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They'll even plan your funeral

As profits on traditional products get squeezed, the banks and insurance giants are bulking up in the hottest segment of financial services: wealth management. And to get your business, they're going to extraordinary lengths

With files from reporter Andrew Willis

This summer, Bank of Montreal sent a press release to newspapers across the country with the title "Boomers Baffled about what it means to be Executor of a Will."

In a recent survey, the bank had found "mass confusion" among baby boomers over what the role of an executor entails, it said. It also found that most baby boomers had no idea that being executor of an estate is a job that usually takes more than a year to complete.

Surprise, surprise - just this spring, the Bank of Montreal had been training staff in its branches across the country in the area of bereavement services.

If a customer's mother dies, that customer can now walk into a branch and request that BMO Trust Company do everything from planning her funeral to asking Canada Post to redirect her mail to settling her outstanding debts.

BMO is not alone. Royal Bank of Canada is rolling out a similar service through its massive branch network under which the bank will pick up many of the duties of the executor of an estate.

The banks are going to new lengths to become closer to their customers - and their wealth.

They know that a greying population means now is the time to push the envelope in wealth management, which is why it has become one of the hottest games on Bay Street.

'The growth rate for this industry is probably twice what the GDP growth rate is," said Gilles Ouellette, chief executive officer of BMO's private client group and deputy chairman of BMO Nesbitt Burns.

"Because it's attractive, it's attracting more and more competition. The banks are competing in this, the independents, the life insurance companies, everybody's in this space because of its growth prospects. I mean, it's the most attractive part of the finance industry."

That's why some of Canada's biggest financial institutions, such as Bank of Nova Scotia and CI Financial, are clamouring over the chance to gobble up DundeeWealth Inc., with its 600 full-fledged brokers and 1,200 advisers who can sell mutual funds. CI's $2.36-billion hostile bid for the business is 52 per cent higher than the price DundeeWealth's shares closed at before the bid was made.

"If there was to be an auction process for Dundee, every single Canadian bank would be kicking the tires there," said Dan Richards, an industry consultant and president of Strategic Imperatives.

Once upon a time, Canadians identified themselves as Royal Bank of Canada or Toronto-Dominion Bank customers the way they identified themselves as a GM owner or a Ford owner, he said. Some bank executives became complacent.

"We've seen a transition away from a relationship-driven world, where people make decisions based on who they've done business with historically, to a value-driven world," Mr. Richards said. "The banks clearly dropped the ball in the 1990s in terms of aligning what they were offering - advice and performance - with what customers were demanding," Mr. Richards said.

A research study in the mid-nineties found that when mystery shoppers posed as prospective customers with $100,000 to invest and wandered into bank branches seeking advice about mutual funds, they were generally handed a pamphlet and told to come back after they had decided what they wanted to buy, according to Mr. Richards. Less than one-quarter of the customers were invited to sit down. One in ten were asked what their name was.

In the years since, the banks have made huge inroads in wealth management, becoming the dominant force in the industry. They've once again demonstrated the ground-shaking power they have in Canada when they put their collective minds to something.

They used different strategies and some were slower than others to wake up to the opportunities. But now all of the big banks are forging ahead in the wealth management arena, and working to recapture those customer relationships that breed loyalty.

Bet your mother's banker never asked her whether her kids might fight over her estate, or when her daughter is getting married, or how her divorce is coming along. Depending on their level of wealth, Canadians might be surprised to find out some of the things some banks are willing to do for them these days - for a fee, of course - from guiding boomers on how to get proper health care for their elderly parents, to helping them decide which child to leave the family business to, to connecting them with a good dog-walker.

While many of these services are still only offered to private banking clients - those with a high net worth, who deal with the big banks' private bankers - they are beginning to trickle down into the branches.

"There are a number of things that are driving the focus that the banks have on wealth management," Mr. Richards said. For one, it's a high-growth area at a time when many of the traditional banking products - mortgages, and GICs and the like - are slowing down. Moreover, "it's a high-margin, high-profit area, at a time when banks are being squeezed on their traditional spread-based businesses." They're being squeezed because customers are becoming more picky, Mr. Richards said. They are smarter and tougher, and they know that the posted interest rate on, say, a mortgage, is just a starting offer.

