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A Deep Dive Into Wealth Planning, Client Needs At RBC Wealth Management

Tom Burroughes

6 May 2022

The challenges for wealth planning and engaging with clients at a time of so much uncertainty have seldom been greater. How to help clients frame expectations when inflation is doing a 1970s tribute band act? What happens when business owners want to sell up and make a transfer? And how can financial planning lead the client experience? This news service recently sat down with Nick Ritchie, director of wealth planning, and Annabel Bosman, head of relationship management, at  at its new offices in London. 

To what extent does RBC WM need to help educate and inform their HNW clients? Specifically, what sort of guidance do your clients need and ask for? What advice requirements have surprised you and what were the reactions you expected? 
New clients typically come to us with a specific need in mind: they may be selling a business, returning to the UK after a period overseas or looking to set aside funds for the next generation. We educate by sharing insights into what other clients in similar situations have done. Our clients come expecting constructive challenges designed to highlight opportunities and pitfalls which they may not be thinking of.

Whether a client is worth £10 million, £50 million or £500 million, understanding the level of capital required to satisfy one’s own needs is the foundation to answering so many other questions – what multiple I need for my business exit, how much might I need to remit to the UK once I’m resident, how much can I set aside for my children, grandchildren or my foundation now without compromising my own lifestyle in the near future.

One of the biggest threats to preserving and growing wealth identified by our clients is the impact of taxes on income, gains and inheritance. We therefore expect to spend time educating them about the various allowances available to them or investment opportunities that may compliment their existing asset allocation while achieving greater tax efficiency.

One of the more surprising aspects has been the demand from parents for education aimed at younger generations and future inheritors of wealth. Clients acknowledge that effective estate planning can help alleviate concerns over gifting too much too soon, or gifting while maintaining control, but there is also a huge appetite for wealth managers to improve the effectiveness of these plans by educating the inheriting generation. We support this by hosting learning days with families covering investment management and financial planning using real world examples to demonstrate what good and bad practice looks like for transitioning wealth between generations.

We talked about the “problem-solving” nature of the advice that RBC gives to many of its clients. Can you illustrate what sort of problems arise?
We’re constantly striving to reduce the time and effort clients have to spend on managing their wealth so that they can focus on growing and enjoying it.

One of the biggest challenges is having a consolidated view of their balance sheet, so we take the time to understand their full wealth profile to help them maintain an up-to-date view of their financial position in one place. Taking this one step further is about identifying the purpose of wealth.

Without this approach, clients often come to us with a disparate arrangement of assets, making it difficult to optimise flexibility of withdrawals to meet cashflow demands, or utilise allowances for income and gains. One of the most common problems is duplication of asset allocation – without a single party having oversight, clients will often find themselves doubling up exposure to certain companies, or overlooking a sensible minimum allocation to cash or alternative assets.

If we can identify the purpose behind a particular portion of wealth for example, a portion ringfenced for a client's cashflow needs versus a portion set aside to support legacy, this helps clients take a more structured approach to the right investment strategy, quantum and ownership structure for that portion and its ultimate purpose. Clients feel more in control of their wealth as a result.

In a world of rising inflation, geopolitical wobbles and so forth, how are you working with clients to keep them focused on the medium term, without becoming overly distracted, or missing important tactical shifts? How do you help them achieve the right balance?
It is very easy to get distracted by noise, so the first thing we do is focus on our clients’ strategy and not the market. In other words, it all starts with helping clients have that clear structured approach based on medium to long-term strategic goals, aligned with their values and risk tolerance.

While markets fluctuate, clients’ objectives shouldn’t and having that sensible plan in place means that clients are more prepared for various scenarios that come with investing. When you have a plan you are able to think more clearly, calmly assess and take advantage of any shorter term opportunities that arise.  

Are you noticing any different trends in new clients' sources of wealth? Are clients younger, more diverse in terms of gender, backgrounds, etc?
We have definitely seen a move towards the democratisation of wealth with a broader diversity of wealth creators across social backgrounds, age and gender. Most of our existing book is still made up of retirees. However, by increasing our conversations with the successive generations who will inherit that wealth, we expect to see the age of the book decrease.

