In many respects, RBC Wealth Management could be said to have been hiding its light under a bushel in recent years, but the firm is intent on making the UK its third home.
Part of Royal Bank of Canada, the group is the sixth largest wealth manager in the world and it is now putting in place aggressive expansion plans.
Tracy Maeter, RBC Wealth Management’s head of investment for the British Isles, a remit that includes the UK and the Channel Islands, says the firm is set to embark on a big marketing push to raise brand awareness and broaden out its client base.
‘International clients and UK resident non-doms have been the backbone of our business, but we want to be more proactive in developing new relationships, particularly in the UK resident market at a time when a lot of people are changing their adviser,’ she says.
‘RBC is looking to the UK as its third key market after Canada and the US. We have already expanded our investments team to 60 and we are looking to build a London-based team of private bankers from 40 to 100 by 2015. Our doors are open, we have the capacity, and we are looking to build that out in London.’
The firm offers a wide range of private banking services targeted at high net worth and ultra-high net worth individuals, from investment advisory, discretionary asset management, tax planning, credit and trusts. Clients are free to pick and choose which of these services they use and are assigned a dedicated relationship manager with Maeter keen to stress the emphasis placed on personal service.
‘With high net worth and ultra-high net worth clients we offer a very high-touch service and we make sure that we understand their needs more broadly. The relationship manager acts as the central point of contact and partners with specialists throughout the bank,’ Maeter says.
‘Our business model allows us to be flexible based on clients’ needs. We don’t have to “sell” them banking, investment or tax services, we can provide them with what they actually want. Because we can offer everything under one roof we talk to clients, rather than just offering prefabricated solutions.
‘Our fee structure aligns our interests with the clients and we don’t price our discretionary or advisory services differently to push them into one or the other, which means the advice we give is based on client preferences rather than price.’
For both discretionary and full service advisers, RBC charges 1.25% on the first £1 million, 1% on the next £2 million, 0.85% on £2 million thereafter and 0.7% on the next £5 million. On higher amounts the charges are negotiable.
Maeter’s own experience of dealing with clients has been honed over many years in both the UK and the US, and she has held senior positions at several major financial institutions in a career spanning more than 20 years.
After graduating from business school in her native US, she started out on the institutional side working on a trading desk in capital markets before switching over to client relations albeit from a technical perspective.
She then moved into private banking in the US at JP Morgan, before relocating to London 13 years ago, where she joined HSBC.
‘I have had a range of experiences: working on the technical side, starting some teams and running investment businesses focused on private clients for the last 15 years,’ she explains.
This broad range of experiences, working in a variety of roles across the industry, has stood in her good stead she says, and really served to underline the significant differences in the approach that needs to be taken with private clients compared to running institutional money.
‘The difference between institutional and private clients and the way they think about the market is like night and day,’ she says.
‘On the private client side, you also see very different preferences in buying behaviour between clients from different geographies and backgrounds and it shows that there are no one-size-fits-all solutions out there. That is one reason why the private client side is so interesting.’
Even within different client sets, individuals’ needs can vary markedly with entrepreneurs a case in point. While some are so busy that they are happy to delegate all of their investment decisions to RBC others are much more hands on, preferring to be kept very close to all aspects of the running of their finances. The key is being flexible enough to accommodate these needs, she says.
But despite the varied nature of the firm’s client base, certain factors ring true for virtually all of the wealthy individuals RBC services.
‘Private clients have very asymmetric risk profiles where losses hurt a lot more than for institutional clients,’ Maeter says. ‘But in this sort of environment, they are caught between a rock and a hard place. If they have been in the perceived safe haven of cash, receiving nil returns, they would have seen 15% of their real wealth eroded by inflation over the last four years.’
In this environment, risk profiling is more important than ever and Maeter says RBC has redesigned its process to focus on highlighting any conflicting themes in the client’s goals, such as marrying an appropriate level of return achievable within their risk tolerance. She stresses this is more than just a box-ticking exercise, but still only really acts as a starting point with the key being getting to know them.
‘We ask them about the experiences they have had of investing and how these have been in the past, their expectations and what they liked or did not like. It is important to know how they feel,’ she says.
Equally, it is vital at the outset that RBC knows where the client is already invested and what portion of their wealth they are running, with Maeter pointing out that the approach taken when you are running 2% of an individual’s net worth clearly being very different to when it is their entire life savings.
Client portfolios typically start at £1 million to £2 million in size, but can be over £200 million or anywhere in between. The firm will run segregated mandates for clients, such as corporate bond portfolios, if required, which would typically be north of £3 million. Equally, clients can just choose to buy individual stocks, hedging for their existing portfolio or hedge funds or structured products.
As a major global player, RBC has research teams around the world covering different asset classes providing the wealth management team with a welter of information. The challenge for Maeter and her team is to break this down into what is relevant to their clients’ portfolios.
‘We have been very focused on how we bring together the different views and product sets we have across RBC globally,’ she says.
‘We plug into our global portfolio advisory committee, which meets every week, and discuss what the asset management and capital markets teams are saying. We distil this information to see what this means for private client portfolios and ensure that we are coming out with one voice and focusing on our best ideas. Behind that we have product specialists in fixed income, currency and equities etc.’
From its research inputs, the firm then devises its core asset allocation with a tactical overlay placed over this to try and take advantage of the prevailing market conditions.
It has a white list of global stocks, but is also open architecture and uses specialist third party managers in a number of areas, which are selected by its global fund selection team.
RBC as a whole is a conservative institution, Maeter says, and this cautious approach to balance sheet management is equally applied to its clients’ assets.
She says that client portfolios have been defensively positioned over the past couple of years, favouring then, as now, high yielding equities and corporate credit rather than longer duration sovereign risk and holding using floating rate notes to enhance yield for income-seeking clients.
Performance has been impressive, with RBC’s Sterling Cautious strategy up 16.3% over three years compared to the ARC PCI peer group’s 4.63%. Similarly, its Sterling Balanced Asset strategy is up 21.79% versus the peer group’s 8.38%.
‘Our overall outlook is that economics and markets will muddle through and the financial system will right itself in due course. Because we are dealing with private clients, we have to be cautious because there are some very binary negative outcomes, so we are focusing on higher quality assets,’ Maeter says. ‘But being sat on the sidelines is a real danger and so we are advising uninvested clients to phase into the market over time.
‘In the next month or two, we are going to expand the assets in core discretionary portfolios to include emerging market debt, real estate and commodities, for example, as we believe these will give better risk-adjusted returns over time,’ she adds.