RBC is a big player in North
America and now wants to use its experience building Canadian
market share to grow through the UK and emerging markets wealth
space. RBC Wealth Management group head George Lewis outlines his
plans to break into the top tier of global wealth managers.
Nicholas Moody reports.
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George Lewis has a
double-sided business card.
This is not unusual in the wealth
business. Many private bankers based in the emerging markets have
cards with their title printed in the local language of commerce on
one side and in English on the other.
Lewis’ is different. On one side,
it lists his position as group head of RBC Wealth Management, the
other has his title as chairman and portfolio manager for RBC
Global Asset Management.
The implication is clear – RBC sees
its wealth and asset management businesses tied inextricably
together.
By his own admission, however,
Lewis says there is work to do internationally, or as Lewis puts it
“to create more geographic businesses to expand our growth”.
Big ambitions
Lewis has high hopes. He says in
the next five years the bank wants to become a leader in both
global wealth and asset management. RBC has 4,500 client-facing
professionals globally, including 2,100 advisers in the United
States and 1,400 in Canada.
Are its targets too ambitious and
what can RBC do differently from all the other global
contenders?
RBC’s wealth management expansion
will ride squarely on the shoulders of its asset management
business as the bank seeks to drive greater value from its asset
business. Asset management makes up more than 80% of RBC’s assets
under management at about $250bn.
About $110bn of that is its retail
asset management business in Canada, where it has about 15% market
share, with the remainder institutional mandates in Canada, the US
and through BlueBay.
Its acquisition of UK asset manager
BlueBay in October last year gave RBC international firepower.
BlueBay, with its focus on European and emerging markets
strategies, added about 250 staff and $40bn in assets to RBC’s
asset business. In the past year, BlueBay has grown assets to
$44bn.
Creating more
collaboration
In 2010, RBC
benchmarked itself against its competitors as part of a strategic
review, the analysis suggested that other banks were having a
larger focus on asset management in their wealth management
operations.
This is something Lewis wants to
change. RBC still has a very low percentage of RBC asset management
solutions held by wealth management clients.
At the moment less than 5% of
client assets within wealth management are held in RBC Global Asset
Management solutions, over the next 10 years Lewis wants this
increased to at least 10%.
He also concedes that the
collaboration between capital markets, commercial bank and wealth
management, while making progress, is not as strong as at some
other global banks.
“I have seen others able to
position their wealth and asset management business as 40% coming
from commercial banking or capital markets – that’s where we would
like to get to,” says Lewis.
Building big
The two other areas Lewis sees
great opportunity in are the UK and the emerging markets. By his
own admission, its UK wealth and emerging markets businesses are
its two smallest and have opportunities for strengthening, Lewis
says.
“Both of them are more important
then their modest bottom line suggest, because they gather clients
and serve clients that are booked not only in their respective
regions, but more frequently referred to teams in global trust if
they need a trust solution,” he says.
RBC is tackling the emerging
markets business through Barend Janssens, the ex ABN AMRO banker
who joined RBC in September last year. He is responsible for Latin
America, Middle East, Africa and Asia, and is based in
Singapore.
About $60bn of assets under
administration come from emerging markets, with many clients served
from outside their home bases. Lewis says this splits roughly into
thirds with about $20bn derived from Asian clients, $20bn from
Latin American clients and $20bn from EMEA clients, including
Eastern Europe and the Middle East. These assets can be handled in
the local markets or the preferred offshore markets.
Eyes on Asia
Boosting its presence in Asia is an
important part of RBC’s emerging markets strategy. Last November,
it bolstered its Asian division with the buy-out of the ex-Fortis
business in Hong Kong and in September it launched a
Singapore-based trust company.
The Fortis acquisition was not
about scale – it added 16 client-facing professionals and 30
support staff with AuM of close to $2bn, but was – according to
Lewis, about “building out a platform to make sure that we can
offer a significant product line in Asia”.
“We need and should have a larger
presence in Asia and we are building that presence,” he says.
“We have added a local head of risk
management, a local chief operating officer and a new head of Asia
within our emerging markets division,” says Lewis.