"Canadians are very much speaking with their feet when it comes to deciding where they're going to do business," he said.

At the same time, the banks are aggressively expanding their private banking businesses, one of the key segments of wealth management right now. BMO Harris Private Banking, for example, plans to double the number of offices it has in Canada from 20 to 40 over the next five years, with the accompanying goals of doubling its assets under management and revenues.

While the phrase "wealth management" likely brings to mind mutual funds, it's increasingly much more than that. The goal is to be a one-stop shop for Canadians' financial needs, and to develop a rapport that keeps the customer coming back.

While there are a host of different ways to rank the players - from number of advisers, to client assets under management, to profitability - it's clear that this country's biggest bank, Royal Bank of Canada, is one of the leaders in Canadian wealth management.

It has roughly 15 per cent of the market in what is still a relatively fragmented industry, according to George Lewis, the bank's head of wealth management.

But RBC's head start hasn't stopped it from pouring more resources into the business and tweaking its model to find new ways to grow.

For instance, it now does 25 per cent of its fund sales outside of its branch network. "If you go back to 2000, we didn't even try to market our funds outside of the bank branch network," Mr. Lewis said.

RBC has come to put such a focus on wealth management that, earlier this year, it rearranged itself into new divisions to carve out a global wealth management division.

"It's a business that we view very attractively, and our shareholders do as well in terms of the valuations that pure wealth management companies trade at," Mr. Lewis said.

The shift to fee-based revenues makes wealth management a lot less cyclical. And "our business grows with our client assets, and does not rely on the growth of the bank's balance sheet," he said.

A high-flying wealth management business sucks few resources out of the banking and capital markets businesses, which both rely on the balance sheet.

RBC's Canadian wealth management business saw revenue rise $53-million or 17 per cent in the most recent quarter to $369-million.

Despite advantages, some Canadian bank executives are playing catch-up in the wealth management business now because their predecessors in the early 1990s were fearful of cannibalization - that a push into mutual funds would divert money out of savings accounts, for example.

These days, you would be hard-pressed to find an executive who didn't extol wealth management's virtues. It's not difficult to see the rationale.

As Sun Life Financial's president for Canada, Kevin Dougherty, points out, about 80 per cent of the household assets in this country belong to people aged 45 and older. About half that would be people who haven't retired yet.

"A lot of the money in motion, if you like, is with people age 45 to 60, the boomers really, who are on the home stretch to retirement," he said. "And then people in retirement, who are increasingly concerned about things like outliving their assets, and estate planning."

According to Investor Economics, Canadians had $2.39-trillion of financial assets at the end of 2006, and roughly three-quarters of that, or $1.83-trillion, was held by the 853,000 households that have half a million dollars or more in savings. Ten years out, there are expected to be more than 1.78 million households with half a million or more, and the financial assets they hold will have risen to about $4.63-trillion.

It's demographics 101; the first boomers have just turned 60. "It ties in with the aging of the baby boomers, people living longer, people being more affluent," said Roy Firth, Manulife's head of wealth management in Canada. "As a result, this is a market that's exploding, quite frankly, in terms of size and importance."

Aside from just managing these assets, the trends open up a whole host of opportunities, from bereavement services to succession planning. About half of this country's privately held companies are expected to change hands in the next decade, says Graham Parsons, executive vice-president of global private banking at BMO.

It's not just that there are a plethora of clients with bundles of money. There's also a school of thought that those bundles will move into the hands of fewer institutions over time.

"One of the things that happens as people age that's a very interesting phenomenon is that they tend to deal with fewer and fewer financial advisers; they consolidate their wealth in one place," Mr. Firth said.

"People in their 40s have three of four different financial advisers, one being their bank, one being their stockbroker, one being their insurance agent, one being somebody else. And, as they move into their 50s or 60s, they actually consolidate a lot of that. And so [financial institutions] want to be able to provide all the services."

There's yet another factor at play here. There's been some neglect when it comes to pitching wealth management services to the baby boomers.

"What's happened is, there's a belief that this market has been considerably underserved," Mr. Firth said. "As a result of that, there are a lot of people trying to move into this space and provide the advice and the counsel and the products that are required by this large demographic group."

