Canada Wealth Management – Market Sizing and Opportunities to 2025

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The Canadian resident retail savings and investments market was $3,145.81 billion in 2020. The market is expected to grow at a CAGR of more than 5% during the forecast period 2021-2025. Canada’s affluent segment (covering HNWs and mass affluents) accounted for 32.4% of the total population. The majority of the affluent segment holds their wealth in deposits and mutual funds. Therefore, as the outbreak of the COVID-19 pandemic caused big downward shifts in the market performance of the country, the country’s affluent population did not incur huge losses due to their leaning quite heavily on safe-haven assets.

The Canadian wealth and retail savings and investments markets focus on the HNW segment. This includes overall affluent market size (both by a number of individuals and the value of their liquid assets) as well as a breakdown of liquid vs. illiquid HNW holdings. The report also provides an analysis of the factors driving liquid asset growth, including a breakdown and forecast of total retail savings and investments split by asset classes including equities, mutual funds, deposits, and bonds.

In addition, losses in the equities market were also recovered in the second half of 2020 which saw an easing of lockdown restrictions and restarting of the Canadian economy, thereby, causing a rebound in the stock market performance. Nevertheless, a strong predicted retail investments growth is expected over the upcoming period, owing to an effective vaccine program that will raise investor confidence in the economic performance of the country. Further, the country’s savings and investments market is observing a growing preference for robo-advisory by HNW investors. This demand has also been accelerated by the outbreak of the pandemic that has been a catalyst in increasing the use of digital products and services.

Canada wealth management market overview

Canada wealth management market overview

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What are the market dynamics in the Canadian wealth management market?

Canadian mass affluent investors have a more diversified portfolio, led by mutual funds:

In 2020, Canadian retail investors allocated 84% of their wealth to property. As retail investors have a lower risk tolerance than more affluent investors, they prefer to focus on safer investments.

Equities, held mostly via funds and ETFs, remain popular among Canadian HNW individuals, despite a market downturn:

In line with investment preferences in the wider region, Canadian HNW investors have seen a strong rise in demand for equity-based investments, despite the heightened volatility witnessed by this asset class due to the crisis caused by the pandemic in 2020. A market crash is a good accumulation opportunity for investors to gather more cheap stocks, with the expectation that the stock valuations will go back up at the time of a market upturn. Consequently, while COVID- 19 restrictions adversely impacted the performance of the S&P/TSX index, they also provided an opportunity for risk-tolerant investors to invest in stocks whose returns they can reap later when the situation improves.

Main bank advisors and IFAs are the most popular source of investment advice across the market:

The most preferred investment channel for Canadian investors across all three affluent classes is that of an investment advisory through a bank, with which they have an investment account. The preference for this type of investment channel is particularly driven by the trust that clients place in the bank’s advisory business as well as the personal relationship they share with the advisor, who is expected to have a proper understanding of the client’s goals.

Canadian HNW investors diversify their wealth equally, with advisory mandates having a slight edge over others:

While Canadian HNW investors distribute their wealth equally, half of the HNW wealth is invested with advisory and discretionary mandates in anticipation of better returns. This is good news for wealth managers, given that advisory and discretionary mandates attract a more loyal customer base and yield higher fee income. In addition, as per our data, 55.1% of Canadian investors have good knowledge of financial products. This confirms why some investors can actively manage their invested wealth on their own and may also opt for execution-only mandates.

What are the segment classifications in the Canadian wealth management market?

Canadian wealth management market is segmented into resident holdings and non-resident holdings. Non-resident equity holdings declined in 2020 despite the S&P/TSX Composite index, the country’s flagship index, registering an increase of 2.2% for the year. This can be attributed to the extremely volatile performance of the stock market in 2020 that made the asset class unattractive to investors abroad. Mutual funds witnessed a similar fate due to their significant correlation with the stock market. In addition, non-resident bond holdings also registered a decline in 2020 owing to the low yields generated by this asset class. On the contrary, deposits remained an attractive investment avenue for non-resident investors in 2020. This can be attributed to the stability of returns that this asset class generates to balance the overall risk factor on the portfolio.

