Published : Feb-2017
No. of Pages : 52
EXECUTIVE SUMMARY
1.1. The Canadian wealth market remains highly appealing
1.2. Key findings
1.3. Critical success factors
2 SIZING AND FORECASTING THE CANADIAN WEALTH MARKET
2.1. Affluent individuals in Canada account for roughly 30% of the adult population
2.1.1. Increasingly favorable domestic conditions will drive further expansion in onshore wealth
2.1.2. Growth in the number of HNW individuals will be strongest among those with more than $10m in assets
2.2. The bulk of Canada's onshore assets are concentrated in the hands of the mass affluent
2.2.1. Affluent assets are forecast to grow at a faster clip than the broader market
2.2.2. HNW portfolios above $10m in AUM will experience the highest growth
3 DRIVERS OF GROWTH IN THE CANADIAN WEALTH MARKET
3.1. Growth picked up in 2016 and will average 5.3% going forward
3.1.1. Lower TFSA limits will only modestly affect the growth of the overall retail investments market
3.1.2. Deposits and mutual funds form the bulk of the retail wealth market
3.1.3. Equities will provide some much-needed firepower behind the retail investment market value growth over the next year
3.2. Deposit growth will remain moderate as interest rates languish near zero
3.2.1. As cautious investors, Canadians have been drawn to solid bank accounts and other cash products
3.2.2. Interest rates will ensure deposit growth remains modest
3.3. The retail bond market will reach new heights, driven by stronger appetite and ample supply
3.4. The drag from the primary resource sector will diminish, allowing equity and mutual funds to take flight
3.4.1. The S&P TSX Composite has recovered from the depths it plumbed at the start of 2016
3.4.2. Alternative investment platforms are increasingly tempting Canadians eager to invest in low-cost alternatives
3.4.3. Both equities and mutual funds increase much more in value when the market is growing
3.4.4. Investors in Canada have used mutual funds to vary an already diversified portfolio
3.4.5. 2016 inflows were reduced or negative for most mutual funds, barring bond funds
4 HNW INVESTMENT PREFERENCES
4.1. HNW individuals have increased the role of non-traditional investments in their portfolio
4.1.1. Hedge funds remain the most popular HNW alternative asset
4.1.2. With more protections, REITs will grow as an avenue for property exposure
4.1.3. Private equity investment will grow as new fintechs ease many of the barriers to investment
4.2. Canadian HNW investors have offshored a substantial proportion of their portfolio
4.2.1. Offshore wealth management centers are managing a growing amount of Canadian wealth
4.2.2. The huge equity and bond market to the south attracts the bulk of offshore wealth
4.2.3. Geographic diversification is the main driver for offshoring wealth
4.2.4. Recent CRA tax enforcement has focused on offshore tax avoidance
4.2.5. Canadian tax regulations have grown more complex in recent years
4.2.6. Proximity, size, and longstanding economic links make the US the main offshore center
4.2.7. Canada has pursued a large number of tax agreements with a wide range of partners
4.2.8. FATCA had major implications for the Canadian market and stirred considerable controversy
4.2.9. Canada signed up for the OECD's CRS in 2015 to help combat tax evasion
5 APPENDIX
5.1. Abbreviations and acronyms
5.2. Supplementary data
5.3. Definitions
5.3.1. Affluent
5.3.2. CRS
5.3.3. Domicile
5.3.4. Double taxation convention (DTC)
5.3.5. Exchange of information
5.3.6. FATCA
5.3.7. HNW
5.3.8. Liquid assets
5.3.9. Mass affluent
5.3.10. Onshore
5.3.11. Residency
5.3.12. TIEAs
5.4. Methodology
5.4.1. 2016 Global Wealth Managers Survey
5.4.2. 2015 Global Wealth Managers Survey
5.4.3. Global Wealth Model methodology
5.4.4. Global Retail Investments Analytics methodology
5.5. Bibliography
5.6. Further reading
List of Figures
Figure 1: Affluent population growth rebounded in 2016 as oil and gas ceased to be a drag on growth
Figure 2: Affluent asset growth will remain solidly positive, if moderate over the forecast period
Figure 3: Canadian retail investments are estimated to have seen stronger growth in 2016 than in 2015
Figure 4: Retail investment value is highly dependent upon mutual funds to provide growth
Figure 5: The improving health of 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: 2016 saw a record year-end close for the TSX
Figure 9: Retail investors' persistent inflows to funds make them less volatile than equities
Figure 10: Investors are turning to balanced and bond funds for stable returns
Figure 11: Mutual fund inflows have tapered off for all but bond funds
Figure 12: Canadian HNW individuals invest primarily in traditional assets, but can be tempted by alternatives
Figure 13: Foreign stocks are driving Canadian HNWs offshore in greater numbers
Figure 14: Geographic diversification is the main reason for offshoring wealth from Canada
Figure 15: The US accounts for over two fifths of Canadian wealth booked offshore
Figure 16: Canada has an extensive array of tax treaties to prevent double taxation