But a strong wealth management business isn't built overnight.

There are plenty of profits to be had once a business is established, but assembling the building blocks, such as a large team of advisers, takes time.

Just ask Bill Hatanaka, the head of wealth management at Toronto-Dominion Bank. While its self-directed online discount brokerage business is the industry leader, TD is still in the early stages of building up some of its advice-based businesses. That's something that Mr. Hatanaka, a former pro football player in the CFL, sees as a significant opportunity for the future.

"We have a huge opportunity, in that we have entire cities with very few investment advisers right now," he said.

With roughly 600 advisers, the bank lags many of its rivals who have networks of 1,000 or more across the country. But rather than instructing the head of the bank's private investment advice business to flood the market with help-wanted signs, Mr. Hatanaka's instructions have been that the next hire made must enhance the organization, as must the one after that, and so on.

This is a business where people, and the relationships they create with their customers, are invaluable. TD sees one of its key differentiators as its staff's reputation for being highly approachable, Mr. Hatanaka said.

"Demographics mean the wind is at our backs right now," he said of the industry. He believes those who do a "great job" in the next 10 to 20 years will have "as much business as they can handle."

So, yes, TD's open to merger possibilities. "Our general view on acquisitions is that it was important to get our own shop into great shape," Mr. Hatanaka said. "After five years, we believe we have our business humming," he said, and TD would now look at opportunities that made sense.

Mr. Richards said "TD really marched to its own drummer in saying 'we think there's a better opportunity by being the first-mover in the discount brokerage business, rather than acquiring a full-service firm.' And they're still benefiting from that today; they're the dominant player with Waterhouse. But what they began doing in the mid-nineties is saying 'we're going to build our own full-service brokerage firm.' And the reason that TD is behind - in terms of numbers and assets - RBC and CIBC and Bank of Montreal on that is fundamentally their decision to build, rather than acquire," he said. "Because any time you build rather than acquire, it's going to be a slower process."

The problem for those who might want to grow through acquisitions is that the opportunities are few and far between.

"One of the challenges today is you say 'who's left out there that's an interesting candidate that has significant scale?' Well, there's Dundee, there's AGF and there's AIC. And what those three have in common is that they're all controlled by their founders, [and there's] no clear sign that they're up for sale," Mr. Richards said.

There are some other players scattered across the country. For instance, Winnipeg-based brokerage Wellington West is quietly shopping itself. And National Bank of Canada CEO Louis Vachon said this week that the problems in credit markets might create an opportunity for National to buy up some wealth management businesses.

What Mr. Vachon is seeking is more stockbrokers and money managers, he said in an interview.

"Scale is important in this business, and where companies don't have scale, and aren't growing, there will be acquisition opportunities," he said.

The need for heft is another factor driving the hunger among some institutions for DundeeWealth.

Scotiabank, which has historically been a bit of a laggard in areas such as mutual funds, is one of the institutions with a strong motivation to snag DundeeWealth, if the chance arises.

Scotiabank's wealth management business has been on a roll this year, earning it kudos from analysts and the investment community, after CEO Rick Waugh made it a top priority.

Executives at rival banks say they respect Mr. Waugh's decision to put more muscle in this area, and that it's a wise move. No one wants to be caught missing the boat.

While Scotiabank's success in the fund business this year might look like it's come overnight, "it's been a lot of heavy lifting for quite a while," said Glen Gowland, managing director of wealth management.

It required the hiring of some key people in investment management, a broadened product group, and new technology, tools and training for staff in the bank branches.

Lastly, there was "a very big focus on raising the profile of the fund business over all, because we did have some very good investment solutions for customers, and we weren't good at telling everybody about it," Mr. Gowland said. "So you'll certainly see now everything from television advertising to in-branch posters, etcetera."

Now that Scotiabank's catching up, it's shifting its focus back to other revenue streams.

"We certainly wanted to ensure that we had the asset management quality and the breadth of product that we need in the mutual fund space," said Barb Mason, executive vice-president of wealth management.

"I think now we're turning to ensure that the broader team of experts we have - whether it be private banking, charitable foundations, insurance - that we've got great quality service there, so the advisers in our various channels have access to those additional revenue streams, and are able to offer our clients that range of services," she said.

