After aggressively expanding over the past two years an elite unit of U.S.-based advisers serving international clients, RBC Wealth Management U.S. has reversed course, leaving nearly 40 brokers scrambling for a new home.
The firm has recently been winding down its international advisory group, which primarily served clients in Latin America. In an announcement last November, parent Royal Bank of Canada said it was exiting the region as it realigned to focus on “priority markets.”
Around that same time, advisers in the International Advisory Group, which comprises RBC brokers for whom international business represents the majority of their revenue, were told they would eventually have to give up their clients and would likely need to move to another firm, multiple sources at the firm said.
As of December 15, advisers were told that they would no longer be able to open new accounts, and that a final deadline for transitioning their business would be announced later.
“It's disappointing to see them sort of do a 180,” said one adviser in the unit, who spoke on condition of anonymity. “I was very excited to come over to RBC.”
International clients have been a tricky market for firms in the U.S. to navigate as anti-money laundering regulations have grown stricter following The Patriot Act and concerns about tax evasion. Barclays, HSBC Holdings PLC and other firms have all pulled back from certain international markets recently.
Anti-money laundering concerns were behind the Royal Bank of Canada's decision as well
according to reports in The Wall Street Journal, although the firm has disagreed with that characterization.
Still, RBC's sudden reversal caught many of the advisers off guard. The firm, which planned to have as many as 100 advisers in the group working with international clients from offices in Miami, New York and San Diego, had added a significant number of internationally-focused advisers and had a strong infrastructure for serving international clients from the U.S.
Last spring, for example, RBC said it had scooped up at least five advisers from Barclays' wealth management group as that firm unwound its own international operations.
“I needed to find a place where I could continue serving [my clients],” said RBC adviser Ileana Platt, speaking in April, just after she joined the firm from Barclays. Around two-thirds of her business was based in Latin America.
The firm had also just built out a new San Diego office in 2012 and began
staffing it with international advisers in 2013.
As a result, the advisers are still sorting through a number of questions as they worry about which firms will continue serving their international clients in the next few years.
Advisers who spoke to
InvestmentNews — all on the condition of anonymity because they did not have permission from the firm to speak publicly — are also concerned about what will happen to their recruiting bonuses, a large portion of their annual revenue provided as an upfront loan that vests over several years provided they remain at the firm.
The advisers said they have been frustrated because nothing definitive has been provided in writing. Some options that have purportedly been considered include a referral program that will allow them to transition their business to Banco Sabadell, a Spanish banking group, they said.
The firm has also reportedly mentioned that it may offer what has been called a “special exit bonus” that would help compensate advisers for the unvested portion of their loans, although that couldn't be confirmed.
To date, the advisers have not been given anything official that could be distributed to clients to detail the move.
“The way they have handled this whole decision to exit — I have been extremely disappointed,” said the same adviser who characterized RBC's move as a “180.”
Some from the international advisory group have already left. Morgan Stanley Wealth Management has hired 11 advisers from RBC so far this year, seven of whom were based in Miami, according to Morgan Stanley spokeswoman Christine Jockle.
For those who remain, the clock continues to tick. Two advisers said they expected that the firm would make an official announcement next week, telling advisers they would have to be done serving clients in Latin America or leave the firm by April 30. They also expected some official client communication to be distributed then.
RBC spokeswoman Jonell Lundquist said in an emailed statement that the firm was committed to helping advisers sort through their decision and would continue to serve their clients during the course of the wind down and transition in order to provide the advisers “with time to make informed and considered decisions.”
“These decisions in no way reflect the quality of our employees or our clients but are the result of a strategic review of our business,” she wrote. “We are committed to providing all impacted employees with support and assistance throughout this time of uncertainty.”
The international unit represents a small portion of the firm's wealth management operations. RBC has more than 2,000 advisers and has been focused on increasing its U.S.-based operations. It announced a
major acquisition of City National Corp. last month.
RBC advisers will also still be allowed to serve clients in Asia and select other markets, sources said. Additionally, advisers with a special international financial adviser designation will still be allowed to serve some Latin American clients and elsewhere. The firm stopped handing out that designation last year, sources said.
