Canadian advisers strive to avoid bank dominance

OTTAWA — Combating the concentration of financial muscle among Canada’s Big Six banks, the nation’s financial advisers are showing modest success in their competitive solution — the creation of their own banks.
MAY 07, 2007
OTTAWA — Combating the concentration of financial muscle among Canada’s Big Six banks, the nation’s financial advisers are showing modest success in their competitive solution — the creation of their own banks. Last September, for example, Dundee Financial Group, a division of Toronto-based Dundee Wealth Management Inc. launched the Dundee Bank of Canada. The bank seems to be doing fine. Last month, Dundee Wealth Management Inc. reported total revenue-earning fiduciary assets of $55.2 billion (U.S.) and bank client deposits of $1.35 billion, as of the end of the first quarter. Another twist on banking for advisers is Waterloo, Ontario-based Manulife Bank of Canada, established by Manulife Financial Corp. of Toronto in 1993 as the first federally regulated bank to be opened by a life insurance company following Canada’s financial reform legislation of 1992. Manulife Bank was created to support the sale of the parent’s core products and to assist in-house financial advisers. Manulife Bank is aggressive. It announced last month that it is willing to take advantage of new federal legislation that came into effect April 20 lowering the minimum down payment requirement on a residential mortgage to 20% from 25%. “This is great news for prospective homeowners,” said Roman Fedchyshyn, the bank’s president and chief executive. “It will mean more money in the pockets of our customers, and that is what Manulife Bank is all about,” he said. Manulife Bank now manages more than $7 billion in assets and has grown to become Canada’s eighth-largest domestic bank. “We provide all of our products to clients through a partnership with financial advisers across Canada,” Mr. Fedchyshyn said. “Our philosophy is that banking is a cornerstone in a person’s overall financial plan and that advisers can assist clients in integrating banking into their portfolio,” he said. Under Canadian law, bank startups can be 100% owned by individuals or enterprises until they reach $2.7 billion in assets. Owners must then divest as the financial institution grows. Large banks continue to dominate the Canadian financial landscape. In March, Canadian mutual fund sales jumped at least 36%, to about $4.5 billion, as Royal Bank of Canada and Toronto-Dominion Bank, both of Toronto, attracted more than a quarter of all fund investments, according to a report by the Toronto-based Investment Funds Institute of Canada. Winnipeg, Manitoba-based IGM Financial Inc. topped all non-bank fund sellers, posting sales of about $439 million.

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