Bank of Nova Scotia’s wealth-management division, last among the Big Five banks in the race for mutual fund assets, is taking bold strides to catch up.
In April, Scotiabank scooped up three top executives — all veterans of rival Royal Bank of Canada, the leader of the pack. It is the most recent step in a long-range plan to improve the fortunes of Scotiabank’s wealth-management group.
Barb Mason, executive vice president of wealth management at Scotiabank, says advisors should expect more changes to come, including the introduction of an enhanced offering of proprietary funds.
“We’ve been late in the game, in terms of introducing new product, and we want to change that trend,” she says. Mason has set a target of at least doubling mutual fund sales through the retail network in 2007.
But Scotiabank has a long way to go to catch up to its Big Five rivals. Scotia Securities Inc. , the bank’s mutual fund arm, manages $17 billion in assets, a modest amount compared with the $76 billion managed by RBC Asset Management.
Mason, herself in the top wealth-management job less than a year, says the key to expanding mutual fund sales is offering a wider choice of proprietary funds, boosting performance in some underachieving products and significantly improving the marketing and support provided to advisors, both at the ScotiaMcLeod Inc. brokerage and in the retail network.
The additional muscle in the money-management department is expected to address these objectives. The new hires are:
> John Varao, who becomes president, CEO and CIO of Scotia Cassels Investment Counsel Ltd. , Scotiabank’s money-management subsidiary. Varao leaves RBC Asset Management after 16 years at the firm, for which he was senior vice president of Canadian equities.
Varao was the lead manager for a number of RBC mutual funds, including RBC Canadian Dividend Fund, which at the end of March had assets under management of $8.6 billion, RBC Monthly Income Fund, which had AUM of $8.7 billion, and RBC Tax Managed Return Fund, which had $1.7 billion in AUM.
Mason says no decision has yet been made about what funds Varao might manage at Scotia Cassels. “He very much wants to sit down first with the team and understand where we are,” she says. “He’ll be structuring how to run the business once he has done that.”
> Shane Jones, who becomes managing director of Canadian equities and senior portfolio manager at Scotia Cassels. Jones has 21 years of experience in the industry and served as vice president and senior portfolio manager at RBC Asset Management. Along with Varao, he co-managed RBC Canadian Dividend Fund.
“Shane Jones has exceptional relationships across Canada with advisors at a variety of firms,” Mason says. “We really see him helping spread the word to markets and supporting us externally, as well as internally, in terms of performance, fund management and strategy.”
> John Kellett becomes senior advisor in mutual fund business development at Scotia Cassels. Kellett has 37 years’ experience in the investment industry, including 26 years at Royal Bank. He retired from Royal Bank in 2004 — the year after Investment Executive named him fund manager of the year.
At Scotia Cassels, Kellett will be in charge of providing training and sales and marketing support to all the distribution channels, particularly the branch network. He will not be actively involved in fund management, but will be part of devising investment strategy.
Mason says that the opportunity to expand the wealth-management platform drew the trio to Scotiabank.
“They’re very entrepreneurial in spirit and they like to grow things,” she says. “All three have a combination of excellent fund-management skills and excellent marketing and sales skills.”
Analysts appear to approve of the bank’s decision to bring aboard the veteran money managers.
John Aiken, an analyst with Dundee Securities Corp. in Toronto, says he is not surprised by the aggressiveness of the three hires because Scotiabank needed to address the situation: “I think what may be a little surprising is the number of people to come across from one institution.
“One of the knocks against Scotiabank has been its wealth-management growth and strategy,” Aiken continues. “The hiring of these three individuals goes a very long way to addressing this issue, particularly performance of the mutual funds.”
“Scotiabank didn’t seem to have an incredibly strong domestic money-management team,” says Mark Chow, senior fund analyst at Toronto-based Morningstar Canada. “But it has strengthened that by hiring these three.”
@page_break@The long-range makeover of wealth management at Scotiabank has already seen management changes, including the promotion of Mason and capital investments in such areas as new technology, product development and brand awareness.
“Our real issue in wealth management is mutual funds,” said Scotiabank president and CEO Rick Waugh at a financial services industry conference held in January. “We have to get much, much better on using the great distribution channels we have to sell more mutual funds.”
Mason says more changes are coming soon; she will announce a new head of Scotia Securities within “the next couple of weeks.” Karen Fisher, the previous president and CEO of the mutual fund arm, quietly left the bank in December. Glen Gowland, the managing director of business development for Scotia Securities, has been serving as the subsidiary’s acting president and CEO in the interim.
Scotiabank has long said that it is interested in making an acquisition in the wealth-management space, but most observers agree that there appear to be few appropriate targets available at the moment.
Until Scotiabank finds a suitable acquisition, it will have to do the hard work of growing its wealth-management group organically.
“Scotiabank is coming from a very difficult position as the smallest of the Big Five, in terms of mutual fund assets,” Aiken says. “This announcement, I think, in conjunction with an improvement of their performance, bodes well for future sales.
“But keep in mind that growing wealth management in particular is a longer-term trend,” he adds. “It’s not anything we’re going to see an immediate impact on in the next month or few quarters. IE
Big changes as bank looks to double fund sales
New proprietary funds, more hires can be expected at Scotiabank following the addition of three RBC stalwarts
- By: Rudy Mezzetta
- April 30, 2007 April 30, 2007
- 10:34