Canada wealth management market, by segments

Canada wealth management market, by segments

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What are the segment classifications in the Canadian resident savings and investments market by asset allocations?

By asset allocations, various segments in the Canadian resident savings and investments market include equities, mutual funds, deposits, and bonds.

Equities

After strong growth in 2019, the stock market crashed at the end of Q1 2020 when the outbreak of COVID- 19 triggered provincial stay-at-home restrictions to curb the spread of the virus, stalling economic activity and subsequently resulting in a loss in investor confidence. The S&P/TSX Composite Index witnessed the steepest decline since the 2008 financial crisis, falling by 21.8% in the first quarter of 2020.

Mutual funds

Generally, the performance of the stock market has a considerable and direct influence on mutual fund investments. While the direct stock market investments by Canadian investors declined in 2020 owing to heightened volatility witnessed by the S&P/TSX index, the inflows into the country’s mutual funds increased.

Deposits

Credited with offering one of the safest investment alternatives in the financial investments market, deposits bring stability to returns on the retail investment portfolio and therefore serve as a viable option for wealth generation. The same is also depicted by our flow analysis, which portrays a series of consistent positive returns on deposits. In times of crisis, investors tend to hold the majority of their wealth in safe-haven assets such as deposits to avoid significant losses from investments in other riskier asset classes.

Bonds

Like most countries worldwide, bonds accounted for the smallest share of holdings in the average Canadian retail portfolio in 2020. To fund the stimulus packages introduced to address the economic turmoil caused by COVID-19 the Canadian government increased the issuance of long-term debt in the first three quarters of 2020.

Canada resident savings and investments market, by segments

Canada resident savings and investments market, by segments

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What is the market trend in the Canadian wealth management market?

Robo-advice in Canada is not a new concept, with the country’s first robo advisory company, WealthBar having launched in 2014. While the traditional approach is still followed in Canada, concerns regarding fees and advanced investment products are encouraging Canadians to opt for robo advisors, which include benefits such as low fees and easy access to advisory services for a wide range of investment products.

WealthBar, rebranded as CI Direct Investing in August 2020, offers online portfolio management and financial advisory platform for individuals to invest their money in mutual funds at a high-interest rate and achieve more returns It offers services including savings, financial advice, financial planning tools, and investment management using portfolios of low-cost ETFs serving both Canadian investors and an expat.

Wealthsimple, launched in September 2014, offers a robo advisory-based investment platform that helps retail investors build a robust portfolio. It offers investors services including automatic rebalancing, dividend reinvesting, and tax loss harvesting at a management fee as low as 0.4%-0.5%. Investors build diversified portfolios of ETFs based on their risk profile and financial goals.

Market report scope

Market size (Year – 2020) $3,145.81 billion
Growth Rate CAGR of >5% during the period 2021-2025
Base year 2020
Forecast Period 2021-2025
Segmentation by wealth management Resident holdings and Non-resident holdings
Segmentation by resident savings and investments market (Asset allocation) Equities, mutual funds, deposits, and bonds

Scope

  • HNW individuals constituted only 0.84% of the total adult population of Canada in 2020.
  • Advisory mandates accounted for 26.5% of the total HNW portfolio composition in Canada in 2020.
  • Deposits remain the most popular investment avenue for Canadians indicating their preference for safe-haven investment asset classes.
  • Bonds accounted for the lowest share of retail investment portfolios in 2020.

Reasons to Buy

  • Make strategic decisions using top-level historic and forecast data on Canada’s wealth industry.
  • Identify the most promising client segment by analyzing the penetration of affluent individuals.
  • Receive detailed insights into retail liquid asset holdings in Canada.
  • Understand the changing market and competitive dynamics by learning about new competitors and recent deals in the wealth space.
  • Discover the key digital disruptors in the country’s wealth market.

Bank of Canada
Statistics Canada
CI Direct Investing
WealthSimple
InvestEase

Table of Contents

Table of Contents

Canada Wealth Market

Investor Insight

Resident Savings and Investments

Digital Disruptors

Recent Deals

Appendix

Frequently asked questions

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