, from that piece of mind perspective, a program and framework that fully educates both spouses as opposed to just one who might traditionally run with the family finances.”

Purves says they go out of their way in extending proper financial education to all members of a family involved. Openly offering information to both spouses and their children ensures that everyone is on the same page and that everyone will be comfortable with the services down the road. That approach, he says, helps them set their service apart from more traditional wealth management services.

Providing sound financial education is also a big part of the business. On a frequent basis, many aging clients with significant wealth come to them worried that their children lack the proper banking knowledge needed before inheriting money. In an age where children are overloaded with false information, she says, these individuals turn to the bank to supply adult children with solid financial information and advice before they inherit their parents’ wealth or business.

Some banks enhanced the educational aspect of their service by launching financial fluency programs targeting 19- to 25-year-old children of high net worth clients.

On the flipside, for children concerned about their older parents’ or relatives’ ability to manage their own large sums of wealth, banks have launched ‘concierge’ services that handle a wide range of banking needs for high net worth seniors, from basic tasks such as handling bill payments and managing investments to picking travel and medical insurance, or home healthcare assistance.

CRITICAL JUNCTION

For Purves, aging seniors in the high net worth category are at a junction in their lives where every decision becomes extra critical. It’s important for seniors in that segment to make sure they’re in the hands of experts who can lay out the best options available. “Wealth is not always a good thing. It can be a dangerous happenstance … The complexities speak on a number of different levels.”

An extensive list of options can be explored, depending, of course, on one’s situation. For those close to retiring and looking to ensure their wealth is protected, CPA provides a wide range of estate planning services such as setting up family trusts for the benefit of future generations; setting up charitable foundations to avoid taxation; or boning up on ‘defensive issues’ such as wills, powers of attorney, and life insurance and making sure those documents are adequate for their current stage in life.

George Di Falco is Private Wealth Canada’s staff writer (gdifalco@powershift.ca).

divider

IS A MILLIONAIRE WEALTHY? WHO IS WEALTHY IN CANADA?

In terms of millionaires, Cap Gemini Ernst & Young, a consulting firm, estimated there were 315,000 millionaires in Canada at the start of 2001 and this would reach 900,000 by the year 2010. Their survey identified millionaires as those with $1 million in investable assets, excluding real estate.

Still, is having $1 million in investable assets wealthy? At one time, it was an impressive amount of cash. But, when real estate prices soared and stock prices reached all-time highs, plus the weekly stream of new millionnaires created by the various lotteries across the country, the ranks of those classified as millionaires reached new highs.

So perhaps real wealth is now in the hands of those members of the ultra-high net worth club, billionaires.

In its annual report on billionaires, Forbes magazine identified 25 Canadians who reached the $1 billion mark last year. This represents two per cent of the 1,125 billionaires it identified worldwide.

Topping the Canadian Business list of Canada’s richest for 2007 is the Thomson family with a fortune of $25.4 billion. Rounding out the top 10 are:

  • Edward (Ted) Rogers Jr. – $7.6 billion
  • Galen Weston – $7.3 billion
  • Paul Desmarais Sr. – $5.64 billion
  • Irving family – $5.3 billion
  • James ( Jimmy) Pattison – $4.5 billion
  • Jeff Skoll – $4.5 billion
  • Michael Lazaridis – $4.4 billion
  • James Balsillie – $4.1 billion
  • Bernard (Barry) Sherman – $3.6 billion

Sources: Cap Gemini Ernst & Young, Canadian Business

Sponsored Content header

banner sample

Private Wealth

 

Home / News / The Big Picture Video / About Us / Advertise / Privacy / Contact Us
©2014 Private Wealth Canada. All rights reserved.
Banner Ad