Monday, October 18, 2010

Big Banks Pursue Big Bucks

Big banks that formally were  known by names like the Royal Bank of Canada, but now are better known as letters and logos want you as clients - if you are a very high net worth individual with assets greater $5,000,000 and especially the uber-wealthy with assets north of $30,000,000.

RBC, BMO, and UBS have all announced recently, that they are making organization changes to target and provide more customized services to the very high net worth and ultra-wealthy  Canadian families.

Their belief is that high net worth people have more complex needs than just managing the investments.  Therefore, rather than an individual using different organizations and advisors, they can get all their advice and service under one roof. The private bankers will offer a full collection of bespoke services including investment management, legal, accounting, estate planning, trust services and philanthropy in an upscale atmosphere.

Depending on the account size and the complexity, each client might work with several advisers, and generate significant fees for the banks. The business of dealing with wealthy families is not only prestigious, but quite lucrative. It is likely that other banks in Canada, will make announcements in the near future that they too, will be targeting the same group of wealthy Canadians.

Competition should be heating up for those investor with significant assets. As a consumer, competition is always good as there will be more options and choices available. Some of those services might even trickle down and become available to a broader client base. The competition  will not likely result in lower costs and fees. It has been my observation that the Canadian banks do not try to attract  more business by chopping prices. They would rather compete on based on “service” and the “brand promise” they make to clients.

We do expect more direct marketing to those very high net clients, as the banks try to retain their own customers and aggressively pursue other bank's clients. As I write this blog, it is likely that they are building a dossier on many potential targets as they try to make a connection with them.

If you are looking for a new investment relationship or a private banker comes knocking at your door, it is important to have a clear understanding your objectives and current requirements. What services do you currently need and are you  properly serviced by your current advisers. As an example, if you have a good lawyer and accountant, do you need one of their lawyers or accountants.
If you want to choose a new relationship with one of the big banks, it is important to get them to compete for your business rather than decide after hearing one sale's presentation. Prepare a  request for proposal and have 3 different banks make their presentation on what specifically they can do to meet your requirements. This process will assure that each participant puts their best foot forward. Also, the proposals can be compared easily. The likelihood of making a good choice improves dramatically. Often hiring an investment consultant  like Ohow Investor Consultants can help manage this process for you and will work with you to ensure you make the correct decision. Often their fees can be recouped through a negotiated discount with the manager.
The Bottom Line
As the big banks  focus is placed on the ultra wealthy, there will be more and more services available to them and other less wealthy investors. Also they are likely to be more aggressively pursued. If you are looking for a new investment relationship, it is important to have a clear understanding your objectives and current requirements and ensure that the potential suitors compete for the business.

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