RBC, City National deal marries bank and brokerage

The $5.4 billion transaction could have RBC's regional wealth management business looking more like a wirehouse than a regional firm

Jan 23, 2015 @ 12:29 pm

By Mason Braswell

In what is one of the largest deals among so-called regional wealth management firms since Raymond James Financial Services Inc.'s $1.2 billion purchase of Morgan Keegan & Co. in 2012, Royal Bank of Canada is buying Los Angeles-based City National Corp. and the approximately $60 billion in assets under management of its wealth unit.

The deal, which is priced at around $5.4 billion, partners RBC's retail bank and wealth management unit, which has around $260 billion in AUM, with a high-net-worth private banking operation. It creates an even stronger tie between banking and wealth management and a firm that has the capabilities and scale that more closely resembles a Bank of America Merrill Lynch than a regional firm.

“We're now marrying a premier wealth management business with a premier private banking and commercial banking business and will be creating something that is unique in the marketplace,” said John Taft, chief executive of RBC Wealth Management, in an interview. “It fills a key product and capability need on our wealth management platform, and I think moves us permanently out of the regional brokerage firm category.”

Mr. Taft will maintain his role as head of RBC Wealth Management-U.S., but he will report to City National's chairman and CEO, Russell Goldsmith, who will lead the combined wealth management business and report to David McKay, president and CEO of RBC.

Executives have yet to finalize details around branding for the units, according to Mr. Taft, who did say City National would not be called RBC Wealth Management.

City National, which cleared through National Financial Services, a division of Fidelity Investments, will also now likely clear through RBC.

CULTURE CLASH?

While bank and brokerage partnerships have not always been a perfect match among veteran advisers, who can be averse to cross-selling or sending clients to bank representatives, this deal is not likely to be viewed antagonistically by veteran RBC brokers, according to Alois Pirker, a research director at Aite Group's wealth management consulting practice.

Some wirehouse brokers who started at regional firms like A.G. Edwards Inc., which is now part of Wells Fargo Advisors, have jumped to regional firms after 2008-09, saying they were seeking a smaller-firm culture and less banking influence.

City National is bringing more private banking products and services to the equation, Mr. Pirker said. The approach will not be about pushing retail banking products, such as credit cards or certificates of deposits, on ultrawealthy clients.

“You really have a great match between ... the client base that City National has and the target zone for RBC,” Mr. Pirker said. “From a positioning perspective, it could be a very fruitful partnership and much less of a culture clash than big wirehouse firms.”

CLIENT RELATIONSHIPS

The private banking model that City National brings is also more about the client relationship than product sales, Mr. Pirker said. In a famous instance of the kind of services a private bank offers, City National is known for having lent Frank Sinatra cash to pay a ransom when his son was kidnapped in 1963.

City National is also the parent company of a number of investment adviser subsidiaries, such as Washington D.C.-based Convergent Wealth Advisors, which had around $8.4 billion in assets as of September. It was bought by City National in 2007. Convergent has been under scrutiny since its chief executive was found dead of an apparent suicide and questions emerged about an outside fund he had been managing and what may have happened to millions of dollars in the fund.

Mr. Taft said no decisions have been made as to what will happen with those affiliate relationships, such as Convergent.

“[Mr. Goldsmith] will be making those decisions after the closings,” he said. “What happens to those subsidiaries is to be decided.”

Doug Wolford, chief executive officer of Convergent, said it will be “business as usual” for a while, since the deal is not expected to close until later this year.

“Longer term, I think there is an opportunity to expand Convergent's footprint across North America,” Mr. Wolford said in an email. “We will continue to provide open architecture, holistic wealth advice and expect to have even broader options for clients going forward.”

While many of the details are still being worked out, “it will be interesting to watch it unfold,” Mr. Pirker said.

Either way, it is likely a sign that the brokerage industry will see more large deals this year.

“It's a good kick off to the year,” Mr. Pirker added.

0
Comments

What do you think?

View comments

Recommended for you

B-D Data Center

Use InvestmentNews' B-D Data Center to find exclusive information and intelligence about the independent broker-dealer industry.

Rank Broker-dealers by

Upcoming Event

Apr 30

Conference

Retirement Income Summit

Join InvestmentNews at the 12th annual Retirement Income Summit - the industry's premier retirement planning conference.Much has changed - and much remains to be learned. Attend and discuss how the future is full of opportunity for ... Learn more

Featured video

Events

How to differentiate from the competition

How does Black Diamond's technology play a role in allowing an advisor firm to differentiate itself from the competition? Bob Conchiglia joins us for a discussion.

Latest news & opinion

Senate committee approves tax plan but full passage not assured

Several Republican senators expressed reservations about the bill, and the GOP cannot afford too many defections.

House passes tax bill, focus turns to Senate

Tax reform legislation expected to have more of a challenge in upper chamber.

SEC enforcement of advisers drops in Trump era

The agency pursued 82 cases against advisers and firms in fiscal year 2017, down from 98 the previous year.

PIABA accuses Finra of conflicts of interest

Public Investors Arbitration Bar Association report slams self-regulator over its picks for board of governors.

Betterment launches 'free' charitable-giving platform

Robo-software provider lets investors donate directly from their accounts, and will not charge charities with less than $1 million on the platform.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print