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Harp Sandhu’s advisory business began transforming into a U.S.-Canada cross-border advice hub after one client inquired about their U.S. individual retirement account (IRA).

Luckily, someone in the office had their U.S. licence and could house it, and the portfolio manager and advisor was able to coordinate with the client’s American accountants.

“I just started realizing there was really a need for [cross-border advice],” Sandhu said. “I also realized that no one was really a full expert at it.”

Sandhu works with Vancouver-based Raymond James (USA) Ltd. (RJLU), through which he’s run Victoria-based Sandhu Wealth alongside three other professionals since 2015. He was with Toronto-based Raymond James Ltd. for a decade before he also joined the U.S. arm, which began with obtaining his U.S. series 7 and series 63 licences through the Financial Industry Regulatory Authority.

Afterward, he began reaching out to various cross-border contacts and introducing himself.

Now, he and his U.S.-licensed associates offer cross-border services as a main feature of their practice; they manage the investments, savings accounts, properties and trusts for U.S. persons in Canada. Between their RJLU and Canadian businesses, their book consists of approximately CA$385 million in assets.

“Ninety percent of our new business has some sort of component of cross-border to it,” he said, adding that most of his existing clients have a mix of domestic and U.S. assets. Yet, Sandhu’s path is relatively rare: only about 150 of Raymond James’ 500 advisors in Canada are dually licensed, said Steven Marcus, president and CEO of Raymond James (USA).

RJLU opened in 2012 with only US$40 million in assets, which increased to US$400 million by 2018, Marcus said. Its assets are valued at roughly US$1.5 billion today, and the continued growth is turning heads.

“The banks are in this space,” Marcus said, listing RBC Private Counsel (USA) Inc. as one example of an established institution. But independent firms have also thrown their hats in the ring.

Despite their efforts, Marcus quipped, “I’m not going to let them catch us.”

How the cross-border advice landscape is expanding

Alongside Raymond James’ U.S. business and offerings from banks such as RBC, firms such as Cardinal Point Capital Management ULC have longstanding U.S. expertise. The latter was founded in 2009, is also based in Toronto and had US$1.2 billion in assets under management (AUM) as of Dec. 31, 2022.

Cardinal Point works with U.S. persons in Canada as well as Canadians south of the border. CEO Jeff Sheldon said offering advice on accounts like RIAs, 401(k) workplace retirement plans, and U.S.-based taxable and trust accounts was a “huge opportunity” more than 10 years ago and remains “a value-add that many firms today still cannot offer.”

But several have been keen to try.

Both Winnipeg-based Wellington-Altus Private Wealth and Toronto-based CI Assante Wealth Management are examples from the past five years.

The former launched Wellington-Altus USA Inc. in June 2019. Using that platform, which managed US$21.5 million in discretionary assets as of Dec. 31, 2022, advisors can offer managed accounts to U.S. clients or U.S.-domiciled accounts to domestic clients.

CI Assante’s parent company, CI Financial Corp., has a U.S. business called Corient Private Wealth LLC, which had AUM of US$151.1 billion as of July 31. That AUM includes assets added through CI Financial’s purchase of dozens of registered investment advisors since it entered the U.S. in 2020.

CI Assante’s Canadian advisors lean on their Corient colleagues to help people with U.S. ties. “The number of clients moving to or working in the U.S., be they professionals or athletes, is generally a small percentage of each [domestic] advisor’s book of business,” CI Assante said in an emailed statement.

According to the 2021 census, more 3 million people living in Canada were not Canadian citizens. Of that group, more than 1 million were U.S. citizens.

In this context, it’s compelling to work with investors who’ve planned a move to Canada from the U.S., or vice versa, potentially leaving stranded assets on either side of the border. Many advisors also have clients who could inherit unfamiliar U.S. assets with complex tax and planning implications.

Sandhu, for example, works with many clients planning a cross-border move. He finds these investors through his network of experts in the U.S. or through existing client referrals.

About intergenerational wealth transfers involving U.S. assets, Marcus said, “We have a lot of Canadian residents [who] contact us and say, ‘Hey, my aunt/uncle/grandparents … just left me this U.S. retirement account. I’m not a U.S. person. What do I do?’ That is a big part of the business now.”

Still, for newer firms in the space, there can be significant challenges.

“I get the attraction,” said John Cucchiella, referring to how more shops are building out cross-border services. He’s now president of Toronto-based SMEx Advisory, a business consulting service for wealth firms and other professionals. But he considered moving into the U.S. advice space when he worked with Toronto-based Dundee Goodman Private Wealth between 2010 and 2015.

