Though Royal Bank of Canada's year-old wealth management business has announced two acquisitions in the past couple of weeks, it does not plan to rely solely on making deals in order to expand, the unit's top executive said.
The wealth management unit has "no current or imminent plans" to pursue further buyouts, said George Lewis, Royal Bank of Canada's group head of wealth management.
It does, however, plan to open offices in the United States, Canada, Latin America, the Middle East, Europe, and Asia to increase its assets under management, now $230 billion, and its assets under advisement, now $700 billion.
"Apart from acquisition, it really requires very little capital to grow this wealth management business organically," Mr. Lewis said in an interview this week. "We want to take advantage of those opportunities for growth."
So far this year the unit has opened offices in India and Chile, and it plans to open one in Panama this year.
"This is a strong business, and we have an opportunity to bring together wealth managers from different regions in the world," Mr. Lewis said.
He said that the Toronto parent company established the unit to target affluent customers and develop investment management products and services.
Mr. Lewis said that Royal Bank of Canada has two chief goals for the wealth management business, which is also based in Toronto: to extend its lead as the largest provider of wealth and asset management in Canada and to develop additional revenue from its wealth management bsuinesses outside of Canada.
The banking company has been buying wealth managers in the United States and Canada to diversify its revenue, and its U.S. buying continued with the deals announced earlier this month for the Washington brokerage firm Ferris, Baker Watts Inc. and a Vancouver, British Columbia, firm, Phillips, Hager & North Investment Management Ltd.
Mr. Lewis said that Royal Bank of Canada has not set any specific growth targets for the wealth management arm.
"We view this as an attractive area for growth driven by client demand in the United States, Canada, and internationally," Mr. Lewis said. "There is a real demand for wealth management products, and this is an attractive business where we can develop recurring revenues and where revenue and success really goes hand in hand with client success."
Mr. Lewis said that he thinks that there are good opportunities to cross-sell wealth management products through Royal Bank of Canada's branches in Canada and the United States.
Currently, 75% of its wealth management arm's sales in Canada are through Royal Bank of Canada bank branches in the country.
Royal Bank of Canada also sells its products through advisers, broker-dealers, and independent financial planners in Canada.
The Phillips Hager deal, which is expected to close by the end of April, would create one of the largest private-sector asset managers in Canada.
Buying Phillips Hager would give Royal Bank of Canada "market leading" share in the Canadian mutual fund business, 15%, Mr. Lewis said. The deal is expected to be worth more than $1 billion and would be 70% larger than its closest competitor.
"Phillips Hager is a leading independent asset manager in Canada," he said. "It has strong roots here and is an established national asset manager that really enhances our investment management capabilities."
Analysts say that Royal Bank of Canada has developing a strong enough banking operation in the United States to enable it to use the same growth strategy here that has been successfully employed in Canada.
The $629 billion-asset Royal Bank of Canada entered the U.S. market in 2001 by acquiring Centura Banks Inc. of Rocky Mount, N.C. (now RBC Centura Inc., in Raleigh) and has expanded rapidly here. With RBC Centura's $1.7 billion purchase last week of the $8 billion-asset Alabama National BanCorp of Birmingham, Royal Bank of Canada has 430 branches in the United States.
Royal Bank of Canada has already developed a large national full-service brokerage firm in RBC Dain Rauscher Inc. with depth across the United States, Mr. Lewis said. The deal for Ferris, Baker Watts, which is to be rolled into RBC Dain Rauscher, would give Dain Rauscher a bigger profile in the "upper middle eastern" markets around Washington, he said.
Royal Bank of Canada's ultimate goal, he said, is to have a strong international wealth management business so that it can "meet all of … [its] clients' cross-border needs."
