John Taft heads RBC Wealth Management in the United States and recently stepped down as chairman of SIFMA, the financial-services lobbying group. Based in Minneapolis, he has worked in the industry since 1981 and recently spoke with Research about challenges confronting both the industry and the firm he leads.
RBC earned the top spot in the 2011 U.S. Full Service Investor Satisfaction Study announced by J.D. Power & Associates earlier this year. It hired John Moran, formerly of Morgan Stanley, to lead its operations in the greater New York area — which includes about 60 advisors and 45 employees in late November.
How has RBC been building its wealth-management force in the United States?
We said publicly in ‘08 and ‘09 that we had tremendous growth, like the other non-wirehouse firms, and added over 300 advisors from recruiting alone and doubled that number with acquisitions. Things were changing dramatically then, and we benefitted from the dislocation [of advisors from the wirehouses].
How has RBC’s growth strategy changed recently?
In 2010, 2011 and 2012, our focus is on adjusting growth and helping advisors join the platform based on their business and productivity. This is very much our top focus, as we’ve gotten back to normal recruiting activity that emphasizes attracting high-quality FAs whose perspective on the business and whose business model matches that of our firm.
As part of this focus on productivity, some lower-end producers have left the firm, namely those in the lower two-quintiles. We also put in a coaching program, FA Forward. And, in 2011, we reduced the compensation of advisors whose production is under $300,000.
We married this approach with the continued recruiting of advisors with productivity equal to or greater than the firm’s current goals. There’s no change to this strategy in 2012.
What other goals for RBC can you share?
One of our other targets, or a stretch goal, is to get production (or GDC) per rep to $1 million. That is currently the average revenue figure for our sister firm in Canada, Dominion Securities, and we know it can be done. They have 1,300 advisors. We are importing such goals and will continue to work with the best practices of the Canadian firm.
Last year, we embarked on a global initiative and effort to restructure the wealth-management platform globally by bringing more capabilities to it and doing more with the resources within it. This includes the intellectual and other capabilities of RBC Global, which can be accessed by clients everywhere in our system. If, for example, a client wants to set up account or international trust in the Channel Islands or Geneva in a certain currency, we can offer such services.
What is the size of your advisor force in the United States and the scope of your RIA business?
We’re down a bit to 2,029 as of October vs. about 2,100 two years ago for reasons I’ve explained earlier.
About one-third of our revenues come from fee-based activities. We are an RIA, and a lot of our business is advisory in nature
Two years ago, we looked at the trend of the growing RIA numbers and the decreasing wirehouse brokers. We saw that the market share of these two segments was changing, and the super-regional firms’ share was growing.
We acquired the RIA custodial and service business of JPMorgan as a product extension for our correspondent-clearing business, which is the fifth largest in the country. Today, about 170 firms clear through us. We have planted a flag in the space for our wealth-management platform and capability to service independent RIAs.
How does this work help RBC’s competitive advantage?
Our primary business is that of a full-service wealth manager as delivered through our advisors and their private-client focus. The RIA custodial work and correspondent- clearing work allows us to spread the cost of the investments we’re making in the wealth platform across a broader revenue base.
RIAs are independent and are passionate about serving clients. They give us a window on tools and best practices that can be used in the marketplace — ways that we can connect more with trends in the industry and that we can import onto our platform.
How is RBC positioning itself vs. rivals?
The RBC culture is that of a small firm with a flat hierarchy. The entire firm knows each of the advisors, who know each other. We are all linked to the global wealth-management platform and to the products, services and other capabilities of one of the largest and best-managed financial institutions in the world.
This combination of a small firm with global capabilities, including capital and one of the best credit ratings in the world, are very important brand attributes. There’s nothing else like this combination in the U.S., which makes us extremely attractive to the best advisors and clients.
What are you current thoughts on regulatory reform?
Reform is the single largest issue facing all areas of the financial-services business. There’s no question about it. And that doesn’t mean that reform efforts aren’t needed or potentially positive. It depends on how the rules are written, and whether or not we can make the system better for all or without any negative or unintended consequences.
We only have [finalized language] on about 40 or so of the 235-plus rules in the Dodd-Frank legislation. We really do not know what the final rules are going to look like, especially with regards to wealth management.
These are areas of concern for the industry, and we are doing all we can to work constructively with regulators to get things moving in the right way in terms of investor protection that won’t limit choices of products and services. We believe everyone can win, which is what we hope for and are working for today. •