Calling the doctors

“MD Financial does, and continues to do, a ton of things very well,” says Dave Kelly, senior vice president of private wealth-management at TD. “But there is some dislocation in the [MD Financial] client base, where they are open to exploring other opportunities.”

In December, TD launched its TD Wealth Management for Health Care Practitioners service, offering private banking, investment management, financial planning and commercial lending on an integrated platform to doctors, dentists and other medical professionals. So far, the service is supplied by 21 dedicated private bankers supported by investment, planning and credit advisory teams covering a dozen markets across Canada. The bank plans to extend the service to nine more markets by mid-2019.

“We’ve been positively surprised at the reaction from our existing client base,” Kelly says. “They have been asking us if they can introduce other people to us, and that’s a much stronger reaction than we were expecting from the start.”

Royal Bank of Canada (RBC) also has identified an opportunity to extend its reach to this client segment. The bank has a long track record of providing specialized private banking and wealth-management services to health-care practitioners, says Ann Bowman, head of Canadian private banking at RBC.

“Everyone is well aware that MD Financial has changed its ownership and position in the market, and that certainly has created heightened awareness, I believe, for many medical professionals about how they approach their wealth planning,” Bowman says.

Most of the Big Six banks offer, to varying degrees, wealth-management services marketed to medical practitioners. Doctors are high earners who require complex financial advice, including credit management, small- business incorporation, tax planning, retirement planning and estate planning. These clients usually don’t have the time to manage their own financial affairs.

“From a planner perspective, doctors are attractive as a market because they provide consistent cash flow,” says Joseph Bakish, investment advisor and portfolio manager in Montreal with the Bakish Wealth team at Toronto-based Richardson GMP Ltd., who specializes in working with medical practitioners as clients. “They are highly educated and understand the [financial advice] concepts you present, but they don’t have the time to implement them.”

Adds Bowman: “[Health-care specialists] want a very accessible, high-touch service, and they often are looking for a breadth of wealth planning.”

In May 2018, Scotiabank acquired MD Financial from the Canadian Medical Association (CMA) for $2.6 billion. MD Financial, established in 1969, had $49 billion in assets under management and administration at the time of sale. The firm served 45,000 physicians and 65,000 of those clients’ family members and employees. As part of the deal, Scotiabank and the CMA entered into 10-year partnership in which the association will promote the bank as the preferred financial services provider to doctors.

Scotiabank also stated it intends to: run MD Financial as a stand-alone wealth-management arm; provide MD Financial’s clients with a broader array of products and services; and seek opportunities to build on MD Financial’s position as the leading provider of financial services to doctors and their families.

According to the CMA, there are 125,000 doctors in Canada, of which 88,000 are CMA members.

“[MD Financial provides] a purpose-built offering that has been refined over many decades to service the specific needs of these clients,” said Glen Gowland, executive vice president of global wealth management at Scotiabank, in an emailed statement. “We are very confident that with MD [Financial]’s existing market-leading offering, along with the expanded range of financial solutions provided by Scotiabank, we deliver singular value to our physician clients and their families.”

MD Financial’s competitors believe, however, that market conditions have changed, and the time is right to persuade doctors to consider all of their options when choosing a wealth-management provider.

In addition to MD Financial changing hands, recent changes by the federal government to the taxation of small businesses and incorporated professionals may have doctors thinking about tax and wealth advice in general.

“The combination of the [small-business] tax rule changes and the sale of MD Financial are kind of a double whammy,” says Bakish, who believes that the sale of MD Financial opens up an opportunity for a Canadian independent firm to offer an integrated platform for health-care providers. “[Doctors] are more open-minded to different strategies than before.”

Says Tony Maiorino, vice president, director and head of wealth-management services, with RBC in Toronto: “We’ve absolutely seen an increase in the number of health-care practitioners who have come to our door to say, ‘I understand that you guys [provide wealth management for doctors] and you do it well’.”

Maiorino agrees that the increased interest can be traced back to mid-2017, when Ottawa released its proposed changes to the taxation of small businesses.

Kelly says TD decided to launch its platform after conducting research that suggested doctors were frustrated with what they considered to be the fragmented wealth-management services they were receiving – either having to deal with several providers or with one main provider that uses subproviders for other services.

“What we’re trying to do,” Kelly says, “is help [health-care] professionals cut through some of the clutter they were experiencing with other offers, and make [our services] much more seamless.”

Kelly adds that TD has begun marketing its service directly to doctors by emphasizing the bank’s deep understanding of their needs as business owners, health-care professionals and individuals with families. The bank also plans to hold client events in major markets to get the word out as TD tries to carve out a greater share of the health-care practitioner market.

Says Kelly: “I would expect this to be one of the most competitive [market] sets, for sure.”