RBC luring away wealth management teams from much bigger rivals in U.S. recruitment push

TORONTO — Royal Bank of Canada’s U.S. wealth management unit has been luring teams managing bigger amounts of assets from much larger rivals, driving a surge in revenue from the new recruits and helping it outperform others in the industry.

As recently as August, the U.S. unit of Canada’s biggest lender hired a team of four advisors from Morgan Stanley who managed US$675 million in client assets, building on additions from other competitors including AllianceBernstein, Wells Fargo, Bank of America’s Merrill Lynch and UBS , according to RBC Wealth Management.

RBC’s recruitment push helped lift average revenue per new advisor, or production, by 43 per cent year-to-date through July from the comparable year-earlier period, even as the number of hires remained flat, according to internal data from its U.S. wealth management unit that was shared exclusively with Reuters.

“The U.S. is a great opportunity for the enterprise, given it is 10 to 11 times bigger than the Canadian market,” Michael Armstrong, the chief executive of RBC’S U.S. wealth management unit, said in an interview.

“The key premise behind recruiting for us is that it’s really important that we try to reach scale in our business,” he said, adding that the business doesn’t have specific growth targets.

Across North America, wealth management companies saw average annual growth of 5 per cent in revenue per advisor between 2015 and 2019, a period that culminated in record assets and revenues, according to a June report from McKinsey’s PriceMetrix unit. Data for 2020 was not yet available.

The key premise behind recruiting for us is that it’s really important that we try to reach scale in our business

MICHAEL ARMSTRONG

RBC has made inroads into U.S. wealth management since its acquisition of Minneapolis-based brokerage and investment bank Dain Rauscher Wessels nearly two decades ago, which it combined with City National following its 2015 acquisition.

Overall U.S. wealth management client assets grew to US$30.5 trillion in 2018, up 64 per cent from 2010, according to a January report from McKinsey.

Stephen Biggar, an analyst at Argus Research, attributed RBC’s success in drawing teams from more entrenched players in the U.S. wealth management arena to its willingness to invest in growth.

“In some cases, there’s a bit of frustration with some of the larger firms,” he said. “If you want to grow a certain business, you have to spend … RBC has gotten the return on that investment. That’s why they’ve not been in a cost-cutting mood.”