RBC’s wealth management arm oversee about $1.3-trillion in assets under administration as of August.Mark Blinch/Reuters
Doug Guzman, Royal Bank of Canada’s RY-T group head of wealth management, is keeping an eye out for future acquisitions in both Britain and the United States as the bank looks to further boost its global presence in wealth after closing the recent purchase of Brewin Dolphin Holdings PLC.
Last month, the bank added $97-billion in assets under management and 80,000 clients with the $2.4-billion purchase of London-based Brewin Dolphin, making RBC the third-largest wealth manager in the U.K., Ireland and Channel Islands.
RBC’s expansion into the U.K. had been on the radar for years, Mr. Guzman said, with bank executives having conversations with a number of potential partners. The Brewin Dolphin acquisition – which closed on Sept. 27 and was renamed RBC Brewin Dolphin, has increased RBC’s international wealth-management assets to more than $104-billion. But Mr. Guzman wants an even bigger slice of the pie.
“We think there’s more potential for the region for sure,” Mr. Guzman said in an interview at his downtown Toronto office. “We like the industry structure and we’ve been watching it for a while.”
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Currently, RBC’s wealth management arm includes operations in Canada, the United States and Europe that oversee about $1.3-trillion in assets under administration as of August – a 48-per-cent jump from where the division was five years ago.
“Wealth is an attractive set of dynamics, consumes very little capital and it serves a really important need for clients,” he said. “For the last 15 years, markets have been pretty friendly for clients, but we think they’re going to need more advice as we go in the next five to 10 to 15 years.”
In recent years, the bank has been investing heavily in its U.S. businesses. Together, with Los-Angeles based City National Bank, a private and commercial bank RBC acquired in 2015, the U.S. wealth segment accounts for more than half of RBC’s total wealth assets with $683-billion.
At the beginning of 2022, Mr. Guzman’s role was expanded to include the U.S. head of wealth management and chair of City National Bank, which has grown to US$91-billion in assets, up from US$36-billion in 2015.
While he doesn’t have a list of specific U.S. prospects in the pipeline, Mr. Guzman says the excess capital RBC is carrying at the moment does allow the bank to respond quickly if anything pops up.
Over the past decade, banks have been increasing their focus on wealth management as $1-trillion in personal wealth is set to be passed down into the hands of younger generations. But it’s hard to buy “people businesses” such as wealth-management companies – particularly ones who have been independently owned for decades.
You have to be patient, Mr. Guzman said.
“The concern for an independent wealth firm being bought by a bank is about whether or not the bank will change what they are doing for clients. Will they be forced to sell a product that’s only in the best interest of the bank?”
“And our success in the U.S. and Canada has been to do the opposite.”
For the Brewin Dolphin deal, he says, building that trust involved flying the leadership team from RBC Dominion Securities – the Canadian full-service securities brokerage that houses 1,900 securities advisers and 110 investment counsellors – to meet the U.K. team in-person.
“Dominion Securities has maintained that investment advisory culture within a bigger bank – and have done so since we acquired them in the 1980s,” Mr. Guzman said.
One segment of the U.S. wealth-management industry that RBC isn’t considering to step into is registered investment advisory firms. In the United States, a RIA firm typically follows an independent business model – meaning it is not part of a larger brokerage – and advisers have a legal fiduciary obligation to act in the best interests of clients. It is an industry that has more than 17,000 companies across the country but has seen a wave of consolidation in recent years.
“We don’t really have an interest in acquiring an RIA,” Mr. Guzman said, adding it’s still a very fragmented industry. “And if you start to assemble RIAs, as some have done, you’re buying all kinds of different cultures, which can be a challenging way to keep consistency for your clients.”