Royal Bank of Canada (RBC) Wealth Management is planning to cut a number of funds from its platform, but has hit pause on the move after an email error.
In early October the firm’s mutual fund product team wrote to asset managers saying that RBC Wealth Management had conducted an extensive review into the funds it offered its Private Client Group and that this would result in some products being closed for purchase at the end of the year.
The email, seen by Citywire, said the review had been both qualitative and quantitative, and considered funds’ assets under management, fees, length of track record and performance. Managers of affected funds were told which strategies were to be cut. The email added that an additional qualitative review was ongoing.
However, a week later these asset managers received another email from RBC saying the first correspondence had been sent in error and that further assessment was required by the wealth manager.
The second email said: ‘Please disregard the [previous] email as, unfortunately, we feel this information was provided prematurely and that further assessment on our part is required.’
Citywire understands the first email had been sent by the product team without the knowledge of the manager research team, which is overseeing the qualitative assessment.
A spokeswoman declined to comment on this aspect of the story, but gave the following statement: 'We have undertaken a review of the funds on our platform to ensure what we offer in each asset class represents the best possible options for our clients. Letters were sent to mutual fund families regarding the status of that review, however the letters were sent prematurely as further assessment on our part is required before a final determination is made.'
In reviewing and probably cutting funds from its platform, RBC is following the path taken by a number of other large wealth managers, broker-dealers and wirehouses.
Last year Merrill Lynch set out plans to cut the 3,500 funds available on its platform by 40%. Morgan Stanley has cut around 700 funds from an original 3,000 available to advisors, while Ameriprise announced it was cutting 1,500 funds from the 3,500 it had available to advisors.
For a full run-down of all the cuts being made at various shops, click here.
In all cases the firms have been at least in part motivated to make the changes by the incoming fiduciary rule, as home offices look to ensure advisors are less likely to recommend underperforming funds that could cause investors to take legal action.