Canadian Wealth Management Industry: Past, Present, and Future (Updated 2022)
In Canada, the use of the term “wealth management” in the financial services industry took off in the early 1990s.
Today, wealth management is the largest growth component of most Canadian financial institutions. We only need to look at 2021 and 2022 Q1 earnings reports to see that the wealth management divisions of Canadian banks and mutual fund companies are primary drivers of their high revenues.
Wealth Management Retrospective
Wealth management is typically seen as the provision of financial products and services to high-net-worth (HNW) clients and it has now evolved into a specialty financial practice.
- Up until the 1960s, individuals typically turned to their bank manager for financial planning advice.
- Starting in the 1960s through to the early 1980s, financial advice for the wealthy was proffered by family lawyers and personal stock brokers.
- From the 1980s onward, the mutual fund industry developed and flourished, and financial advice was readily available from the Investment Advisors (IAs) employed by banks and mutual fund distributors looking to sell their investment products.
Wealth Management Today (2022)
All the Canadian banks have private banking divisions to provide one-stop wealth management services and products to HNW clients.
As well, mutual fund companies and integrated wealth management firms are also offering similar financial services supermarkets.
More recently, professional firms offering wealth management related services such as accounting firms, law firms, insurance providers, investment counsels and others have established “family office” practices. In this way they can provide HNW clients with an overall financial plan that includes their area of expertise, while referring to external financial specialists to fulfil clients’ additional needs such as investment advice.
Then there is the Certified Financial Planner (CFP)—a relatively new professional designation launched in Canada in 1995 to meet the needs of clients. A CFP is capable of designing a comprehensive financial plan to provide for a client’s financial concerns and goals, but is not a registered Portfolio Manager and is therefore unable to help clients with discretionary investment management.
The Future of Wealth Management
Growth in the HNW sector is projected to double in terms of prospective clients over the next 10 to 15 years with assets increasing at a much higher rate.
Accordingly, the wealth management industry will continue to grow, providing more options for HNW clients.
Mega financial institutions like banks and larger mutual fund companies will increase their purchase of private wealth firms (much like the consolidation of the institutional investment management industry that escalated through the late 1990s and still continues to this day with few truly large independents left).
At the same time, we are seeing a movement by CFPs to establish their own truly fee-for-service firms and maintain control over their independence and fiduciary credibility. More recently, we are seeing CFPs leaving to set up their own independent practices in order to maintain their objectivity as their employers are engulfed by the larger institutions.
However, since CFPs are not licensed to provide discretionary investment management, these practices mainly focuses on providing a financial plan for clients, subsequently referring clients to specialized professionals to fulfill the clients’ financial objectives and goals.
What This Means for the High-Net-Worth Client
Wealth management in Canada has evolved to meet the increasingly complex financial needs of a growing high-net-worth client sector.
Today, the new HNW client is not only overwhelmed by their own financial complexities, but now has to navigate a multitude of financial service providers all offering wealth management solutions.
The starting point may be to reach out to a trusted professional like Bloom Investment Counsel, Inc. who can help HNW clients with their investment needs, and if needed can direct them to a known and trusted financial planner.
Bloom Investment Counsel, Inc. is a well-established Toronto-based independent, privately-owned boutique investment management firm providing customized, actively managed, Canadian and U.S. dividend-paying portfolios for wealthy individuals, family offices, foundations, corporations, institutions and trusts.
Founded in 1985, Bloom has experience in managing in excess of $2.5B in assets over the years. We believe that generating independent cash flow is central to the success of our clients’ portfolios because it provides capital for the present day, if needed, while continuing to preserve and build wealth for the future.
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This content is provided for general informational purposes only and does not constitute financial, investment, tax, legal or accounting advice nor does it constitute an offer or solicitation to buy or sell any securities referred to. Individual circumstances and current events are critical to sound investment planning; anyone wishing to act on this content should consult with his or her financial partner or advisor.