The Fee-based Summer 2010 Semi-annual Report

In the first six months of 2010, the Canadian wealth management industry saw a continuation and acceleration of some of the trends we have seen emerging since the dark days of 2008 and early 2009. One of the trends is the growing concern over the cost of investment at a time when returns are inconsistent and generally at a level that is lower than that at which most investors are comfortable. This concern is one of the drivers of the development of the exchange-traded fund (ETF) market in Canada, the topic of the special feature in the Summer 2010 edition of The Fee-based Report. In particular, the research article examines the role of ETFs in the management of portfolios constructed for the high net worth investor and the use of ETFs by the two channels that provide that segment with advice—full-service brokerage firms and private investment counsellors. Support for ETFs is not universal, although few will deny that they represent a ‘game-changer’ in terms of the wealth management business in this country. This issue of the report also examines the slow-down in the growth of assets under management in the investment counsellor channel and the offsetting gains being made by full-service advisors, particularly those able to manage portfolios on a discretionary basis. Meanwhile, fund wraps are back on their rapid expansion path and dominating fund industry sales. The overriding theme, whether we are commenting on fund wraps, personal trust or fee-based brokerage (to name a few areas), is the seemingly relentless efforts of the major banks to secure a dominant position in the wealth industry, which is becoming an important contributor to burgeoning bank profits. These and other developments are forcing participants in the wealth management sector to look inwardly at their business models to ensure they are as efficient and as economic as possible, and outwardly at the competitive environment that is becoming increasingly cosmopolitan as both local and global names seek a piece of Canada’s personal wealth market.