(February 2) – “Royal Bank picked up 4,000 new clients this week. Big deal, you say. That many people would barely keep a small-town branch open at Canada’s largest bank — an average branch might deal with three times that many folks. But the 4,000 new arrivals are different from you and me. In the eyes of the bank and its shareholders, they’re special. These folks are rich. Really rich. And they’re just the latest in a list of seriously wealthy types to arrive under the Royal Bank umbrella through acquisitions,” writes Andrew Willis in the Globe and Mail this morning.
“On Monday, Royal Bank bought Ernst & Young Trust Co. in Jersey, a wonderful little business that’s grown up on the Channel Islands, nestled among the cows and thatched-roof cottages.
“The 4,000 folks live in places like continental Europe and South Africa, but the tax haven is home to $9.6-billion of their assets, or an average of $2.4-million a person.
“Millionaires such as this are not the easiest people to keep happy. Royal Bank will add to its headcount to service the new book of business, with all 265 former Ernst & Young Trust employees moving over. Just for fun, that’s one customer service representative for every 15 rich people. The ratio over the rest of the bank runs to something like one employee to every 200 clients.
“This week’s deal is Royal Bank’s fourth major wealth management acquisition in the past two years. In September, the bank picked off Monument Trust Co. in Guernsey, another business being sold by Ernst & Young. That deal added 1,650 new names to the client roster, along with $2.4-billion in assets, or about $1.5-million per head.
“Taken together with Royal Bank’s existing operations in Jersey, the Canadian institution now ranks among the largest players in the Channel Islands. It’s also one of the world’s biggest wealth managers, partly the result of the 1998 purchase of Credit Suisse’s North American private banking operations and the European arm of Coutts, a British private bank that counts the Queen as a client.
“Back-of-the-envelope calculations show why wealth management is a business that Royal Bank is aggressively expanding. In exchange for its help in managing money and dealing with tax and estate planning issues, the bank should be able to glean a fee of at least one percentage point per year, which means this week’s purchase should be good for $96-million or more in annual revenue.