Faced with slow growth in its traditional Quebec markets, the giant Desjardins Sécurité Financier credit union group, based in Montreal, is pushing aggressively to build its wealth-management business.
Desjardins, Quebec’s largest financial institution, with 5.5 million members, wants to grow its wealth-management assets in Quebec by almost 40% over the next three years. In Ontario, the goal is to increase those assets by 30%.
These targets are part of a larger strategy to diversify Desjardins’ dominant, but slow-growing business of providing lending and deposit-taking to Quebecers through its network of caisse populaires. The focus now is on getting more Desjardins members to choose its mutual funds and do business with its securities arm, Desjardins Securities Inc.
Currently, Desjardins enjoys a 43% market share in Quebec in deposits and other fixed-income savings products. But its share of the mutual fund and securities markets in the province is just 11% and 13%, respectively.
“These are the areas in which we have the most room to grow,” says Eric Lemieux, vice president for wealth-management services.
The push in wealth management is accompanied by efforts to woo more English-speaking and ethnic Quebecers to the Desjardins fold and to build more business outside Quebec. The moves reflect the fact that Desjardins has saturated its core small-town Quebec, francophone market — at least, when it comes to traditional lending and deposit-taking business.
To make matters worse, the small-town market is facing a demographic decline that is more rapid than in the rest of Canada.
“We have come to the conclusion that the markets that the caisses Desjardins have cultivated to this point are insufficient to ensure the long-term strength of Desjardins,” says CEO Alban D’Amours.
Desjardins is looking to increase its share of Quebecers’ savings by $33 billion, or 37%, to bring its total to $125 billion by the end of 2008. In Ontario, where Desjardins operates 24 credit unions, the goal is to increase savings under management by $700 million to $2.9 billion.
Lemieux says Desjardins will achieve these targets by offering clients an integrated “one-stop” offering of savings products, insurance and financial-planning advice. Desjardins is aiming to attract more business from aging baby boomers and retiring entrepreneurs.
Desjardins doesn’t plan to add investment advisors, however, Lemieux says. Instead, it will work to co-ordinate the work of the personnel it already has.
In Quebec, Desjardins has 1,300 financial planners in its branches, 300 brokers at Desjardins Securities and another 300 at its life and health insurance arm, Desjardins Financial Security Life Assurance Co.
Lemieux says advisor compensation has been reworked to encourage co-operation among these various units. “Our concept, known as ‘The Experts,’ gives clients one-stop access to the expertise of our various specialists, enabling them to identify strategies and investment tools that are best suited to their specific needs,” he says.
Desjardins got off to a good start this year. In the first quarter, the co-operative achieved a record $1.6 billion in new savings assets, an increase of $387 million over the same period a year ago. It attracted $3 in RRSP assets from competitors for every $1 it gave up.
The provincially chartered Desjardins is allowed to sell insurance in its 1,500 branches in Quebec — an important advantage over the banks, which are forbidden by federal legislation from selling insurance in branches. Desjardins is now hoping to get the same edge in Ontario, where the legislature is studying whether to allow credit unions to sell insurance in their branches.
As part of its overall growth strategy, Desjardins is also looking to build its business outside Quebec by building partnerships with other credit union groups and expanding Desjardins Securities, among other initiatives.
It also wants to attract more ethnic and English-speaking Quebecers. That’s a market in which Desjardins, an overwhelmingly French-Canadian institution, has traditionally lagged far behind the chartered banks. Desjardins has announced plans to open a large business centre on the west side of Montreal’s downtown, traditionally the more English-speaking end of the core.
In addition, it plans to hire more English-speaking employees and get more non-francophones involved in caisse boards and other governance structures.
Desjardins rang up net income of $1.09 billion in the fiscal year ended Dec. 31, 2005, a slim increase of 1.6% from $1.07 billion in fiscal 2004, amid rising interest rates and tough competition from the likes of National Bank of Canada. Return on equity, a key measure of profitability, fell to 14.5% from 15.8%.
@page_break@But the mutual fund and insurance operations were bright spots. Desjardins Assurance increased its net earnings by 23% to $159.7 million, while mutual fund assets grew by 23.5% to $18.8 billion.
Desjardins Securities, on the other hand, continued to run up losses, recording an $11.1 million shortfall on revenue of $257 million (which was up 14%). D’Amours says the securities unit is in a growth phase and should be in the black next year. IE
Desjardins pushes for wealth management
Its traditional small-town Quebec, francophone market is saturated, the credit union group says
- By: Don Macdonald
- June 2, 2006 June 2, 2006
- 12:33