By James Langton

(January 18 – 08:30 ET) – Bill Hatanaka, chief operating officer of Royal Investment Services, preached RBC’s “bigger is better” wealth management strategy at the RBC Dominion Securities Conference on Wealth Management yesterday.

Hatanaka says, “The bar to compete in wealth management is now at an all time high. The resources required in the form of capital, talent, and technology are overwhelming many of the smaller players — forcing them to sell.”

This position is not surprising from RBC, which boasts one of the biggest wealth management businesses in Canada, with a 30.4% market share on the retail brokerage side, and more than 41% of the trust market.

“As a starting point — bigger is better in the wealth management business,” says Hatanaka, “particularly on the distribution side, as it allows the serious players the economies of scale to continually enhance their offerings to clients, while still providing an acceptable return to shareholders and meeting increasing regulatory scrutiny.”

RBC has expanded its retail division dramatically with the recent acquisition of Dain Rauscher in the United States, which more or less doubles its retail sales force.

Hatanaka stressed the importance of going global in wealth management, “Canadian companies can no longer hide behind borders and try and protect their home turf. The Internet has made having a global brand and being a global player a priority for any wealth management firm. The client of 2001 is the most informed and discerning client that a wealth management company like ours has ever dealt with.”

Better-educated clients are creating a brave new world for retail firms. “Old approaches just will not work as the client is more powerful, has much more choice. Putting the client experience at the centre of all of your business processes is key.”

The consequence of this is that client solutions become the focus, open product architecture (selling third-party products and marketing your products to third-party distributors) becomes essential, as does organizational efficiency.

“For Royal Investment Services, our strategy is based on creating a superior client experience, ensuring that clients get what they want, how they want it, and when they want it. The key to greater share of wallet among our clients is to establish deeper, more aligned relationships, to ensure that we are the provider of choice for a diverse continuum of client needs.”

Hatanaka outlined RBC’s competitive advantages: the quality of its people, its bias towards advice, its emphasis on managing assets for a fee, back office efficiency, online strength, institutional knowledge, and brand recognition.

“We are just beginning to fully understand the immense potential of our integrated wealth management offering to generate cash and profitability through spread, fees, transactions and fee for service revenues. The combination of all of these factors will lead to solid, sustained growth in earnings that we believe will allow Royal Investment Services to hit its target of 25% of overall Royal Bank earnings in 2-4 years, up from 19% in 2000.”