The wealth management market in Canada

Ashleay: Hello and welcome to the “In Your Interest!” podcast. My name is Ashleay and I'm joined by my colleague Sébastien Mc Mahon. And today, we're happy to receive once again Stephan Bourbonnais, Executive Vice-President of iA Wealth. So, for our second episode of the podcast with Stephan, we decided to focus on the wealth market in Canada and the importance of good advice. So, hi, Stephan! Hi, Sébastien!

Stephan: Hi, Ashleay! Hi, Sébastien! Nice to be with you.

Sébastien: My pleasure to have you again, Stephan.

Ashleay: And Stephan, can you tell us what makes you so passionate about your work and give us an overview of the market?

Stephan: Yeah. Thank you, Ashleay. I get very passionate about, when I look at the market, it's about the size of the prize, right? The Canadian market right now, when we look at the financial wealth across Canada, we're looking at about $6.5 trillion in money that's being invested in the market. This should go up to about $10 trillion by 2030. So, there's a huge opportunity in terms of wealth management in our industry. When you look at the number of advisors, I mean, this is quite surprising. There's 134,000 people in Canada that are providing advice to Canadians. I mean, we thought that the environment with the fee transparency and more information about the advisory landscape would probably reduce the number of advisors, even with the aging population, but we haven't seen that. So, it's been remaining stable over the last couple of years. But in our industry, where we work at mutual fund dealers, in full-service brokerages, about 30% of the advisors are in our space. So, there's a huge opportunity out there. And when you look at the client from a demographic perspective, we know that the affluent market and the high-net-worth market—and high-net-worth market here, we're talking about $1 million+ for a household—are probably the largest and fastest growing segment in the industry. And those are people that probably need the most support, advice and help from a professional advisor. So, I think there's an opportunity for us to be very disruptive in the market right now: a growing market, a challenging environment with the advisory population and obviously client needs that are growing in our industry.

Ashleay: And there's a significant transformation in the wealth market in Canada. Can you tell us a bit more about it?

Stephan: There's a lot of transformation right now in our industry. It's touching clients, it's touching advisors, it's touching dealers and even the regulatory environment. So, there's a lot of things coming in the way. I think what I'm seeing from a client perspective, if we want to go there, I would say the need for advice is at an all-time high, right? I mean, we're getting bombarded by information every day, right? Every ten minutes we get an update on our iPhone. It's getting very, very challenging for people to have a clear head space about what they need to do, how they need to go about it because of that overload of information. So, I think more and more people will be seeking advice to help them achieve what they want to achieve in life. I mean, the role of an advisor is there to help them build, grow, protect and transfer their wealth, and at every stage you need to have a conversation with a professional. I think this is going to be remaining very, very important in the years to come. The other thing we're seeing, and I've talked about the growth from $6.5 trillion to $10 trillion, is, obviously, there's going to be money in motion that is going to come in the next few years, and we're going to see it through intergenerational transfer of wealth. So, it's going to be important for families to involve the beneficiaries, the next generation in that conversation as well, if we want to make sure that we're transferring that wealth in a proper manner. And I've talked about it: we're seeing a shift in the high-net-worth space, in the affluent space, and I think those clients will be looking for more catered services, something that's more personalized, maybe, than what we're seeing right now. So those are going to be some of the key trends that I think we're going to be seeing in the next few years in terms of client expectations.

Sébastien: And if we put ourselves in the shoes of clients because we're all, you know, clients ourselves, we're all investors, we all have to build our wealth also. As you mentioned, the information or disinformation that's out there, but, you know, a thing that we've been discussing a lot in previous episodes of this podcast is that technology brings the ability to commit mistakes, things that can be avoided if you have a good advisor by your side. Like we always say, you know, it's easy on a Tuesday morning, you see an investment that goes wrong or there's some volatility in the markets, and then you just do something that you're going to regret a few days after. So, if you're in the shoes of the client, there's the information, there's the access to technology. But the other trends that are touching clients, if you could maybe enlighten us on that.

Stephan: Well, there's an ongoing demand for integrated platforms, right? So, people are going to be looking at “I want to have access to my data when and how I want it.” And I think we'll need to adjust. I think people are going to be looking for more products and solutions that are tailored to their specific needs, and that's also an area that we're going to need to work on. So, I really see it as being a high touch point, high personalization environment that is now being generated from the client perspective. And I think this is where, Sébastien, the digital aspect of it will help advisors to be able to cater to those needs.

Sébastien: Okay.

Ashleay: And what about from the advisors’ view?

Stephan: Yeah. Advisors. There's a few key trends that we're seeing there. I mean obviously they need to adapt to the clients’ needs. So, we're seeing a shift to more of a holistic planning and managed solution. Definitely a predominant trend that we're seeing right now. I think the evolution of the advisory space went from “I used to be an investment manager, now I’m a wealth manager”, and now they're becoming wealth coaches almost. So, it's to talk about more than just the investment portfolio, it's to talk about everything that is impacting clients and prospects every day.

