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Wealth in Canada: HNW Investors 2017

  • Executive Summary
    • Canadian HNW individuals are concentrated among business owners
    • Key findings
    • Critical success factors
  • Profiling HNW Consumers in Canada
    • Family business is the dominant source of Canadian HNW wealth
      • Dedicated programs targeting female HNW investors are a must
        • Table Figure 1: The Canadian wealth market is more balanced by gender than most of the world
      • Entrepreneurs are also a lucrative target market
        • Table Figure 2: Business owners are the key demographic in Canada's HNW market
        • Table Figure 3: Business owners are given a holistic package of services at RBC Wealth Management
      • Many HNW investors have built their fortunes through property
        • Table Figure 4: A strong run in the property market has boosted the sector as a generator of HNW wealth
    • Expats are a large and important target group in Canada
      • Expats constitute almost 18% of the resident HNW population, making it important for wealth managers to comply with CRS rules
        • Table Figure 5: Expats represent an above-average proportion of the Canadian HNW population
      • Friendly visa conditions encouraged migration of the rich, although this route was closed in 2014
      • Chinese and US individuals represent the bulk of the HNW expat population
        • Table Figure 6: Chinese migrants dominate Hong Kong's HNW expat space
  • HNW Investment Style Preferences
    • Wealth managers must lead with a discretionary offering
      • There is a significant benefit to being the lead wealth manager in Canada
        • Table Figure 7: HNW investors in Canada typically work with only one or two wealth management firms
      • The convenience factor has to feature in every wealth manager's marketing campaign
        • Table Figure 8: A lack of time and expertise drives uptake of financial advice in Canada
      • The majority of HNW wealth is kept in discretionary mandates
        • Table Figure 9: The majority of Canadian HNW wealth is held in discretionary mandates
      • A strong advisory capability is also beneficial in Canada, with 35% of HNW investors exhibiting strong demand
        • Table Figure 10: HNW demand is strongest for advisory and discretionary mandates
    • Lack of time and expertise is driving demand for advisory and discretionary mandates
      • Demand will remain largely flat across the various different mandate types
        • Table Figure 11: On the whole, wealth managers expect demand to remain relatively unchanged across mandates
      • Lack of time and knowledge mean discretionary mandates will maintain their leading position
        • Table Figure 12: Canadian HNW investors are pressed for time and lack knowledge of investments
      • HNW investors' desire for non-financial assets drives self-investment
        • Table Figure 13: Investment in non-financial assets is the leading driver for execution-only asset management
        • Table Figure 14: BMO gives investors low fees and access to expert advisors, opening the robo space up to less
  • Understanding Asset Allocation Trends among HNW Individuals in Canada
    • Canadians' love affair with equities is set to continue
      • Equities dominate the HNW portfolio and are forecast to grow their share further
        • Table Figure 15: HNW investors are heavily exposed to equities, and this will not change in the near future
      • Equities dominate HNW investors' managed wealth
        • Table Figure 16: The typical HNW equity portfolio is dominated by funds
        • Table Figure 17: Capital appreciation opportunities is the leading driver of equity investments
      • Bonds constitute the second-largest asset class, in line with global averages
        • Table Figure 18: HNW investors allocate around a fifth of their portfolio to fixed income products, in line with the global average
        • Table Figure 19: Bond investment is driven by Canadian HNW investors' risk-averse nature
      • Cash and near-cash investments constitute a significantly smaller proportion in Canada
        • Table Figure 20: Only 7.2% of managed HNW wealth is held in cash products
        • Table Figure 21: Already low HNW demand for cash products will decline as investors deploy cash reserves
      • Property constitutes only a minor proportion of the typical HNW portfolio
        • Table Figure 22: Offering REITS is a must in Canada, although ETFs are growing as a source of property exposure
        • Table Figure 23: The expectation of property price appreciation currently drives investment in this space
      • Alternatives represent a significant and growing proportion of the typical HNW portfolio
        • Table Figure 24: Hedge funds dominate Canadian HNW investors' alternative investment portfolios
        • Table Figure 25: Demand for alternatives will increase significantly over the next 12 months
      • Commodity investments are of little interest to HNW clients in Canada
        • Table Figure 26: Appetite for commodity investments is extremely low among Canadian HNW clients
        • Table Figure 27: Demand for commodity investments is set to decline over the next 12 months
  • HNW Product and Service Demand
    • Led by financial planning, HNW investors show strong demand for all planning services
      • Financial planning is at the heart of investors' service demands
      • In-house tax planning is a crucial element of wealth management in Canada
        • Table Figure 28: HNW investors are most drawn to holistic financial planning, although all planning services record
      • BMO provides succession planning services
        • Table Figure 29: BMO targets family business owners concerned about succession, a key demographic in Canada
    • Demand will increase for all planning services, making it a growing element of wealth managers' value proposition
      • Table Figure 30: Already strong HNW demand for financial and pension planning services is forecast to increase modestly
  • Appendix
    • Abbreviations and acronyms
    • Definitions
      • Affluent
      • HNW
      • Liquid assets
      • Mass affluent
    • Methodology
      • GlobalData's 2016 Global Wealth Managers Survey
      • GlobalData's 2015 Global Wealth Managers Survey
      • GlobalData's WealthInsight
      • Exchange rates
        • Table Canadian dollar to US dollar exchange rate, December 31, 2015 and December 31, 2016
    • Bibliography
    • Further reading

