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Aug 9, 2018

Scotiabank eyes expanded products for Jarislowsky Fraser unit

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Bank of Nova Scotia is seeking to make its newly acquired Jarislowsky Fraser wealth business a little more worldly.

There is “a willingness and an openness” to expand offerings beyond the traditional Canadian balanced products the Montreal-based money manager was best known for, said Glen Gowland, Scotiabank’s executive vice president of global wealth management. He sees the potential for more global investing by the business, increasing the appeal for wealth clients.

“As you’re trying to gain and retain these type of investors, broader diversification actually makes a lot of sense and could actually become very compelling,” John Aiken, an analyst with Barclays Plc, said in an interview. “Within Canada, if you can get the Jarislowsky Fraser mandate with a good global product, that’s probably a win for them.”

Scotiabank acquired Jarislowsky Fraser for about $950 million  in May, adding a firm that managed about C$40 billion of assets for institutional investors and wealthy clients, mostly in Canada. The deal plugged “some clear gaps” for the Toronto-based bank while giving the money manager capital to expand, Gowland said last week in an interview.

“It’s such a great brand in Canada and they’ve got such great investment discipline and do such a fantastic job -- both in up markets and down,” Gowland said. “Over the long haul that’s something we want to get behind and make sure that more people have the opportunity to experience it, because it’s a real gem.”

Jarislowsky Fraser was founded in 1955 as a research boutique and expanded into a investment firm overseeing portfolios of pension funds, foundations and endowments as well as corporations and individuals in Canada and abroad.

Scotiabank also agreed in May to buy MD Financial Management from the Canadian Medical Association for $2.59 billion, giving it a business that administers $49 billion of assets for physicians and their families. The deal is expected to close by the end of October.

The deals will help Scotiabank in its goal of getting an increasing share of earnings from wealth management. About $1 billion of Scotiabank’s $8.2 billion of net income last fiscal year came from global wealth management, according to financial statements. Wealth contributed $515 million to overall profit of $4.5 billion in the first half if 2018 before the purchases of Jarislowsky Fraser and MD Financial.

“Our expectation is that we will take our wealth-management earnings from around 12 per cent of global earnings for the bank to about 15 per cent within the next five years,” Gowland said.

Scotiabank’s wealth focus is a good strategy when industry growth in Canadian retail lending is cooling, according to Barclays’ Aiken.

“I’m a big fan of wealth management and investors are as well,” Aiken said. “It is a capital-light business with recurring revenues, and that is exactly what investors like to see at a bank.”