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. Key Findings
-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. Synopsis
Verdict Financial's "Wealth in Canada: Sizing the Market Opportunity" analyzes the Canadian wealth and retail savings and investments markets, with a focus on the HNW segment. The report is based on our proprietary datasets. Specifically the report: Sizes the affluent market (both by number of individuals and the value of their liquid assets) using our proprietary datasets. -Analyzes which asset classes are favored by Canadian retail investors and how their preferences impact the growth of the total savings and investments market. -Examines HNW clients' attitudes towards non-liquid investments such as hedge funds, property, and commodities. -Identifies key drivers and booking centers for offshore investments by Canadian HNW clients. 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.
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 SandP 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
List of Tables
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
List of 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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