How Canadian wealth firms are fending off robo challenge

Even with increased digitization, there are still gaps in advice that need to be filled

How Canadian wealth firms are fending off robo challenge

Digitization has proven to be a disruptive force in the financial sector, including Canada’s wealth management industry. With the increasing popularity of platform technology over the past decade, there were murmurings of a future where can manage their financial lives without consulting a human for advice.

But it seems that Canadian financial professionals, particularly those in the high-net-worth space, don’t need to be worried for now.

“Robo-advisers certainly have gotten the attention of the millennial generation,” Sean Lasko, senior investment counsellor at Manulife Private Wealth, told International Adviser. “However, whether they can tap into to the high net worth market remains to be seen.”

The challenge for robo advisors — and the opportunity for traditional wealth management firms — arises from affluent clients’ need for more complex financial advice. Robo platforms tend to follow a more cookie-cutter approach, which industry professionals say isn’t enough to satisfy clients at the higher end of the wealth or income spectrum.

“The wealthy and the ultra-wealthy would have reasonably good advice and are willing to pay for it,” said Kyle Richie, senior investment consultant at Richie Group Private Wealth Management.

Tax advice is one area where wealth managers and financial planners can certainly defend their value. Tax changes are arguably the worst threat to wealth preservation, according to a recent RBC Wealth Management survey, with 48% of wealthy Canadians polled tagging it as their biggest concern.

“Many HNW clients are paying high taxes on surplus investment assets,” Tony Maiorino, vice president, director and head of RBC Wealth Management Services, told International Advisor. “[I]n recent years, available strategies, such as income splitting by private business owners, have been curtailed.”

Aside from possible added tax increases resulting from the recent federal election, Maiorino underscored how many HNW clients don’t plan for the large tax liability represented by Canada’s general disposition of assets owned at death, unless they are transferred to a spouse. Also of concern are cross-border tax considerations — particularly those with US citizenship or significant US investments — as well as a disposition of assets in established trusts every 21 years.

And while do-it-yourself investment platforms benefited from an extended bull run in equities following the global financial crisis, that’s set to change as volatility re-enters financial markets.

“The do-it-yourself online investors, more so, have been rotating back to full-service advisers,” said Chad Larson, director of wealth management and portfolio manager at MLD Wealth Management. “As markets become more volatile, complicated products make their way into the market. More than ever, advice is needed.”


Follow WP on FacebookLinkedIn and Twitter