RBCs Taft Warns of Pitfalls of Cross-Selling
Any investment firm now has to be able to address digital forms of financial advice, says John Taft, CEO of RBC Wealth Management-U.S.
That's why RBC is exploring all options in terms of adding a digital advice component to its platform, he adds. But that doesn't mean it will take over the business; rather it is another channel for clients who want it, he says.
What firms should still remain focused on, regardless of delivery method, is the services rendered to clients, Taft says, as that is where the client, especially the high-net-worth client, gains the most value.
There too has been innovation in terms of the services and products that wealth managers are offering to clients, and Taft warns against a dilution of service in the pursuit of product promotion.
WHAT’S YOUR PERSPECTIVE ON DIGITAL DISRUPTION IN THE WEALTH MANAGEMENT INDUSTRY?
It’s a very real phenomenon. But I think a lot of the commentary exaggerates the effect that it’s going to have. Not long ago, there was a lot being written about the effect online brokerages were going to have on the brokerage industry. Yes, they had an effect, but it wasn’t as extreme of an effect as many people thought it would be.
So I do think it’s going to change the nature of our industry, but not to the degree where individual advisors and the relationships they have with their clients are going away.
IS RBC EMBRACING THE TECH TREND?
Technology is a major area of investment for us. At least every year we spend more on technology than we did the year before, and that’s probably true of all of our competitors.
Advisor productivity, client experience and business efficiency — all of those are driven by technology today, not to mention regulatory developments.
Increasingly, regulators are demanding that we do things that we weren’t required to do before, and that requires systems and training, and it requires new policy and procedures, and technology is part of that, too. Technology is ubiquitous. It’s a bigger part of our business today than it has ever been.
HOW DOES THE ACQUISITION OF CITY NATIONAL FIT INTO RBC?
If you look at RBC’s presence in the U.S., we have wealth management, we have capital markets, both of which are important scaled businesses for RBC in the U.S. What we’ve lacked, and what City National represents, is a true private banking capability to make jumbo mortgage loans, personal lines of credit and commercial lines of credit to our clients.
Meeting the credit needs of our clients is a critical piece of being a comprehensive wealth manager and being the value-added advisor that a digital robo advisor can’t be.
Culturally, it is a very good fit from what I’ve seen. We haven’t had a lot of interaction with them, but they are focused on the high-net-worth clients, and we are focused on high-net-worth clients.
AT ONE POINT THERE WAS A VERY DISTINCT WALL BETWEEN PRIVATE BANKING AND BROKERAGES, AND IT SEEMS TO BE DISAPPEARING.
The primary physician model is really what you’re talking about in the wealth management industry; it’s called a primary relationship manager. It can be a private banker, it can be a financial advisor, but the point is, whoever they are, they have to be able to address 360-degree needs of their clients.
And that’s why you’re seeing these business models converge and why, as you say, the walls have come down in the wealth management and private banking industry over the years so that it seems like everybody is doing everything, or trying to do everything for their clients.
ARE THERE ANY RISKS IN THIS INTERMIXING OF SERVICE, THOUGH?
Definitely. You don’t want to do something so poorly that you jeopardize the relationships you have built up with your clients, so that is critical.
I’m going to leave you with one thought: The fundamental principle in our industry needs to be, “What is best for the client?” I do not like the word cross-sell, because it quantitates this notion that I didn’t have a mortgage product yesterday, I have a mortgage product today, so I am going to sell that mortgage product to my clients. Any time you get into a sell, whether it’s cross- or direct-sell mode, you get into trouble. Our industry gets into trouble, and clients aren’t well served.
As firms move into holistic wealth management, there are a bunch of challenges that go along with that. If you don’t do it well, then clients are either going to be dissatisfied or disadvantaged by unsuitable activities, so that’s a huge risk.