Wealth in Canada: Sizing the Market Opportunity; Analyzing the wealth market in the Great White North

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While the commodities market bust has not forced the country to contract, it did dent growth in retail savings and investment in 2015. 2016 should see a resurgence in Canadians’ asset appreciation, but a tepid recovery in oil and gas along with substantial household debt loads will see slower growth over the rest of the forecast period.

Scope

• The affluent population in Canada will consistently expand over the forecast period, with growth strongest among the $10m+ category.

• Over half of onshore liquid retail savings and investments is in the hands of the mass affluent and thus exposed to credit risk, as these investors have often taken on considerable mortgage debt.

• After dragging down growth in retail wealth in 2015, equity assets will boost growth in 2016 along with mutual funds.

• While Canadians do not offshore substantial portions of their wealth, investing in China is a strong attraction – unsurprising given Canada’s strong links to the country.

Reasons to Buy

Benchmark your share of the Canadian wealth market against the current market size.

Forecast your future growth prospects using our projections for the market to 2019.

Identify your most promising client segment by analyzing penetration of affluent individuals in Canada.

Evaluate your HNW proposition by understanding how FATCA and CRS affect your HNW clients.

Review your offshore strategy by learning HNW motivations for offshore investments and their preferred booking centers.

TD Canada Trust
Bank of Montreal
Bank of Nova Scotia
WealthBar
Wealth simple
RBC Financial

Table of Contents

EXECUTIVE SUMMARY

Growth in Canadian wealth will be less pronounced after a rebound in 2016

Key findings

Critical success factors

SIZING AND FORECASTING THE CANADIAN WEALTH MARKET

Affluent individuals in Canada account for roughly 28% of the adult population

Increasingly favorable domestic conditions will drive further expansion in onshore wealth

Growth in the number of HNW individuals will be strongest among those with more than $10m in assets

The bulk of Canada's onshore assets are concentrated in the hands of the mass affluent

HNW portfolios above $10m in AUM will experience the highest growth

DRIVERS OF GROWTH IN THE CANADIAN WEALTH MARKET

Growth has dipped, but stimulus and higher oil prices should see a rebound

The Canadian retail savings and investments market will perk up in 2016 before a more steady expansion resumes

Deposits and mutual funds form the bulk of the retail wealth market

Equities will provide some much-needed firepower behind the retail investment market value growth over the next two years

Deposit growth will remain moderate as interest rates languish near zero

As cautious investors, Canadians have been drawn to solid bank accounts and other cash products

Interest rates will ensure deposit growth remains modest

The retail bond market will reach new heights, driven by stronger appetite and ample supply

The drag from the primary resource sector will diminish, allowing equity and mutual funds to take flight

The S&P TSX Composite has largely moved sideways since its peak before the financial crisis

Both equities and mutual funds advance much more in value when the market is rising

Investors in Canada have used mutual funds to buy an already diversified portfolio

HNW INVESTMENT PREFERENCES

HNW individuals allocate

15.6% of their investible assets outside of traditional liquid investments

Hedge funds are the most popular HNW alternative asset

Canadian HNW investors have offshored a substantial amount of their portfolio

Offshore wealth management centers are managing a significant amount of Canadian wealth

Tax issues are the main driver for offshoring wealth, raising the stakes for many investors

The large number of expats mean China ranks higher than the US as a booking center

Canada has pursued a large number of tax agreements with a wide range of partners

APPENDIX

Abbreviations and acronyms

Definitions

Affluent

HNW

Liquid assets

Mass affluent

Methodology

Verdict Financial's 2015 Global Wealth Managers Survey

Bibliography

Further reading

About Verdict Financial

Disclaimer

Table

Table 1: Federal and Ontario income tax bands and rates for 2016

Table 2: Combined Federal and Ontario non-income tax bands and rates for 2016

Figures

Figure 1: Affluent population growth will rebound in 2016 as oil and gas ceases to be a drag on the country

Figure 2: Affluent asset growth will remain solidly positive, if moderate

Figure 3: Canadian retail investments will see stronger growth in 2016

Figure 4: Retail investment value is highly dependent upon mutual funds to provide growth

Figure 5: Returning health to the commodities market will boost retail equity holdings

Figure 6: Wage growth will see Canadians add steadily to their savings accounts and GICs

Figure 7: Bonds will grow at a more sedate pace, driven by consistent wage and GDP growth

Figure 8: The benchmark stock market index has struggled to add value since the global financial crisis

Figure 9: A resurgent stock market will boost growth rates in 2016 before tapering off

Figure 10: Investors are turning to balanced and bond funds for stable returns

Figure 11: Inflows were made into all but short-term funds, but balanced funds are the clear favorite

Figure 12: Canadian HNW individuals invest mostly in traditional asset classes, but can be tempted by alternatives

Figure 13: Almost one fifth of Canadian HNW wealth is booked abroad

Figure 14: Tax considerations are the main reason for offshoring wealth from Canada

Figure 15: HNW Canadians are mostly investing back into the major economies of China and the US

Figure 16: Few countries have not signed a tax agreement with Canada

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