Watching the global brokers roll out results, the rationale behind Canadian Imperial Bank of Commerce's recent purchase of a U.S. broker network starts to become pretty clear.
Canada's status as a haven is steadily less true in wealth management, while the rest of the world looks like a more fun place to play.
While wealth management is a tough business in Canada right now, companies like Morgan Stanley are chalking up significant revenue growth. Morgan Stanley reported net revenue in its global money management business rose 4.4 per cent in the first quarter from the fourth. J.P. Morgan's asset management profit rose 26 per cent from a year ago and 0.8 per cent from the fourth quarter.
If you are based in Canada, what you want is a global footprint, as demonstrated by Royal Bank of Canada. The company reported a 6.3 per cent increase in its wealth-management earnings in the first quarter. All of that came from global asset management and the business of managing money for retail investors in the U.S. and abroad. Revenue from Canadian wealth management slipped. CIBC, by comparison, has a much more Canada-focused wealth management business right now, and revenue was up more like 2.8 per cent.
The big integrated firms in Canada that have large retail wealth management networks, a group that includes the bank-owned securities dealers and large independents such as Canaccord Financial, saw commission revenue decline 8.3 per cent compared to the year before, offset by fee income that rose 9.6 per cent (albeit off a smaller base). Smaller retail firms saw commission revenue decline 20 per cent last year, and fees declined 16 per cent.
(Boyd Erman is a Globe and Mail Reporter & Streetwise Columnist.)
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