Paul Lorentz, president and CEO of global wealth and asset management with Manulife Financial Corp., says the firm’s strategy of aligning its global wealth-management businesses more closely is driven by the goal of ensuring the firm leverages all of its capabilities.
Manulife’s integration of its wealth-management businesses is aimed at meeting the evolving expectations of its clients, wherever they are. The company is doing this by introducing digital innovations, offering tailored products and services, and providing financial advisors and their clients greater access to alternative products.
“We believe in the value of advice – not just in Canada, but globally,” says Lorentz, who has led the firm’s global wealth-management business since 2017, when Manulife’s management team decided to combine all of the firm’s global wealth-management businesses into one business segment.
In May, Manulife announced it would be rebranding its retail, retirement and institutional global wealth and asset-management businesses in Canada, the U.S. and Asia under one umbrella: Manulife Investment Management (MIM). While the John Hancock brand has been retained for business lines in the U.S., the company will rely on Manulife branding in Canada and everywhere else. All told, the rebranding consolidates about 25 company brands and logos worldwide.
The integration, which is expected to take about two years, allows Manulife’s wealth-management business to communicate with clients “in the same voice,” Lorentz says, “and to really showcase what we can offer to our customers around the globe.”
Under the leadership of Roy Gori, who took over as president and CEO of Manulife Financial in May 2017, the company identified growth in its “highest potential” businesses, including the firm’s global wealth-management unit, as a key strategic priority. In 2018, Manulife’s global wealth and asset-management business reported core earnings of $986 million, up by 21% from 2017 – the fastest growth rate among Manulife’s business segments.
“Two of the main pillars of growth [for Manulife] are the global wealth and asset-management business and Asia,” says Scott Chan, director of research and financial analyst with Canaccord Genuity Group Inc. in Toronto. “[Manulife] has been rationalizing a lot of U.S. legacy businesses to free up capital to support growth in the higher- margin areas.”
Integrating Manulife’s wealth businesses will create more opportunities to innovate in product selection, particularly alternative investment products such as private equity, real estate and resources, Lorentz says. As a global insurer, Manulife has a significant stake in alternative asset classes. The firm is one of the largest institutional managers of timberland in the world, for example.
“The opportunity for us is to expand what we’ve been doing for ourselves on the balance sheet of the [parent] insurance company, and make those [products] available to third parties,” Lorentz says. In 2018, for example, Manulife launched its first infrastructure fund – John Hancock Infrastructure Fund – for institutional investors.
The company also looks for ways to make alternative investments more readily accessible to high net-worth (HNW) and mass affluent clients, Lorentz says: “We only see the demand for private markets going up.”
The integration, including the merging of investment product teams, gives Manulife “more of a line of sight” in identifying products that are successful in one region that may work in another, Lorentz says. For example, in April, Manulife launched a multi-asset diversified income fund in partnership with an Asia-based bank “to really meet a yield need that they were looking for in Asia. We think [that product] will have applicability around the globe.”
The integration also allows greater and faster adoption of digital innovations, Lorentz says, which is another of Manulife Financial’s strategic priorities. For example, Manulife Securities, the company’s broker-dealer unit, is introducing a digital onboarding tool that originally launched in Manulife’s Asia market.
“That’s allowed [Manulife Securities] to accelerate some of its plans of creating more digital services for advisors and customers,” Lorentz says.
Lorentz appears to be less keen on robo-advice – as a distribution channel in its own right, at least, as opposed to a tool that can help advisors serve clients more efficiently. “For us,” he says, “it’s less about buying a robo vs investing in the digital [capability] and the technology that creates a platform that consumers expect in today’s world to access advice.”
The integration also allows Manulife to use technology to understand who its clients are, and how the firm can customize products and services for different segments.
“How do we tap into the customer relationships we do have,” Lorentz says, “leveraging data and analytics; understanding where the client segments are; to really go after those clients and offer those [product] solutions directly?”
Wealth managers are increasingly turning to data and analytics to help them understand their clients better and to drive growth, says Chris Pitts, national leader, Canadian asset-management practice, with PricewaterhouseCoopers LLC in Toronto. Firms can identify the kinds of clients they have and where they’re located, then segment them by asset levels and a variety of other metrics, such as profession or life stage.
“That’s the benefit of data, particularly for global firms,” Pitts says.
The overall focus of the integration is primarily on organic growth – deepening existing wealth-management business lines – rather than on growing by acquisition.
Lorentz acknowledges that opportunities to accelerate growth through mergers and acquisitions exist, but Manulife would consider an acquisition only if it is a “strategic fit.”
In June, Manulife identified one such fit when it entered into an asset-management joint venture with Mahindra & Mahindra Financial Services Ltd., an India-based non-bank financial services company that has $11.4 billion in assets under management (AUM).
“We’re very excited about our entry into India,” said Lorentz in a Manulife quarterly earnings conference call in August. “It’s a very attractive market with very strong growth prospects, particularly in the wealth- and asset-management space.”
MIM’s focus will also be squarely on organic growth regarding Manulife Securities and Manulife Private Wealth, the boutique wealth- management unit aimed at HNW investors. Both distribution channels “have plans to organically acquire assets and advisors year-over-year,” Lorentz says.
Manulife Private Wealth, which launched in 2012 and offers discretionary wealth management, has become one of the parent firm’s “fastest-growing advice shops over the last couple of years,” Lorentz says. “It started from a base of nothing to really filling a value proposition in the market that I think was missing.” Manulife Financial declined to disclose growth statistics for Manulife Private Wealth.
Lorentz says that he foresees MIM expanding its lineup of ETFs that it offers in partnership with Vancouver-based Dimensional Fund Advisors Canada ULC (DFA), which acts as subadvisor. Manulife offers seven multi-factor “strategic beta” ETFs with $303 million in AUM (combined) as of June 2019, according to the Canadian ETF Association.
The choice to partner with DFA, Lorentz says, reflects a broader belief at MIM in the value of active vs passive investing over the long haul.
“There’s so much discussion on price, price, price,” Lorentz says. “What really matters is what’s the net return to consumers after they pay that price. Fees aren’t the only thing to consider.”
Clients, Lorentz adds, “aren’t looking for a benchmark strategy anymore – and that’s the big shift.”
For both Manulife’s asset- management and retail arms, the focus now is on talking to clients about their goals and building the right products for them, Lorentz says: “Forget ‘What fund do you need?’ [and focus on] ‘What problem are you trying to solve, and how do we construct that?'”
As MIM’s business comes together, that division can focus its sales team “on telling our stories,” Lorentz says. “That’s where the brand really helps: in pulling together the consistent story around what we’re really good at.”