The IIAC president explains why revenues in the industry have seen a surprising average annual growth rate
by Gerv Tacadena
The strong indicators seen in retail and wealth management business painted a vibrant picture of Canada's investment industry over recent years.
Investment Industry Association of Canada (IIAC) president and CEO Ian Russell said retail revenues in the industry have seen a surprising average annual growth rate of 11% over the past three years, with both large and small firms reaping benefits from the expansion in the demand for financial products and advisory services.
"This upward trend in financial services has prevailed despite continued low rates, market volatility and an uncertain outlook for the economy and markets," he said in his latest letter to the industry, noting that this reflected a ballooning demand from both high net worth and middle-income clients for advice and products.
The retail advisory business has become a dominant business in the industry as it now accounted 60% of the total industry revenue in 2016.
With the growing demand for diversified investment products and services, the revenues from fee-based accounts soared to $6 billion in the same year, accounting slightly more than 50% of the overall retail yields.
Meanwhile, the retirement trend amongst the baby boomers has led to the change in focus of the client demand for retail financial services and compelled traditional retail-focused business models to undergo a major revamp.
Russell said these indicators contributed strongly to the resilient performance of the investment industry. From 2013–2016, the industry recorded an average return on equity of 8.4%.
"The relatively steady performance over the last four years in industry revenue and operating profit belies the turmoil and divergent performance across firms and firm groupings in the industry," he stated.
Whilst the retail and wealth management businesses have become pillars of growth, the public and private equity financings remained the bane of the industry.
Russell explained these equity financings have yet to snap back from the extended collapse during the 2008–2009 financial crisis. Even the boost in tech, biotech, pharma, and real estate financings has not offset the slump in the hardest hit sectors.
"This erosion in the vitality of the venture public markets is a serious concern for Canadian markets and the health of the small business sector," he said.
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