Sébastien: Influencer kind of role.

Stephan: Influencer kind of role. So, this is going to be very important. People want to talk to one person to solve for their needs. So, I think the industry will evolve from that perspective. And I guess that I think that that demand from a best-in-class experience is also making advisors change a little bit how they are bringing that value advice to their clients. We're seeing teams becoming more and more important, where we're able to bring more skills within the team to obviously answer to those tailored needs that our clients are looking for.

Sébastien: In the previous episode we did, you were talking about coaching and mentoring, but an advisor towards a client has that role of being a coach or a mentor. Just the savings habits, you know, how to approach their investments, knowing yourself, knowing your needs. So, it's very much a coach and coachee kind of relationship.

Stephan: Those that are successful, this is where they're able to go with their client. So, you need to be able to have that connection with the client and have a conversation that you bring to another level with them.

Ashleay: And what do you believe is the power of good advice?

Stephan: I'm the best client for advice! To be honest, everything I do in my life, I do it through advice. If I buy a car, I've got somebody that's there to assist me to find the right car. If we do home renovation, we're going to leverage the expertise of people to help us create the plan and make the right choices. I think once a year, you know, I'll hire a personal trainer to help me evaluate in terms of eating habits, sleeping habits, training, what I do. So, I mean, I think for some people they see advice as being an extra cost or an extra expense. I actually see it as a way to invest money and time and to make sure that you're staying on track and you're achieving your goals. You cannot be an expert at everything, and this is where you need to lean on professionals. And I think one area where we see it has a huge impact, it's in the financial services.

Ashleay: Yeah.

Stephan: I'm a big fan of behavioural finance because humans, we are emotional about money. And when emotion gets in the way of making sound financial decisions, it's a risky value proposition. And this is where the advisor, from studies that we've seen, could add up to 2 to 3% to a client on a yearly basis by being that gatekeeper, that coach that has the understanding of who the client is, but also understands what could be the client's, kind of, blind spots, and can help them navigate through all the noise that we have. So, I think this is what good advice brings is that discipline, rigor and focus on what we need to achieve and helping you control the emotional aspect of dealing with money.

Sébastien: And, you know, one of the buzzwords—artificial intelligence and big data. So how do you address all of that? What do you think is the right place for all of this stuff?

Stephan: We're very excited about it because I think the industry—I mean, we've been talking about providing personalized service to clients—I don't think the industry has been able to go there. I think we've segmented our industry based on the size of your portfolio, but not on based on your values, beliefs and what you want to achieve. And I think this is where AI will help us get to. So, I don't think AI will replace the advisor. I think it's going to help advisors scan, process, search and compile all of the information that they have. But at the end of the day, people will need assistance. They will need somebody that's there to think it through. And I think you'll need somebody that's going to be able to translate that information and guide you. So, I'd like to see it as being more of digital assistance than digital advice. I think this is what AI will help us with. So it won't replace humans. It will create efficiency in terms of what we do, but the human part will remain front and centre, and it's just going to help people, I think, to cater to a more personalized offering.

Sébastien: Yeah. Like the augmented intelligence rather than artificial intelligence approach.

Stephan: Exactly.

Ashleay: And Stephan, what makes a great advisor?

Stephan: Well, we've talked about the human piece, right? And I think this is what we need to lead on. I think a lot of the things that we do could be commoditized. I think, you know, gathering the information because of AI will become a commodity. But if you have that information about your client, this is where you'll be able to make a difference, right? So, if you understand their family situation, the work they're doing right now, what they’re passionate about or excites them, and what are their goals, their dreams, this is where you can make an impact. So, for me, it's about, you know, making it personal. Asking the right question. The difficult one. It's  building trust with your client. I mean, we need to make sure that we're putting clients’ best interests consistently first, when we're having any interaction. But at the end of the day, it's developing that meaningful relationship, making sure we've got a plan, making sure we're sticking to the plan, and it's a plan that's being shared by the client and by the advisor, and we have a clear understanding of where we need to go. And I think the pivot now is how do we bring digital into that equation to make it an even stronger value proposition.

Ashleay: Perfect. Well, thank you so much, Stephan, for taking part in not one but two episodes of our podcast. It was a pleasure hearing you talk about the market and the importance of advice. So, thank you and thanks, Sébastien.

Stephan: Thanks to both of you. Happy to be able to be joining you guys today.

Sébastien: Yeah. It was a joy to host you here. Thank you very much.

Ashleay: And thanks to all our listeners and we will see you next week. Loved this podcast? Want to know more about economic news? Follow our “In Your Interest!” podcast, available on all platforms, visit the economic news page on ia.ca or follow us on social media.