Hey there, time traveller!
This article was published 13/4/2018 (678 days ago), so information in it may no longer be current.
Ian Russell, the CEO of the Investment Industry Association of Canada, is an optimist and says he is confident in the excellence and value of the services his member firms offer. But the business is shrinking.
Initial public offerings are down, raising capital in the resource sector is getting harder and he believes lower tax rates in the U.S. will likely funnel off foreign direct investment that might otherwise have come to Canada.
"I worry over the next year about the investment banking business," said Russell, who was in Winnipeg this week meeting with industry officials, regulators and Growth, Enterprise and Trade Minister Blaine Pedersen.
His concerns revolve around the fact the Canadian economy is in a slow growth mode and hence the need for capital formation and investment — the kind of services investment bankers provide their clients — will be less in demand.
Uncertainty in the energy sector — typically a mainstay for Canadian investment bankers because of the capital-intensive nature of the business — as well as trade issues, U.S. tax reform and other concerns are unsettling for the business community, he said.
"I think business spending will fall off. It has been falling off and it will continue to fall off, especially for smaller companies," he said, "So that is going to make it much rougher on the investment banking boutiques."
But Russell says his member firms continue to see growth and profit in wealth management advisory services.
That is coming at at time when new digital technology enterprises in the space, such as robo-advisers Wealthsimple and Nest Wealth, were supposed to be threatening the status quo — namely, the industry’s dependence on personal advisory services as its profit centre.
Some of that has happened, but Russell was adamant the legacy industry’s adoption of technology has been thoughtful and efficient.
He said the general level of competitiveness in the industry and need to provide competitive prices and greater convenience has led to a lot of investment in technology by his 160 member firms (down from 200 in 2010 and likely sinking to 100 in the next few years).
And the wealth management business is growing because of strong demand from the baby boomer generation, which he said still has a few more years of life left in it.
"What is driving this more than anything else is the fact that people recognize that they are going to be more dependent on their portfolios for their retirement savings," he said, citing uncertainties and vulnerabilities in group pension plans in the future.
"They have to take more responsibility into their own hands and they are finding they may need more money than they thought they would need," he said.
That means there is even more demand for personal advisory services.
He said industry research has shown that there is strong client demand for professional advice to make investment decisions and provide long-term financial, estate and tax planning. Further, that demand isn’t just from high net worth clients, but affluent mass-market clients as well.
Russell said some of his members are attaching robo-adviser options onto their suite of services and some of the robo-adviser companies are including personal advisory features in their offerings.
Like every other sector, the investment industry faces changes. But Russell believes his members are up for the challenge.
Martin Cash has been writing a column and business news at the Free Press since 1989. Over those years he’s written through a number of business cycles and the rise and fall (and rise) in fortunes of many local businesses.