This article appears in the April 2022 issue of Investment Executive. Subscribe to the print edition, read the digital edition or read the articles online.
Canadian wealth firms are still fighting over doctors four years after Bank of Nova Scotia acquired MD Financial Management Inc. and set off a battle for the lucrative physician client segment.
Following the May 2018 transaction, bank-owned and independent wealth management firms began promoting services for medical practitioners, hoping to lure clients from a no longer independent MD Financial. Scotia acquired MD for $2.6 billion from the Canadian Medical Association (CMA).
A TD Wealth spokesperson said the firm doubled its health-care professional clients over the past three years. (The firm declined to disclose specific numbers.) TD Wealth Management for Health Care Practitioners launched in December 2018, offering doctors and other medical professionals private banking, investment management, financial planning and commercial lending services on an integrated platform.
CIBC launched its full-service physician-related platform in March 2019 that integrates personal and business banking.
“One thing we know for sure — and this has come out in spades [since the acquisition] — is that this group [of clients] doesn’t like to be pegged in,” said Andrew Pyle, investment advisor with CIBC Wood Gundy in Peterborough, Ont., whose team specializes in serving doctors, dentists and other medical professionals. “They like to have flexibility; they like to know they can make choices with their finances.”
Joseph Bakish, portfolio manager and director of wealth management with Bakish Wealth (a unit of Richardson Wealth Ltd.) in Pointe-Claire, Que., said the lack of a big, independent non-bank player in the market left the door open to competitors. “That has allowed us to have pretty good growth opportunities in the physician market,” he said.
National Bank also redoubled its efforts to recruit physicians. Nicolas Schulman, portfolio manager and senior wealth advisor with National Bank Financial Ltd. in Montreal, said three-quarters of his clients are doctors — some of them former MD Financial clients.
“New clients [come to us] because they’re not getting the financial advice that they’re looking for — that they need — from their current advisors,” Schulman said.
Despite the increased competition, MD Financial and Scotiabank together command 48% of the physician market share in Canada, according to a bank spokesperson. MD, which was founded in 1969, had $60 billion in assets under management as of Dec. 31, 2021, up by 22% from $49 billion when it was acquired.
“The offering we’ve got between the bank and MD is unmatched,” said Daniel Labonté, president and CEO of MD Financial in Ottawa. “As a result, I feel very confident that the success we’ve had over the past four years, since the acquisition, is only going to grow.”
MD advisors are compensated primarily on salary, and “the MD [product] offering is completely open architecture,” Labonté said. MD Financial announced in March that it will launch a new multi-employer pension plan in the first half of 2023 that will give doctors the opportunity for a guaranteed income stream in retirement. The Medicus Pension Plan will be available to all incorporated doctors, not just MD Financial clients.
“This is the first [retirement] solution that allows physicians to pool their investments and their longevity risk,” Labonté said. “Any other solution is basically an individual [one], with the advantages and risk that come with an individual plan.”
The plan will be suitable for doctors at a “broad range of stages in their careers, but have a very particular appeal to those early-career physicians,” said Simone Reitzes, managing director of the Medicus Pension Plan with Scotiabank.
Scotiabank’s 1832 Asset Management LP will play a key role in the investment of pension assets, Reitzes said, but the plan will be “appropriately diversified” across various other subadvisors as it grows.
Labonté declined to provide specific growth targets for the pension plan. However, he said MD Financial will promote the pension using MD Financial’s partnerships with 38 physician associations, including a 10-year agreement whereby the CMA exclusively promotes MD and the bank as financial services providers for doctors and their families.
“We’re certainly looking to have MD advisors well equipped to integrate the pension plan into their existing physician-based planning framework,” Labonté said.
Advisors with rival firms acknowledge that retirement planning is a key concern for doctors, who as a group generally don’t have access to pension savings. However, those advisors also said many doctors and other medical professionals would benefit from, and be drawn to, a tailored retirement strategy rather than a group solution.
“Individual pension plans have taken off with [medical professionals] because they like the fact that they’re in control of their own pension,” Pyle said. “[An IPP] is a great tax-advantaged tool within their corporation and that’s why a lot of them have gone down that road — because of the flexibility.”
Schulman said a pension plan may be an appropriate vehicle for a small percentage of doctor clients looking for a turnkey retirement-savings vehicle, but most wealthy physicians are looking for a holistic, integrated plan created just for them.
Doctors often brag to their colleagues, Schulman said: “They often speak about certain experiences, ideas or products that are more personalized or tailored to their needs.”
Hanif Dharamsi, vice-president and head of private banking at TD Wealth in Toronto, said the bank receives interest from doctors in mid-career looking for holistic wealth management, anchored through a private banker, but that the platform’s growth focus is establishing relationships with doctors in the early stages of their career.
“We have a great referral system that’s coming through our retail branches to refer to private bankers early on in [doctors’ and health-care professionals’] careers,” Dharamsi said.
Calvin Greefhorst, vice-president and regional director of high-net-worth wealth planning with BMO Private Wealth in Vancouver, works closely with several advisors in B.C. who are focused on the medical professional segment.
During the past two years, doctor clients have shown greater interest in re-evaluating their overall financial plan, Greefhorst said, “to make sure they’re still aligned with what they’re trying to achieve, to make sure their estate plans are in place should something negative happen [and] to make sure their families are taken care of.”
The pandemic has had doctors re-evaluating their goals. “What they’ve done in two years probably feels like five to 10 years for them,” Pyle said. “So, we’re hearing a lot of them [say], ‘We need to get back into our financial plans today to see if it’s feasible for us to make a decision to advance our retirement timeline because this is what we want to do.’”
Advisors who specialize in serving health-care professionals said their wealth management and planning needs are similar to those of other incorporated business owners, but with key differences: doctors tend to be focused singularly on their practices, and generally have even less time to manage their finances.
“Trust is the most important thing for this group because of their lack of time and their desire to really help people,” Bakish said.
Doctor clients living through the challenges of the past few years also need to have confidence that their advisor’s team can address “anything that the medical professional [client] requires,” from portfolio management to commercial banking, Pyle said.
“They want stability,” Pyle added. “‘Solve these problems for me so I can focus on the practice.’ That’s where I think the industry is going. [For] those in the industry right now, I think the challenge is, can you meet that?”