RBC to Ease Small Accounts Away from Brokers
RBC Wealth Management plans to wean its brokers in the U.S. away from small accounts by offering them small cash bonuses for referring households under $100,000 to call centers and significantly reducing payout on the accounts that they continue to service.
Details of the new program, which will be unveiled to the firm’s approximately 1,800 U.S. brokers by the end of June, are still being finalized, said managers who received preliminary briefings earlier this month. The program will be marketed as RBC Advantage and become effective at the start of RBC’s fiscal year in November, a spokeswoman confirmed.
The strategy of focusing full-service brokers on wealthy individuals and families has long been followed by larger U.S. broker-dealers.
Merrill Lynch, for example, does not pay its advisers on accounts with less than $250,000 at the firm, and incentivizes brokers to refer smaller accounts to “financial solutions advisors” at its parent Bank of America’s no-frills Merrill Edge unit. Morgan Stanley brokers get no credit or pay for servicing accounts with $100,000 or less of investable assets.
“We believe that money management shouldn’t be a one-size-fits-all approach,” RBC spokeswoman Nicole Garrison said in an e-mail. “The RBC Advantage model relies on a team of professionals who are dedicated to serving the specialized needs of this household segment….This approach allows our advisors to have the peace of mind that all accounts at RBC Wealth Management, regardless of segment, are benefiting from our client-first approach.”
RBC Wealth Management-U.S. is an amalgam of regional broker-dealers with roots in servicing primarily mass affluent customers. It is owned by Royal Bank of Canada, which entered the U.S. retail brokerage market in 2000 with its purchase of Minneapolis-based Dain Rauscher Wessels and subsequently added San Francisco-based retail brokerage Sutro & Co. and Boston-based Tucker Anthony to the mix. RBC Wealth-U.S. now has 200 offices in 40 states servicing about $336 billion of customer assets.
The firm does not disclose the percentage or number of client households with less than $100,000 in assets, Garrison said.
The people briefed on the plan said executives have variously discussed paying brokers between $50 and $200 for each account that they help migrate to the RBC Advantage program. Migration will not be mandatory, but RBC’s stick will be a cut in payout on the small accounts.
Brokers who today receive from 25% to 54% of the fees and commissions that customers pay the firm will get closer to 10% on small accounts, according to briefings that managers have received.
RBC executives are still deciding whether to permit brokers to continue serving small households that are in fee-based managed account programs, said two managers. Like many other broker-dealers, RBC has been encouraging brokers to shift customers from traditional transactional accounts that charge commissions to accounts that assess a fee based on assets held in an advisory account.
RBC will continue to provide “proactive advice, [a] focus on holistic wealth planning and….a high level of support and accessibility” to customers using the Advantage model, the spokeswoman said.