RBC Chief Featured in Denver Business Journal

RBC chief: Canada offers lessons for avoiding another U.S. financial meltdown

by Heather Draper
June 2, 2011

Denver Business Journal

John Taft, CEO
RBC Wealth Management

If the U.S. wants to figure out how to avoid another debacle like the financial crisis of 2008 and 2009, it should look to its northern neighbor.

“Canadian banks provide a good lesson on the importance of stewardship,” said John Taft, CEO of RBC Wealth Management, a subsidiary of Toronto-based Royal Bank of Canada (NYSE: RY). “No Canadian bank failed. No developed nation banks performed as well as Canadian banks have.”

A conservative regulatory environment and conservative business practices in Canada helped that nation’s banks thrive while many banks globally struggled during the crisis, he said.

Canadian banks had larger capital reserves and less leverage going into the crisis, which is what federal regulators are asking of U.S. banks today, said Taft, who is also chairman of the Securities Industry & Financial Markets Association.  SIFMA, with offices in New York and Washington, D.C., is an industry trade group representing securities firms, banks and asset management companies.

“When crisis hits today, the contagion is much deeper and faster and more virulent than ever before,” Taft said. “Banks need more cushion and less leverage. The world is taking a page from the Canadian banking book.”

Taft was in Denver on Thursday to lead a symposium of RBC Wealth Management advisers from around the nation on the importance of a team approach to wealth management.

“Teams are the wave of the future,” he said. “You need to take a comprehensive, holistic approach to wealth management.”
Because RBC’s clients are getting older and living longer, they need a team of specialists — such as an investment, estate and long-term care specialist — advising them on how to save for retirement and create income during retirement, he said.
Taft — great-grandson of the nation’s 27th president, William Howard Taft — said stewardship is a theme that runs through all of his talks about the finance industry.

“We can’t forget how important an ingredient stewardship is in restoring public trust and confidence in financial systems,” he said.
Restoring confidence among investors is going to be key to the U.S. economic recovery, Taft said.

“Look at the unprecedented levels of cash held by corporations and investors. It’s a sign that people are still uncertain,” he said. “Trust was so severely damaged in 2008 and 2009 … it left people traumatized.”

Taft said new regulations under the Dodd-Frank Wall Street Reform and Consumer Protection Act should go a long way toward restoring confidence in financial institutions.

“There is anger toward highly compensated workers on Wall Street. It’s a fact of life,” he said. “But the narrative is too often that the financial services industry is fighting financial reform. I don’t think that’s true.”

Many more finance professionals were victims of the financial crisis than they were contributors to the crisis, Taft said, so they, too, want to prevent what happened in 2008 and 2009.

“The trick for investors is living your life in a way to survive financial crises,” he said. “The same is true for banks and corporations.”
Part of RBC’s team building work in Denver on Thursday will include a tricycle building competition, with all the tricycles built being donated to the Tennyson Center for Children in Denver.

“Part of our culture is giving back. We build it into everything we do,” Taft said. “To see a smile on a kid’s face — that’s the right kind of experience we want to create at the firm.”