“We are focused first and foremost
on putting in place a strong management team and a strong operating
platform in Asia and then establishing targets around attracting
new private bankers and new advisers to the platform,” he adds.
Lewis will not share any concrete
targets for staff recruitment, only saying RBC will be building up
from the 60 relationship managers in Asia it currently has.
Publicly he has shared AuM targets,
saying that by 2015 the firm plans to more than double its private
banking assets under management in Asia to C$25bn ($23.8bn).
Focused Asian
strategy
This Asian strategy is based on a
tightly defined footprint. Janssens is very clear on the challenges
in establishing businesses in new emerging markets and this has
helped shape RBC’s vision that its Asian operations will remain
centred on Singapore and Hong Kong.
“Our focus from the wealth point of
view is very much on building our presence in those two centres and
serving clients who use those centres. We are not going onshore
Vietnam or onshore China, or onshore India,” says Lewis.
But what can a relatively small
non-local player like RBC offer that differs from the myriad of
already established wealth managers and banks or those who are
setting up and building out their Asia-Pacific operations?
Lewis says the well-documented rise
in Asian HNW wealth around demographics is one part of his belief
in RBC’s success. The other two differentiators he thinks will help
RBC gain market share are slightly different: historical links and
the security of RBC Group. RBC is looking to capitalise on existing
links: estimates put the number of Canadian passport holders in
Hong Kong at about 270,000.
“Hong Kong has a very strong
association with Canada and part of this feeds into our strategy in
Canada to be a premier bank for new immigrants and immigrant
investors into Canada,” says Lewis.
Financial security is another
factor that has risen in prominence.
“We recognise that there are a lot
of players out there, again not many with the strength and
stability of RBC’s balance sheet combined with our global focus on
wealth management,” says Lewis. “Clients should never have to worry
about the financial institution they are dealing with and today
many do.”
Top UK spot
‘open’
Lewis says RBC also
has high hopes for its UK onshore business which it aims to make
its third ‘home’ market for the bank’s wealth and investment
banking businesses.
To do this RBC is boosting
relationship managers within its private wealth management team
from 30 to 100 by 2015 as it looks to bring the services the bank
currently provides to resident non-doms to domestic UK HNW
clients.
“We think there is a good
competitive opportunity, because no financial institution, in our
view, has established a premier position in the UK wealth
management,” he says.
Indeed the UK’s highly fragmented
market is drawing an increasing number of foreign banks to set up
in the UK. German player Berenberg established a London team this
year and Bank of Singapore has recently begun serving HNW clients
out of London.
“No large British UK-based
financial institution, in our view, has focused on wealth
management to such an extent as to create a premier position the
way we have achieved in Canada,” he says.
“Obviously, our strategy is not to
be all things to all people in the UK,” Lewis adds.
“We are not going to be a large
retail bank in the UK. But, what I am saying is no universal bank
in the UK has dominated the wealth management segment in the UK.
And therefore we think it is open for us and we intend to pursue
it.”
What makes RBC think they can
succeed when its domestic UK assets under administration are about
£3bn ($4.8bn)?
“We are able to leverage our
relationship with capital markets, besides our wealth management
operations themselves, which include the full suite of banking,
trust and credit investments,” says Lewis.
“We do believe that we are very
well positioned for HNW and ultra-HNW clients who frequently need
and want a relationship for their wealth management needs –
separate from their basic retail banking needs.”
What price for
success?
Is it wise though for RBC to be
planning such big moves when the wider economic environment is so
unsettled? Lewis says the current economic uncertainty,
particularly around the eurozone, is actually helping RBC win more
clients – partly as a result of RBC Group’s strength.
“We are seeing a lot of clients
re-examine their relationships with institutions [at the higher
end]. We saw it in 2009 and that gave wealth management and our
capital markets business a significant opportunity to attract
talent and to attract new clients. All of our businesses are
experiencing net new asset positives: Canada, the US, the UK and
the emerging markets.”
To climb to the top, RBC will have
to leverage its asset management and trust expertise to a greater
degree, expand its staff and operations considerably, while trying
to maintain a high quality of client service. This is a juggling
act many of its competitors have failed at.
RBC will need all of its strong and stable base to keep the
bank’s global ambitions from throwing it off balance.