The hurdle was high barriers to entry: “It can be good business but it’s expensive to get off the ground. Your [compliance] liability goes through the roof, so it’s really designed for your best advisors.”

New kid on the cross-border block

iA Financial launched Toronto-based iA Private Wealth (USA) Inc. in November 2022. Leader Michael Smith, who’s now president and CEO of iA’s U.S.-focused arm, said the project was several years in the making.

“Our advisors at iA [the Canadian arm] were asking for a U.S. retail solution,” Smith said. “They wanted to be able to service clients they were losing” as cross-border moves increased and stoked demand for U.S. expertise.

Smith knew other firms were established in Canada’s cross-border arena. Still, after years of consultation, it was clear advisors wanted a fee-based platform. Many of them were portfolio managers who wanted to protect U.S.-bound clients, he said. “It really started out as a defensive strategy.”

One was portfolio manager Brent Vandermeer, part of the discretionary advisory team with Ottawa-based CrossPoint Financial under iA Private Wealth. He and two of his colleagues are now dually licensed, serving a handful of clients with U.S. assets. Those account for a small percentage of their approximately CA$380 million in assets.

The niche is new, but “the move was important for us because as our business has grown over the years. A lot more higher-net-worth clients have cross-border needs,” Vandermeer said. He previously referred clients to experts in his growing U.S. network. “But there was always this gap” and the potential for stranded assets.

iA Financial gained U.S. registration in July 2022 and its U.S. arm opened in the fall with Bank of New York Mellon’s Pershing Custodial Services as a partner. The division manages approximately US$45 million in assets across 25 advisor teams, while more than 400 advisor teams work on the Canadian side with iA Private Wealth. The goal is US$75 million or more by the end of 2023, and between US$100 and $150 million in 2024.

Two executives are dedicated to the U.S. arm’s launch and growth, while eight offer support outside their main duties to iA Private Wealth in Canada. That team will grow as the firm’s needs increase, Smith said.

What’s intriguing so far, Smith added, is 75% of U.S-tied assets are from new clients, thanks to the firm’s new advisors with established U.S. relationships.

Vandermeer’s team will soon market their expertise on their website, hoping to expand the client pipeline. Nearly a year in, they’re thinking, “Are we ready and confident enough now that we can talk to people about how this is something we do?”

Cross-border advice won’t be their main offering, but it’ll be high-quality, he said. “I’m a measure, measure, measure and then cut kind of person. We want to make sure we know how to [give advice] as well as we do on the Canadian side.”

U.S. expertise isn’t easy to master

Firms developing operations in the U.S. must abide by two sets of investment regulations as well as grasp two sets of tax laws pertaining to investor earnings and investments. Individual advisors must maintain two types of registration and build partnerships with experts on both sides of the border.

That’s why offering cross-border wealth services requires dedication: “If you’re going to get into [this], don’t make it 10% of what you do. It minimally has to be 50%,” said Harp Sandhu of Sandhu Wealth in Victoria. Some issues sound simple but have consequences, he added. For example, failing to take a client’s minimum distribution from an IRA represents a risk and can anger the U.S. Internal Revenue Service.

About his network and client referral opportunities, Sandhu said he spent decades making U.S. industry connections before jumping into the space, plus he has a mentor and business coach who continues to guide him.

Cross-border markets represent a boon, but firms may fall short because they lack related expertise,” said Steven Marcus, president and CEO of Raymond James (USA) Ltd. “Up here in Canada, there’s not a lot of U.S.-licensed people.” (Regulatory bodies were unable to provide this figure.)

Michael Smith of iA Private Wealth (USA) Inc. explained that firms must seek approval from the Canadian Securities Administrators (CSA) to serve residents in Canada with U.S. assets, for example, or they need a registration exemption. “If you file for a registration exemption, you cannot exceed 10% of your total revenue derived from Canadian residents,” Smith said. “It [must] be an ancillary part of your business strategy.” That can make it tough to onboard Canadian residents with hefty assets, he added.

On top of that, “The U.S. [financial industry] can be very litigious,” said John Cucchiella of SMEx Advisory. “The risk for a Canadian firm down in the U.S. is very high.” Given the parameters for firms, he added, “I don’t know if there’s enough business here [domestically] to tap into.”

Diligence by firms is crucial, said Jeff Sheldon of Cardinal Point Capital Management. He suggests companies understand the costs and rules tied to cross-border business.

“There has to be scale,” he warned. “You can’t just simply decide, based on [a few] opportunities, that you are going to be an expert in something.”