RBC Wealth Management Case Study
"We now offer 40 model portfolios comprised of mutual funds, SMAs and ETFs or a combination of all three. But financial consultants and clients can personalize a portfolio at any level – there is no minimum requirement to customize."
Ann Senne
RBC Wealth Management
Summary:
In 2003, RBC Wealth Management, a subsidiary of Royal Bank of Canada and one of America’s largest full-service securities firms, wanted to expand its separately managed account (SMA) program with a new fee-based offering. The firm had a specific goal for increasing the amount of fee-based business and revenue, as well as the number of financial consultants who were using fee-based products.
RBC Wealth Management decided to implement a UMA program as a means to achieve its corporate fee-based objectives and increase the flexibility of its SMA offerings and began researching alternatives. UMAs combine multiple separate accounts and other financial products such as mutual funds and exchange traded funds (ETFs) into a single portfolio, providing a more robust asset allocation for a client and automating services such as rebalancing and tax management.
RBC Wealth Management’s initial research efforts focused on evaluating a series of pre-packaged, earlier generation UMAs promoted by a number of investment managers. These products combined the portfolios of multiple managers within a single investment management firm in pre-configured asset allocations but did not allow financial consultants to configure custom allocations or use their own preferred investment products.
Solution: Open Architecture
Placemark showed RBC Wealth Management how an open-architecture UMA could be quickly developed. The UMA program the two firms conceived together not only supported integration of the separate account portfolios of unaffiliated managers but also the use of ETFs as well as the 4,000+ mutual funds available to financial consultants through RBC’s mutual fund wrap platform.
Implementation
RBC Wealth Management and Placemark worked together to develop the program for launch in October of 2004. RBC Wealth Management created a custom Web-based advisor Workstation to help its financial consultants create proposals and account opening paperwork for the new program. Placemark integrated its overlay management process into RBC Wealth Management’s portfolio accounting system (CheckFree Security APL) and worked with RBC Wealth Management to educate and recruit its preferred investment managers into the UMA program. RBC Wealth Management also worked with Placemark in developing a custom education and support system to help financial consultants understand the new program and use it to serve the needs of their clients.
Results
After a year of operation, the RBC Wealth Management Total Portfolio program has been a great success with financial consultants and their clients. Over 10 percent of the firm's financial consultants have opened a Total Portfolio account, and many have adopted the program as their default solution. Although the minimum account size is $250,000, the program has successfully been used to serve the needs of more affluent investors with an average account size of $650,000+. The optional tax-management feature has also been widely adopted, allowing financial consultants to offer a new and highly differentiated service to their clients.
"Overall advisor reaction and adoption has been very positive," said Ann Senne, director of investment consulting services at RBC Wealth Management. The UMA program’s flexibility has also allowed RBC Wealth Management to offer its clients with smaller accounts the opportunity to use this new program. Using the same system and technology, clients with just $25,000 can now create a custom or prepackaged portfolio using mutual funds and ETFs. "It’s a perfect introductory program for clients until their assets are large enough to qualify them for separate accounts," said Senne. "We now offer 40 model portfolios comprised of mutual funds, SMAs, ETFs, or a combination of the three. But financial consultants and clients can personalize a portfolio at any level – there is no minimum requirement to customize." RBC Wealth Management and Placemark continue to develop enhancements to RBC Total Portfolio. Planned enhancements include the addition of new product types and features to the UMA program, including a more robust 100 percent mutual funds/ETF offering, as well as active fixed-income, advisor-managed sleeves and alternative investment products.
