High net-worth clients have always been coveted by financial advisors. Now, several of Canada’s major banks have raised the ante by targeting the growing market of ultra-high net-worth individuals and families in Canada and abroad.

Two banks recently announced they are expanding their services to reach this well-heeled market. Toronto-based RBC Wealth Management, a division of Royal Bank of Canada, is accelerating the growth of its UHNW international business. And Toronto-based Bank of Montreal has launched a new department within its private-banking division that will cater solely to UHNW clients.

“Over time, we have had very strong success with our ultra-high net-worth families,” says Andrew Auerbach, senior vice president at BMO and head of BMO Harris Private Banking. “And as we developed our capabilities, we recognized that at this point in our journey, it was really time to formalize a group that specifically focused on this market.”

The financial services industry typically views those clients with $1 million or more in investible assets as being HNW; those with at least $10 million are seen as UHNW.

The new focus comes at a time when numbers of HNW families and UHNW families are growing at a faster pace than the overall financial marketplace, says Auerbach. BMO predicts that households with investible assets of $1 million or more will double by 2018.

As well, the UHNW space is being expanded by retiring wealthy baby boomers and by the sale of family businesses.

“There is a tremendous transfer-of-wealth opportunity,” adds Auerbach, “and that will be very favourable for the growth of the UHNW space.”

BMO Harris’s UHNW division will be headed by Diana Reid, who will work closely with teams set up in the four central hubs in Toronto, Montreal, Calgary and Vancouver.

BMO Harris has hired 130 employees over the past year, bringing the total number of financial advisors, lawyers, accountants and other specialized professionals to 600. Growth doesn’t stop there: the plan is to expand the private-banking group by 15% in the coming year.

“We have mainly hired professionals from within the private-bank industry,” says Auerbach, “but also have looked to other outside areas to hire because, for us, it is really about finding individuals that fit well with our co-ordinated team effort.”

BMO Harris estimates that the UHNW marketplace is almost 26,000 households in Canada, which is not a big number in the overall market for financial services.

“There is a tremendous concentration of wealth in a very small number of households when you are talking about HNW families, so it is even more concentrated when you look at the UHNW client,” says Auerbach. “You can assume it’s about $500 billion in wealth in that very small number of households.”

In such a tight marketplace, Auerbach says, word-of-mouth recommendations provide one of the biggest opportunities to build UHNW clientele; so far, referrals from existing clients in all of BMO’s divisions have been paying off.

For RBC, the competition is on a global scale. RBC is expanding its wealth-management division in Canada and beyond its border. The bank wants to accelerate the growth of its international business, says David Agnew, the newly appointed head of RBC Wealth Management Canada, with a strong focus on serving clients in emerging markets and in Britain.@page_break@In Canada, RBC “has a goal to strengthen its HNW division, which includes ultra-wealthy families, those with $25 million or more in financial wealth,” Agnew adds. “We want to see this division grow to include a much larger market-share number and broaden the market out for high net-worth clients by expanding RBC Dominion Securities Inc., RBC Phillips Hager & North Counsel and also our trust and estate business.”

The international UHNW division will be managed separately by Michael Lagopoulos, newly appointed deputy chairman, RBC Wealth Management, ultra-high net-worth, international. Lagopoulos was formerly president and CEO of RBC Wealth Management’s international business.

Says Agnew: “[Lagopoulos] is going to focus on developing the RBC Wealth Management UHNW business by deepening existing relationships and acquiring new UHNW clients outside of Canada.”

Global competitor UBS Bank (Canada) of Toronto heralds itself as one of the largest global players in the UHNW wealth-management space. The news that Canadian banks are looking to squeeze into the already tight market doesn’t concern UBS executives.

“If I felt they got the model right, then I would be more concerned,” says Grant Rasmussen, president and CEO of UBS Bank (Canada). “But, unfortunately, the model is still really broken at most firms. Most advisors are still operating on a commissions-based model — and we are not.”

Rasmussen also adds that smaller firms may offer only certain products or investment options, while UBS Bank (Canada) offers clients custom solutions to their investment needs: “If someone asked how many products and solutions can a client have access to through UBS, it would literally be somewhere in the thousands.”

In 2006, UBS Bank (Canada) decided to build a separate division for its UHNW clientele, who are defined as those with $50 million or more in financial wealth. Angela Wiebeck, head of UBS’s UHNW group in Canada, leads a team of 20 individuals who work with some of Canada’s wealthiest families.

Typically, UHNW clients are provided with access to a variety of financial experts, including investment bankers, accountants, estate lawyers and institutional specialists. A UHNW client also receives personalized philanthropic plans, as well as access to a wide range of special professionals. In UBS Bank (Canada)’s case, this has included providing one client with a real estate agent specializing in vineyards.

UHNW clients often also need more assistance in creating family mission statements, as well as help in engaging their children in discussions about their wealth and how it will be handled in future.

“Everyone always talks about ‘rags to riches to rags in two generations’,” says Rasmussen. “And that is the real fear for families that have taken the risk to build a business. But now they need to motivate their children to do the same.”

The growing competition in the UHNW marketplace doesn’t surprise Keith Sjogren, director, research and advisory services, with Investors Economics Inc. in Toronto. He believes it is a natural evolution of the private-banking businesses in Canada to start segmenting their client base into UHNW.

“I think that these strategic initiative are not an unexpected development,” he says. “But I think that the banks may be slightly surprised at the impact on the bottom line of these initiatives — because there is some evidence that the UHNW is not only extremely demanding, but the weight of return may be less than some of the banks are expecting.”

IE