Great-West Lifeco headquarters in Winnipeg in 2013. Wealth and asset management has been the smallest contributor to the profits of Canada’s third largest insurer, but the company has plans for that to change.John Woods/The Canadian Press
Canadian insurer Great-West Lifeco Inc. GWO-T is looking to bolster its bottom line with a goal to double profits from its wealth management business over the next four years.
During the company’s recent annual investors day, chief executive Paul Mahon told analysts the wealth division currently contributes about 15 per cent to Great West Life’s base earnings – or $500-million in 2022. But he plans to see that figure jump to more than $1-billion by 2027.
“We are uniquely well positioned to serve the evolving and, in many cases, underserved wealth management needs of existing and potential customers across our business,” Mr. Mahon said.
Part of that growth, he says, will come from an aging population who are seeking advice for the future, as well as “pre-retirees who are now worried about their preparedness for retirement.”
Currently, wealth and asset management is the smallest contributor to the profits of Canada’s third largest insurer. However, in recent years Great-West Life has steadily been building momentum in the wealth management industry, completing a series of acquisitions during the pandemic, mostly in the United States.
The company now manages about $218-billion in its wealth and asset management divisions throughout Canada, United States and Europe. That is up from $122.2-billion in 2017. Over those five years, the biggest increase was in the U.S., where assets rose to $74.1-billion from $9.6-billion as a result of Mr. Mahon’s aggressive U.S expansion plans.
In June, 2020, the insurer’s U.S subsidiary Empower Retirement spent US$1-billion to purchase online wealth manager Personal Capital. A month later, Empower boosted its U.S. presence further with a US$4.45-billion deal to buy the retirement business of Prudential Financial Inc. PRU-N The same year, Empower also bought the retirement business of Massachusetts Mutual Life Insurance Co., adding US$167-billion in assets.
Since then, Mr. Mahon has snapped up two Canadian wealth managers, Investment Planning Counsel and Value Partners.
In April, Canada Life Assurance Co. – a subsidiary of Great-West Life – bought Toronto-based securities dealer Investment Planning Counsel for $575-million in an all-cash deal from its sister company IGM Financial Inc. IGM-T The deal added more than 650 investment advisers who manage about $32-billion in assets to Canada Life’s roster (IGM and Great-West are both subsidiaries of Montreal-based Power Corp.)
And last month, Canada Life added another $5-billion in assets with the purchase of Winnipeg-based Value Partners Group Inc., a financial planning firm that serves clients with complex and sophisticated wealth needs.
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Together, the deals extend the insurer’s access to the high-net-worth market – including IPC Private Wealth, which operates a discretionary portfolio manager, a business. that Canada Life did not have before.
“We have seen growth in wealth and asset management achieved both organically and through mergers and acquisition,” Great-West Life chief financial officer Garry MacNicholas said during the June investor presentation. “We expect that growth to continue – which will shift our portfolio over time as wealth and asset management becomes a larger and larger contributor to Great West Lifeco overall.”
The two Canadian deals are expected to close later this year, and will propel Canada Life into the top-three spot among independent, non-bank owned wealth managers in the country, with more than $89-billion in assets.
Credit Suisse analyst Joo Ho Kim said in a note that the bank believes Great-West will pursue further acquisitions, as well as boost client assets and profit margins.