Canada’s financial services industry needs to adopt a more service-oriented offering if it plans to get a piece of the high net worth pie.

That was one of the key messages delivered this morning when a panel of finance industry experts met in Toronto to discuss the findings of the World Wealth Report 2004, the 8th annual examination of investment trends among the world’s high net worth investors.

“It’s going to be a year of challenges for the wealth management industry in Canada,” said Paul Battista, vice president of Capgemini Canada Inc. in Toronto. “The increase in sophistication among Canadian investors means there’s going to be an increase in demand,” he says.

The report, compiled by Merrill Lynch and global consulting firm Capgemini, revealed several trends among high net worth investors, including:

  • an increasing demand for risk and risk management;
  • investment advice that is global in scope;
  • a broader acceptance of alternative investments; and
  • a push for advisory services that were once reserved for “ultra” high net worth investors.



“The wealthy have different expectations,” said Battista, who addressed a roomful of high net worth advisors. “Their lifestyles drive up expectations of performance.” What’s more, wealthy investors are becoming increasing cost-conscious and won’t pay a premium price for mediocre returns.

According to the report, Canada’s wealthy possess $1.3 trillion in investable assets. The report broke down the sector in three categories: the “mass affluent” with between $100,000 to $1 million in assets, which accounts for 1.9 million Canadians; the “high net worth”, with between $1 million and $20 million, accounting for 450,000 Canadians; and the “ultra high net worth”, accounting for the 7,000 Canadians with more than $20 million in investable assets.

Battista notes that 72% of wealthy Canadians are 53 years old or older, and 32% are 70 years and older. The aging wealthy demographic is driving a need for more sophisticated financial planning, particularly in the areas of philanthropy, succession planning and estate planning.

The wealthy are also taking more risks, says Scotiabank chief economist Warren Jestin. “We’re seeing a shift to alternative investments, including real estate,” he says. “Investors are looking for something for diversification.”

While Jestin expects the Canadian dollar to reach the US85¢ to US90¢ range by the end of 2005, he warns against investing too heavily in Canada. “Many people are pulling their money back into Canada because the dollar is rising,” he says. “The danger there is it’s bad for diversification, and many of the companies they’re pulling from are going to get competitive because of the weak American dollar,” he says. Diversification remains the biggest defense against volatility, he says.

Here in Canada, Jestin says “the West is best”, citing the potential for growth in resource-rich provinces such as Alberta and British Columbia.