TD bets on wealthy clients to drive parent’s profits

Toronto-Dominion Bank is ramping up its U.S. asset management business while doubling the number of financial advisers for wealthy American clients in a bid to accelerate profit.

TD is seeking to build on its March takeover of money manager Epoch Investment Partners Inc., while increasing wealth management offerings for its bank customers from Florida to Maine, said Leo Salom, executive vice president of wealth management.

Efforts include doubling the number of private-wealth advisers to 300 in the next two and a half years, he said.

“We’re really excited about the U.S. expansion,” Mr. Salom said. “Over the next three or four years, that part of the business will be a significant contributor to our growth.”

Canadian banks are bracing for a lending slowdown as over-indebted consumers slow their borrowing and demand for mortgages slips amid the prospect of rising interest rates. Lenders are left looking for growth in other areas, such as providing customers investment advice and financial planning, as well as managing their money — all for a fee.

“Firms are looking at other fee-based opportunities, and the wealth business provides that added revenue source,” said Mr. Salom, who took over July 1.

“You’ve got an aging demographic that’s increasingly more affluent, that’s struggling with historically low interest rates,” he said. “The need for retirement advice, long-term planning advice, has never been greater.”

U.S. banks including JPMorgan Chase & Co., Morgan Stanley and Wells Fargo & Co. also have put greater emphasis on their asset and wealth management businesses as regulators step up capital requirements. Under the 2010 Dodd-Frank law, banks have to hold more capital against risky activities, such as trading, beginning next year.

COMPANY’S EMPIRE

TD’s wealth management division includes its TD Direct Investing online brokerage, an advice business that is made up of the TD Waterhouse full-service brokerage and private bank, and an asset management business, with about $75 billion in mutual fund assets. The firm also has a 42% stake in U.S. discount-brokerage firm TD Ameritrade Holding Corp.

TD posted record profit from wealth management in the quarter ended July 31, with earnings from its wealth business, including TD Ameritrade, climbing 19% to $240 million from a year earlier. By comparison, Canadian personal and commercial banking rose 12% to $956 million.

“I would expect wealth to be able to grow at a slightly faster pace than some of the more traditional retail channels,” Mr. Salom said. “I would expect that number to inch up.”

Mr. Salom, 47, took over TD’s wealth management business from Mike Pedersen, who became group head of U.S. banking July 1 as part of a management shuffle. Mr. Salom reports to Tim Hockey, who also oversees Canadian banking.

Canada will provide a shorter-term boost to profits as TD seeks to tap existing banking customers with financial advice and products to boost market share, providing a bridge to a longer-term U.S. growth strategy.

“For wealth management in Canada, TD is very well-known,” said Ian Nakamoto, director of research at MacDougall MacDougall & MacTier Inc. “The awareness of brand name in the U.S. definitely has risen a fair bit with the number of branches there. I would say to the average U.S. consumer, they still have some way to go.”

In the United States, the $647 million Epoch acquisition, which added about $25 billion in assets, gives the division more capabilities in equities as markets are beginning to shift from bonds to stocks amid rising interest rates, Mr. Salom said.

“Epoch puts us in a very competitive position to take advantage of the shift we’re seeing in the marketplace,” he said. “We’re looking to continue to expand and evolve our asset management business, and the Epoch acquisition is a good example of adding significant capabilities on that front.”

Related Topics: TD Ameritrade Institutional, Wells Fargo & Co.