TD, CIBC, BMO and other skyscrapers in Toronto in spring

Ed Dodig, the brother of Canadian Imperial Bank of Commerce’s (CIBC) president and CEO Victor Dodig, has taken the reins of both CIBC’s full-service brokerage and the bank’s private-wealth business.

This move takes place as the bank looks to grow its Canadian wealth-management business by offering more services and products for high net-worth clients. The appointment is part of CIBC’s strategy – one also pursued by other Canadian banks – to strengthen the links between the brokerage and private-wealth businesses.

“Ed will lead our integrated wealth-management business, driving forward momentum as we deepen client relationships and enhance connectivity,” CIBC stated in an internal memo.

Ed Dodig took over as executive vice president and head of both Private Wealth Management Canada and CIBC Wood Gundy on April 15, replacing Peter Lee, who had been in that role since July 2016. Lee now is executive vice president, banking centres, with responsibility for CIBC’s retail branch network.

The two moves were part of a broader set of executive changes announced in April that are meant “to foster collaboration, share best practices and instil a strong, client-focused culture as we develop leaders,” CIBC stated in an email sent to Investment Executive.

Dodig, who for the past two years led CIBC’s global equities business, will report to Jon Hountalas, senior executive vice president and group head of the bank’s Canadian commercial banking and wealth-management unit. Over the past 24 years, Dodig has held various positions within wholesale banking at CIBC, including managing director and head of the bank’s European and Asia-Pacific Region, while based in London, U.K.

Dodig, a chartered financial analyst who worked as an Imperial Service advisor earlier in his career, will spend the coming months introducing himself to advisors via road shows, regional meetings and branch visits, the bank indicated. Wood Gundy has about 1,000 advisors in 80 branches and $160 billion in assets under management.

CIBC, like other big Canadian banks, has spent the past several years connecting its full-service brokerage business more closely with its private-wealth business, including private banking, trust and investment-counselling services. The bank, like some of its peers, is undergoing a firmwide digital transformation as it tries to stay ahead of customer expectations.

“We are enhancing our position as a leading wealth franchise in Canada by building strong relationships with our clients and further enhancing their experience with us through investments in our technology and people,” CIBC stated, referring to its strategy for the bank’s brokerage business.

In 2016, CIBC combined Wood Gundy with its Canadian private-wealth arm to align “our high net-worth businesses under one platform,” the bank stated at the time. When Lee took over at Wood Gundy from Monique Gravel, who retired, he added that role to his existing one of managing director and head of private wealth – the first time one executive oversaw the two business lines.

The following year, CIBC reorganized its strategic business units (SBUs), carving out its commercial business from its domestic retail and business banking unit, merging the former with wealth management. Hountalas was named group head. At the time, the bank stated the new SBU would better serve “middle- market companies, entrepreneurs, high net-worth individuals and families along with institutional clients across Canada.”

During CIBC’s 2019 first-quarter earnings conference call in February, Victor Dodig, speaking of the bank as a whole, said: “We continue to see the benefits of an interconnected franchise. Strong connectivity across our team has been instrumental in generating new business.”

In CIBC’s wealth-management business, that connectivity means teaming up advisors and private-wealth specialists. A few years ago, CIBC began to locate wealth- management advisors, such as private bankers and estate planning specialists, together with financial advisors in Wood Gundy branches. Today, 23 branches include both investment and wealth-management advisors.

Greater co-operation between brokerage and bank will help spur continued organic growth, suggested Hountalas at the National Bank Financial Markets annual financial services conference in Montreal in March 2019.

“We think there’s more to do in our own channels, in our branches and with our Wood Gundy advisors,” said Hountalas, who suggested that acquisitions in the wealth-management business were not a high priority.

CIBC isn’t the only big Canadian bank seeking to improve connections between its brokerage and its private-wealth businesses.

In January 2019, Bank of Montreal announced it was merging its brokerage business, BMO Nesbitt Burns Inc., with BMO Private Banking to create BMO Private Wealth Canada and Asia.

“We are staying ahead of our clients’ evolving needs and delivering best-in-class advice for high net-worth families,” Joanna Rotenberg, group head of BMO Wealth Management, stated at the time.

In late 2015, Bank of Nova Scotia brought together its wealth-management advisory and private-banking businesses under the umbrella brand of Scotia Wealth Management, looking to offer its clients seamless, integrated wealth services.

Rob Wessel, managing partner with Hamilton Capital Partners Inc. in Toronto, says that increasing regulatory costs and fee compression are challenging the Canadian wealth-management business, affecting asset managers and distributors alike. In finding ways to offer clients wealth-management products and services across business lines, the banks are leveraging their existing strengths to adapt.

“The banks are facing all of these headwinds,” Wessel says. “But because of [the banks’] scale, their brand and because they have massive captive distribution, they are in a much stronger position than the independents [are].”

Richard Nield, senior portfolio manager with Invesco Canada Ltd. in Austin, Tex., agrees that “the brokerage business isn’t as profitable as it used to be.” He adds that aiming to grow the wealth-management business organically, as CIBC has signalled it is doing, rather than through acquisition is a less risky if slower process.

“If you can grow organically, hire good people, poach the odd good advisor from somewhere else and bring them on board, [that’s] definitely more economical,” Nield says.

However, banks attempting to tie their brokerages more closely to their private-wealth businesses risk their advisors resenting a perceived pressure to favour in-house products and services, suggests Charlie Spiring, co-founder and chairman of Wellington-Altus Private Wealth Inc.

“[Banks] can drive earnings in the short run,” Spiring says, “but sooner or later you get a pushback, and that marginal set of increased earnings you got from getting a few more credit cards and a few more lines of credit gets wiped out when you get six brokers deciding to get up and leave.”

Over the long term, the broader trend toward co-operation between the brokerage and bank isn’t positive for either advisor or the firm, Spiring says: “Wealth divisions need to be run by wealth leaders, not bank leaders.”