From will and estate planning to financial planning to charity donations, "we're seeing increasingly, from our research and experience in our businesses, that our clients are looking for more and more of those services," she said.

And so it comes full circle, with Scotiabank and its rivals looking to expand their grasp on the wealth of Canadians by becoming a more integral part of their lives.

"We're certainly seeing that, as the demands on peoples lives continue to increase, whether it's in the baby boomer segment, the preretirement segment, the concept of one-stop shopping, of being able to get all of your financial needs serviced by one entity, is increasingly popular," Ms. Mason said.

Some executives are travelling across the country to help coach staff on how to build relationships with their customers. And others are going halfway around the world to scope out opportunities for their clients to give to charity.

Marvi Ricker, BMO Harris Private Banking's vice-president and managing director of philanthropic services, recently took a trip to Africa, because it's a region where many Canadians want to use their money to make a difference and she wanted to be sure she knew the local charitable landscape.

Whether it's creating a foundation or donating to a local hospital, Ms. Ricker sits down with BMO's wealthy private banking clients and their families to help walk them through the process.

As BMO's Mr. Ouellette says: "I think what you're going to be seeing over time is that organizations like ours are going to be expanding the services that we offer in areas that have not traditionally been considered to be banking."

Power rankings: The top players in Canadian wealth management

1. Royal Bank of Canada


Largest branch network, most assets per stockbroker, experienced integrator.


Prohibition on insurance sales in branches means extra costs and lost opportunities.

Wonder if ...

RBC will ever get a chance to take over a rival bank.

Momentum: 1

2. Power Financial


Scale, due to ownership of insurer and largest fund manager, IGM.


Not a bank, so fewer links to customers.

Wonder if ...

There is anything left in Canada for the clan headed by Paul Demarais, left, to buy?

Momentum: 3

3. Toronto-Dominion Bank


Tops in discount brokerage and strong branch sales culture.


Fewer stockbrokers than rivals, small Quebec presence.

Wonder if...

TD wants to buy National Bank.

Momentum: 1

4. Manulife Financial


International operations and scale.


Smaller dedicated sales force and scary integration challenge in planning firm Berkshire-TWC. Wonder if...

CEO Dominic D'Alessandro still wants to merge with a bank.

Momentum: 1



Massive network of brokers and planners, ex-stockbroker is CEO, benefited from two Merrill Lynch retreats.


Board may lack stomach for big acquisitions.

Wonder if ...

Merrill Lynch will sell CIBC another great asset?

Momentum: 3

6. CI Financial/

Sun Life Financial


Strong performing fund family that eventually marries strong insurer.


CI puts 'em in play, but rivals end up buying smaller funds.

Wonder if ...

Sun Life is smart enough to tap Bill Holland as successor to CEO Donald Stewart, left?

Momentum: 1

7. Bank of Montreal


Strong North American money management business, lots of stockbrokers


Branch network still learning to sell.

Wonder if ...

BMO can turn things around before Ottawa allows mergers.

Momentum: 5

8. Bank of Nova Scotia


They know they're behind and determined to fix it, solid marketing campaign.


Puny fund division and a relatively small broker network.

Wonder if ...

The Goodman clan has any intention of ever selling DundeeWealth?

Momentum: 5

9. National Bank


Own the Quebec market.


Tiny in rest of Canada and neck-deep in asset-backed commercial paper debacle.

Wonder if ...

The Desmarais clan wants to own a bank?

Momentum: 5

10. DundeeWealth


Hot fund managers and the last single girl at the dance.


Proved running a bank is harder than it looks, tough to keep family companies in the family.

Wonder if ...

David Goodman, left, actually wants to run his dad's company?

Momentum: 3

It's all about wealth



Charitable donations for 2006



Number of credit cards in 2005



Total value of mortgages in 2005



Total value of mutual funds

in 2005



Total assets, including pensions, stocks, bonds and residences

Canada's wealth market

Share of financial wealth (%) of those over age 55.

2006: Total assets of those 55 years or older: $1,445-billion: 60.3%

2016: Total assets of those 55 years or older: $3,869-billion: 70.6%



© 2007 The Globe and Mail. All rights reserved.

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