By Richard Chu
Australia’s Macquarie Group has been busy in Canada since the start of the global financial crisis.
In 2009 alone, the global financial firm expanded its investment-banking arm by acquiring Calgary’s Tristone Capital and Toronto’s Blackmont Capital, which was rebranded Macquarie Private Wealth.
The company has spent the past year integrating and expanding its wealth management business, the first expansion of the division outside of Asia. The company has quickly increased its number of advisers by nearly 20% to 157 from 132 at the close of the $93.3 million Blackmont acquisition.
BIV spoke with Peter Maher, the worldwide head of Macquarie’s banking and financial services group, about the state of global finance and the Canadian market during his recent visit with Canadian staff and clients.
In terms of the number of advisers we’ve recruited, we’re running ahead of plan; in terms of the client numbers and client assets, that’s tracking really well.
Canada is a really interesting and important market for us from a private wealth point of view and from an investor products and mortgages point of view. If you look at the development of Macquarie’s footprint in Canada, it’s one of the most diverse footprints of all the major markets we operate in. It’s one of the most complete outside of Australia.
Generally, we’re targeting high-net-worth clients – that’s generally where our brand and proposition works most effectively. In the high-net-worth space, we find Canadians to be relatively sophisticated, but our onus and framework is working with the adviser at the individual adviser level and not having a prescriptive model.
Canadians generally are more open to working with an adviser. Roughly three out of four Canadians use an adviser. The equivalent statistic in Australia is around one in four, one in five.
In terms of similarities, you do have legislated growth. In Australia, we’ve got the compulsory super-annuation system, and here you have a Canadian pension system, so there is a degree of natural growth in the market every year in terms of new funds going into the market. That, again, makes it an attractive market. You’re not just battling for market share in a market that’s declining.
I think inevitably what tends to happen in any downturn in the cycle is, to some degree, clients reassess their risk appetite. There is a certain degree of rear-window risk management. I think the antidote is for our advisers to always be talking about risk, regardless of where you are in the cycle to avoid a reaction that might be an over-reaction.
I think if you look at some of the elements of the market, there is a willingness, similar to that in Australia, to direct equities. We would see Canadian investors as relatively sophisticated. In Australia, there is a high proportion of ownership in direct equities. Resources are more on the minds of both Canadian and Australian investors, and that plays out in a number of ways.
The short answer is probably no. I think it’s a little overused. We do see opportunities. Recently, one of our team members was in town talking about the agriculture thematic. We saw that (trend) some time ago, and we created the Pastoral Fund in Australia. The first clients were global pension funds, who took a long-term perspective on returns and understood the thematic in terms of a growing middle class in Asia.
Our approach is different from some of the other major players in the market. We primarily work through mortgage brokers and we see them as business partners. Our payment structure to brokers is weighted to ongoing trail fees as opposed to up-front commissions. So, we think we’ve created a bias for the broker to work with the client, generally, on a more long-term basis. The business model is designed to help them build a sustainable business and has got a lot of traction. So, we’ve had a very strong year from a mortgages point of view.
We don’t go nuts. It’s interesting to see the level of competition in the Canadian market versus the Australian market. There does appear to be, at any point in time, one of the majors going on a rate drive, but we’re not interested in competing on price. It’s a product, service and partner proposition as opposed to a price-led, volume-based one.
There are other bodies in the marketplace, but ours is one with some credibility with the government. They do find it advantageous to sit down with one group that can talk on behalf of a large number of member companies and get input as opposed to sitting there and getting bombarded with five different industry bodies and 30 individual companies coming to Canberra with different points of view. The feedback we get from government is positive; they see that kind of input as constructive versus adversarial.
I think it potentially simplifies and potentially leads to lower costs for investors.