Wealth in Canada: HNW Investors 2017

Summary

Canadian HNW individuals are drawn mainly from the ranks of business owners - overwhelmingly those in the family business segment. The most prominent industries from which HNW individuals have amassed wealth are real estate, oil and gas, agriculture, and manufacturing. Expats represent an important part of the Canadian resident HNW population, and the majority of expats have lived in the country for more than three years.

HNW market in Canada is dominated by family business owners and expat clients drawn from Asia Pacific and the US. These busy owners prefer discretionary asset management and have little desire to try other options. As cautious investors they favor classic investments such as equities and bonds, investing little into less liquid assets such as property and commodities. Tax is a major issue for the domestic wealth market and a key driver for booking offshore. There is currently strong and growing demand for financial and pension planning.

Key points include in this report -

  • The majority of HNW individuals in Canada have accumulated their wealth through first-generation entrepreneurship and family businesses.
  • Expats, particularly those from China and the US, represent a large part of the HNW market.
  • Canadian HNW investors heavily favor equities, followed by the fixed income security of bonds.
  • HNW individuals show a strong and enduring preference for discretionary asset management.
  • Led by financial planning, HNW investors show strong demand for all planning services.
HNW demand is particularly pronounced for discretionary mandates. While demand for all types of asset management services is on the rise, discretionary asset management has enduring appeal, and demand will continue to outpace other more hands-on approaches. Wealth managers would do well to highlight their expertise as general financial planners able to maximize returns as investment managers, while also ensuring assets are structured in support of life goals and so that the portfolio is best able to cope with the advanced business cycle.

The report Wealth in Canada: HNW Investors 2017 analyzes the investing preferences and portfolio allocation of HNW Canadians. The report is based on our proprietary Global Wealth Managers Survey.

In depth, this report provides the following analysis -
  • Profiles the average HNW investor in Canada in terms of their demographics and analyzes the expat opportunity.
  • Analyzes which wealth management mandates are preferred among HNW investors in Canada and how demand will develop going forward.
  • Examines the allocation of HNW investors’ portfolios into different asset classes and how this will develop in the future.
  • Analyzes product and service demand among HNW investors in Canada.
Companies mentioned in this report: Scotiabank, RBC, Bank of Montreal, TD CanadaTrust

Scope
  • The majority of HNW individuals in Canada have accumulated their wealth through first-generation entrepreneurship and family businesses.
  • Expats, particularly those from China and the US, represent a large part of the HNW market.
  • Canadian HNW investors heavily favor equities, followed by the fixed income security of bonds.
  • HNW individuals show a strong and enduring preference for discretionary asset management.
  • Led by financial planning, HNW investors show strong demand for all planning services.
Reasons to buy
  • Develop and enhance your client targeting strategies using our data on HNW profiles and sources of wealth.
  • Give your marketing strategies the edge required and capture new clients using insights from our data on HNW investors’ drivers for seeking investment advice vs self-directing.
  • Tailor your investment product portfolio to match current and future demand for different asset classes among HNW individuals.
  • Develop your proposition to match the product and service demand expressed by HNW investors in Canada and react proactively to any forecasted changes.


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