Over the past several decades, the Canadian wealth management industry has enjoyed steady growth in assets under management (AUM). In the last decade in particular, Canadian wealth management firms witnessed consolidation in this industry that led to a smaller number of players and limited foreign competition. After the financial crisis of 2008, Canadian banks invested in their wealth management businesses to improve profitability as a consequence of slower growth in lending, deal making and exiting from certain businesses due to regulatory requirements. Despite the growth witnessed, Canadian wealth managers must brace themselves for several trends that will impact their industry:
Some Canadian wealth management firms see the trends as opportunities, while others have taken a wait-and-see approach. But in order to benefit from the opportunities these trends present, wealth management firms need to step out of their comfort zones and evolve their operating and interaction models to stay a step ahead. If not, these new generations of investors will quickly flock to independent, disruptive digital wealth management platforms that provide tailored and personalized advice geared to this new audience.
Thus far, most wealth managers have tackled recent challenges tactically and with fragmented strategies. They have lacked a consistent long-term vision and a differentiated business strategy that focuses on the changing client. To address these trends, wealth managers have to rethink their value proposition, user experience, business and operating models, and digital innovations. Established wealth managers must embrace flexibility to adapt to industry changes or risk losing market share.