Manulife targets Canada's rich in industry a decade behind U.S.

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TORONTO (Feb 21): Manulife Financial Corp plans to more than double assets in its wealth unit and hire five new portfolio managers, as it targets the growing business of Canada’s rich.

Canada is about 10 years behind the U.S. in offering financial services to the wealthy under one umbrella — from investment management to tax planning — and the industry is ripe for growth and consolidation, said Glen Brown, head of Manulife Private Wealth.

"Five years ago, you would see the average person dealing with 4.7 different advisers. It’s now under three," Brown, 49, said in an interview at Bloomberg’s office in Toronto. "So we’re bringing in money from other firms from clients that had maybe three or four managers and have consolidated things with us.”

Manulife Asset Management has about US$364 billion under management. It doesn’t break down assets in its wealth unit but Brown said the 45-person team currently caters to about 400 households with an average portfolio of about C$3 million (US$2.3 million). Managers look after no more than 125 households.

Manulife started its wealth business in Toronto about six years ago and now has offices in Montreal, Vancouver and Calgary. Clients must have C$1 million in liquid assets and are generally referred by independent advisers. The firm charges 1.45% on the first C$2 million and the fee goes down from there.

Cashing Out

Canada ranked eighth worldwide for the number of individuals with at least US$1 million to invest in 2017, holding a combined wealth of US$1.2 trillion, according to Capgemini SE. Solid economic growth, a real estate boom and vibrant tech and marijuana industries are fueling newfound riches. Aging business owners and baby boomers are looking to cash out, Brown said.

It’s a business coveted by financial services companies that bulked up in the space as they diversify away from a slowing housing market. Toronto-Dominion Bank agreed to buy Greystone Capital Management in July, adding a platform with alternative assets and funds attractive to the wealthy. Bank of Nova Scotia spent C$3.54 billion last year on MD Financial Management, which caters to doctors and their families, and Montreal-based money manager Jarislowsky Fraser.

Brown, who has more than 20 years experience working with high net worth clients, including at Canadian Imperial Bank of Commerce and Toronto-Dominion Bank, said BMO Private Banking, the unit of Bank of Montreal, is one of Canada’s biggest players in the sector, he said.

Outside Canada

Returns for Manulife Private Wealth clients vary depending on the client’s goals, be it buying a retirement home in Florida or setting up a philanthropy fund for their grandchildren, but expectations are usually similar to a pension fund, Brown said.

“What we’re hoping to do is get a creative add on by using active managers and paying that premium for active managers so that the 4.7 percent return expectation turns into a 6.3 percent actual return,” for example, Brown said.

A typical portfolio is currently about 60% equities and 40% fixed income with about 70% of the equity held outside Canada, whose 5.5% annual return in its benchmark stock index has lagged the U.S. by about half over the past five years. Their U.S. equity manager holds about 37 stocks, focusing on blue chips which are more conservative than the broader index.

“We’re not going to take the outlandish risks that somebody might take if they’re day trading on their own PC," he said.

Investors’ expectations need to be reset as the world economy slows, he cautioned.

“We’re going to continue to see volatility,” he said. “That’s become more the norm than we would like to see. It’s self perpetuating, so every headline that comes out with something just continues to feed into the cycle on that."