Wealth management: lots of advice, little money

Banks are acquiring wealth management businesses, but customers aren't buying in

For Canadians who entrusted their retirement savings to professionals over the past few years, the phrase “wealth management” probably seems like a contradiction in terms. The combination of volatile stock markets and ultra-low interest rates has made it difficult for investors to come out ahead. As a result, many have simply opted to sit on the sidelines.

And that has been a problem for the wealth-management industry, which employs everyone from financial advisers to stockbrokers. As a result, several Canadian financial services firms have looked to sell their underperforming wealth-management businesses—mostly to the big banks, which are keen to diversify and are attracted to the steady stream of fees that can be charged to wealth-management clients.

In August, the Canadian Imperial Bank of Commerce bought the wealth-management arm of MFS McLean Budden. National Bank bought the wealth-management business of Wellington Financial last year. The most recent deal, last week, involved Montreal’s Fiera Capital buying Canadian Wealth Management Group from Société Générale Private Banking for an undisclosed sum.

However, all that shopping hasn’t addressed the issue of too many advisers chasing too few clients. That’s among the reasons Canaccord Financial, one the country’s largest independent full-service firms, recently revealed plans to close 16 of its 32 wealth-management branches. Canaccord, which posted a loss of $20 million in the first quarter, said the offices on the chopping block only contributed to 16 per cent of the $13.1-billion of assets under management. “The consolidation of branches will allow Canaccord to better service its private clients by concentrating its support resources and capital investments in client service activities in its key markets,” the firm said in a statement.

However, Canaccord cautioned that the remaining branches “will operate on a near break-even basis in current market conditions,” although they all have the potential to be “consistently profitable” in the future. Now it’s just a matter of waiting for deep-pocketed customers to return.

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