Bank of Nova Scotia yesterday became the latest to expand its wealth management operation with the acquisition of WaterStreet Group Inc., a boutique advisory firm serving 30 ultra-high-net-worth families with assets as much as $1-billion. The price was not disclosed.

Formed in 2006 with about four families, Burlington-Ont.-based WaterStreet has grown mostly by word of mouth and now provides a full gamut of services ranging from advice on tax and philanthropy to risk management.

"WaterStreet will be the anchor for the expansion of an ultra-high-net-worth service offering within Scotiabank, providing us with the ability to immediately service this growing segment of the Canadian market," said Barbara Mason, executive vice-president of Scotia's wealth management unit.

By linking up with Scotia, Water-Street is hoping to broaden its strengths and achieve economies of scale that would not have been possible while the company remained independent, said Tim Cestnick, the president.

"This will give us the kind of scale that will allow us to bring some of our fees down and it also [gives us access] to Scotia's tremendous trust capability," he said.

Regarded as the most prized slice of the wealth management sector, the ultra high-net-worth business is expected to grow from about 24,000 households in Canada today to more than 46,000 within the next eight years.

"These are very sophisticated people with complex needs," said Mr. Cestnick.

The WaterStreet acquisition comes less than a week after Royal Bank of Canada agreed to pay $1.5-billion for BlueBay Asset Management, a leading U.K.-based wealth management company.

Since the financial crisis, banks around the world have been hit by earnings volatility especially in their capital markets operations, pressuring them to look for more stable sources of profit.

Wealth management is seen as a key opportunity because of the consistent flow of fee-based revenue it generates. It's also attractive because it requires banks to set aside only a small amount of capital compared to more risky businesses such as wholesale banking.

Another consideration is the upheaval in private banking sparked by the global crackdown on offshore banks.

Players such as UBS AG have sustained serious hits to their operations in the wake of negative publicity, with the loss of billion of dollars of client assets.

Courtesy of Financial Post