The new head of wealth management at National Bank of Canada says the continued expansion of the bank’s wealth-management business will depend on how well the bank can leverage its unique strengths rather than on pursuing a “me too” approach of copying what the other Big Six banks are doing.
“I want our [wealth-management] business lines to challenge the status quo always, to be different, to bring different solutions to our clients and investment advisors,” says Martin Gagnon, who took over in July as executive vice president of wealth management at National Bank, as well as becoming co-president and co-CEO of its brokerage subsidiary, National Bank Financial Ltd. (NBF).
Case in point: the Montreal-based bank, which lacks a large branch network outside Quebec, has introduced a program through which the bank places its bankers “in close proximity” to some NBF branches – next door or in a separate part of the building (with separate data systems and entrances, so as not to contravene regulatory restrictions).
This approach, Gagnon says, allows financial advisors to offer banking services to clients without delay rather than having to send a client to a distant retail branch.
“[The advisor and the banker] work together,” Gagnon says. “The advisor doesn’t fear the bank will try to sell investment products to these clients. [The bank] offers the credit side of the balance sheet only.”
This program now has six centres across the country and there are plans for further expansion.
Gagnon, a 29-year veteran of the capital markets and wealth-management businesses, moved up from his position as senior vice president of intermediary business solutions with National Bank to take on the new role. He replaces Luc Paiement, longtime head of NBF, who will be serving as an executive advisor to the bank as part of a broader succession-planning process.
Gagnon is responsible for the retail investment business of NBF, which includes the retail brokerage, direct brokerage, private banking, investment products, correspondent network and trust services arms. (The institutional side of NBF is headed by Denis Girouard, deputy head of financial markets and co-head and managing director of fixed-income services, who took over that role in June from Ricardo Pascoe, now the bank’s new chief transformation officer and executive vice president in the strategic initiatives office.)
Gagnon takes over a wealth-management business that is thriving, posting an $86-million profit in the quarter ended July 31, which is up by 5% from the same period a year ago. The July 2016 figure represents an 18% contribution to the bank’s total net income of $486 million in the quarter, up by 17% from the same period a year ago.
Although Gagnon hasn’t yet drawn up specific priorities for the business, he says he intends to pursue the larger strategic themes as articulated under Paiement: a focus on advice and building relationships with clients; offering a broad, “open architecture” product shelf; and seeking strategic partnerships to extend NBF’s reach. “There’s no 180-degree turn [in strategy] here – not at all,” Gagnon says.
Gagnon believes that NBF, which has 925 advisors, has the size to be a force in the brokerage marketplace, thanks in large part to key acquisitions made over the past several years.
In 2011, NBF acquired the remaining shares in Winnipeg-based Wellington West Holdings Inc. that NBF didn’t already own. Wellington West had about 220 advisors at the time of that transaction. Also that year, NBF bought the investment advisory arm of HSBC Securities (Canada) Inc., which brought in 120 advisors to NBF.
NBF also added advisors organically, recruiting them either to bolster its advisory force in specific regions of the country or based on the size or makeup of a particular advisor’s book of business.
Some recruits have been drawn from those freed by recent restructuring trends at other bank-owned brokerages, including ScotiaMcLeod Inc. earlier this year. “We have definitely benefited from this [trend],” Gagnon says.
National Bank also has been expanding its high and ultra-high net-worth division, Private Banking 1859 – particularly in Western Canada. In June, the division opened a branch in Vancouver; in January, a branch in Calgary.
“You’re talking about a segment that is going to grow in the mid-teens [as a percentage change], and 1859 has been growing faster than this,” Gagnon says. “We have been capturing market share in Quebec, and now we’re just using this recipe [outside Quebec].”
Gagnon believes that a unique differentiator for NBF’s wealth-management business is its lineup of investment fund products, all of which are managed by third-party providers. In 2012, National Bank sold its Natcan Investment Management Inc. subsidiary to Fiera Capital Corp., one of the bank’s primary asset-management providers; the bank holds a minority position in Fiera.
“Instead of trying to sell products that we manufacture,” Gagnon says, “[our strategy] puts clients first, answers their needs, then turns around and looks at any asset manager – anywhere around the world – and finds the best way of answering the needs of clients.”
Gagnon says that NBF’s wealth- management business will continue to look for strategic partnerships. He cites the example of the relationships the bank has with 400 independent portfolio managers and investment dealers through the bank’s clearing and custody provider, National Bank Correspondent Network. In 2013, National Bank acquired TD Waterhouse Canada Inc.’s institutional services arm, a deal that allowed National Bank to add scale and introduce new products and services, including investment-portfolio rebalancing.
“We support the independents in Canada, we work closely with them, and we want to go further and deeper with all of those [relationships],” Gagnon says.
Gagnon is well positioned to lead that initiative. He began his career in 1987 in National Bank’s treasury department, then moved on to hold various positions in the bank’s financial markets business.
In 1993, he left the bank to join New York-based Goldman Sachs Group Inc.’s investment-banking business, first in Canada and then in New York.
“I had an amazing nine years on Wall Street,” Gagnon says. “I learned from some of the best. It was a motivating, learning experience.”
Gagnon believes the wealth-management industry faces some tough challenges today, including responding to shifting demographic realities and trying to help clients facing the dilemma of saving for retirement in an era of stubbornly low interest rates.
“It’s a huge challenge,” Gagnon says. “I believe that our investment advisors are put in a very, very tough situation when someone retires without enough money, [with] low rates and high expectations – advisors are in a tough position [to help.]”
The rising regulatory burden for advisors and their firms is another major challenge, Gagnon says: “It is extremely difficult not only to stay on top of but to answer the needs of our regulators and, at the same time, to make sure we end up doing the right thing for the client.”
Despite these hurdles, Gagnon remains optimistic about future growth, both for the industry as a whole and for NBF.
“I wake up everyday because of the kick of bringing value-added to our clients in a different way than what our competitors do,” Gagnon says. “And that’s going to be our playbook.”
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