Playing to our strengths in dealing with wealth creators and entrepreneurs, we have seen this population get younger. We are also noticing a similar trend with private equity and hedge fund professionals who are typically in their 30s to 50s.

How “international” are your clients? Have you had to refresh your KYC checks and make any changes because of sanctions vs Russians, etc?
We take great pride in our AA- credit rating which means doing the right business with the right people. This means that we take a more cautious approach to risk and, as such, are comfortable with our rigorous screening pre and during onboarding.

How busy are you in creating strategies for estate plans, succession, business transfer and the use of trusts, foundations and other structures? Do you see trends in the structures and approaches people like to use?  
Speaking with our clients, we find that the impact of inheritance tax is the number one concern for preserving wealth. More specifically, clients are concerned about developing an effective estate planning strategy – common concerns include not knowing how much to gift and when or wanting to understand how to gift while retaining an element of control.

The biggest trend we are seeing is towards a diversification of structures used to support estate planning goals. Clients are familiar with the concept of diversifying investments to reduce risk and the same applies to the use of different structures.

Whether it’s a trust, a corporate entity or a foundation, all structures have their own merits and disadvantages when it comes to access, control, taxation, fees, reporting and governance, but some may serve clients better than others in specific situations. A good example is comparing the use of trusts and corporate structures – with entry charges applying on most gifts to trust above the limited nil rate band. Many families continue to opt for a corporate structure if they are transferring larger amounts of wealth and have specific intentions as to who they want to benefit and to what extent, which can be drafted through a shareholder agreement.

At the same time, it may be complimentary to use a trust, either to hold shares in the corporate entity or for a different purpose altogether such as ringfencing funds specifically for grandchildren’s education. The corporate entity will be governed by articles and a memorandum, whereas the trust will be governed by a deed each with differing rules to abide by. Having assets held across both provides some reduction to the impact of legislative risk whereby a change in legislation is favourable to a corporate structure versus a trust or vice versa.

What approaches does RBC adopt in building a pipeline of new clients – how you interact with intermediaries, advisors, etc? Do you have a particular approach to marketing? Do you track net promotor scores, other metrics, for a sign of progress? What is your client retention like? 
We believe that our best introducers are our clients themselves. Although we work closely with intermediaries, our focus is to understand our clients’ ecosystems and ask them for referrals. Researching and understanding who our clients know, whether business partners, families or advisors and asking for qualified introductions has stood us in good stead to build a pipeline.

We regularly undertake short surveys at different points in the client lifecycle to ‘temperature check’ what we’re getting right and where we should be improving.

We met shortly before International Women’s Day, but of course the need to add more female advisors, help HNW women clients, remains a constant area of focus. Please elaborate on the work you do in this area. 
The industry has work to do to improve our standing with female clients, and to attract more women to working within the wealth industry. We know from our research and our earlier work with WealthiHer that women do not feel served or heard by the industry.

From a client perspective, our focus remains on educating our female client base and building their confidence with regards to their finances.

From a recruitment, perspective, our organic growth and development plans for relationship managers means that over time, we become less reliant on having to attract female advisors from a small external pool. Ensuring that we are bringing in young, female talent and developing them is a core part of our strategy

With external hiring, we ensure that we are direct with recruiters about looking for a diverse set of CVs. Then we talk about RBC’s culture and values which resonate well with a female audience. Diversity and inclusion is embedded into our culture. But we believe in doing more to realise opportunities and address challenges. We also believe that we can achieve progress in areas that are under-explored and lead change through ideas and action. Ultimately, we focus on helping people to succeed, making a positive impact on our clients and in the communities where we live and work.

With City National Bank, RBC has an important connection to the world of entertainment, etc. Does the RBC business continue to evolve in the way in which it looks at certain client segments? 
We view the world in terms of two broad client types: business owners and entrepreneurs and corporate executives. This allows us to identify broad buying behaviours, spot trends and provide insight whilst still allowing the latitude to speak with clients across a range of wealth backgrounds. This can also be evolved over time, for example, our recent development of a strategy for PE executives, or connecting our work with the Brit School, and CNB’s prevalence in the space, with the media world.