Top 4 RBC Wealth Management Interview Questions

While Canada is dominated by the Big Five banks - BMO, CIBC, TD, RBC, and Scotiabank - the wealth management industry is not as concentrated as you may think. In fact, on a per capita basis there are more independent wealth management teams in Canada than in the United States. 

However, most wealth managers in Canada get their start working in one of the Big Five, and only after building up a client list do they go out on their own (by either starting their own shop, or joining an established one).

Over the past few years, the Big Five banks - just like Goldman, J.P. Morgan, and Morgan Stanley in the United States - have placed a heavy emphasis on building out their wealth management businesses. Both because there is room for expansion - given the relatively fractured nature of the Canadian market - along with the fact that during turbulent times wealth management fees are relatively stable and predictable for banks.

The largest wealth management platform in Canada is RBC who, much like BMO and TD, have placed an emphasis for decades on the wealth management side of their business. 

Like with other large investment banks, RBC will place junior wealth managers onto a non-trivial salary (much higher than it was decades ago!) and as a result the interview process has become significantly more rigorous. 

RBC Wealth Management Interview Questions

Below are some of the wealth management interview questions you should be prepared for at RBC. Keep in mind that you should ensure you have answers prepared for the most common market-based questions for both the Canadian and American markets (as most wealth management clients will have significant U.S. exposure).

1. Why RBC wealth management?
2. How would you advise a client wanting to liquidate their holdings during market turmoil?
3. Do you expect the Bank of Canada to continue to raise rates?
4. Can you name one alternative asset class and discuss their pros and cons?

Why RBC wealth management?

While you need to prepare for a wide variety of questions for wealth management interviews, this is the most critical one because you will get it at every stage of the interview process.

Because this is such an important question, I actually wrote an entire post (that's quite lengthy) on answering the more generic "why wealth management" question.

However, I'd add a few things that are critical to incorporating into your answer if you're interviewing specifically at RBC.

First, you should talk a bit about how you view it as being essential to join a large bank at the outset of your career so that you can take advantage of their institutional framework. By this I mean that when you begin your career at a place like RBC you get to take advantage of all of their data, equity research reports, and name brand as you try to get clients of your own. This is absolutely not something that should be overlooked as the first few years as a wealth manager are always difficult, but they're made much easier when you're housed within a strong institutional framework that's brimming with resources for you to utilize.

Second, you should make it clear that you're interested in staying at RBC for the long term. So, as a result, you've given careful thought as to where you want to begin your career. This is important to bring up because one issue that all large investment banks face, as was briefly touched on in the introduction to this post, is that excellent wealth mangers leave as soon as they've become established. Basically what happens is that young wealth managers use the institutional framework provided by the bank to their maximum advantage, and then as soon as they're doing well move to an independent shop where they get better economics.

So when answering, "Why wealth management?" or "Why RBC wealth management" make sure you try to slide in the two points above (along with what was mentioned in the longer post dedicated to answering this question).

How would you advise a client wanting to liquidate their holdings during market turmoil?

As 2022 began, we saw significant amounts of market turmoil. This was largely a result of central banks - like the Federal Reserve and the Bank of Canada - making it clear that they were going to begin aggressively raising rates in order to fight the rather sticky inflation that's been observed over the prior year. 

This change in tone from central banks led to a quite sharp and persistent drop in risk assets (e.g., tech companies), which in turn led many wealth management clients to contemplate rotating into cash. 

A large part of the role of a wealth manager is acting as a quasi-therapist. You need to reassure your clients that being able to perfectly time markets is a terribly difficult thing to do, and that making the decision to rotate into cash could result in missing out on large positive swings in the market (thus necessitating you needing to reinvest in the markets at a higher level than you initially sold at). 

In an interview you should make it clear that it's always wrong to condescend to your clients - even if they're behaving irrationally - and that ultimately a wealth manager must always act on what a client wants to do after the wealth manager has given their input. 

However, when a client wants to do something you disagree with you should calmly outline why you think they could be mistaken. Explain to them that timing markets is an incredibly difficult thing to do and show them evidence that the turmoil they're observing may not continue (e.g., hedge funds putting lots of money back into markets, corporate earnings beating expectations, etc.).

Do you expect the Bank of Canada to continue to raise rates?

This is a bit of a trick question, because there's one thing you should absolutely include in your answer.

The reality is that you can look to the overnight index swaps (OIS) market to see how priced in rate hikes are over various durations. So, for example, in early January of 2022 traders had priced in a 70% likelihood that the Bank of Canada would raise rates from 0.25% to 0.5%. However, the Bank of Canada shocked market participants by staying at the 0.25% level that had been in place for the last few years.

Even with the delay in takeoff from the 0.25% level, the market is still pricing in around six rate hikes in 2022 (although that is subject to change based on market conditions, of course).

So when answering this question you shouldn't just give your unqualified opinion, but rather say that the market is pricing in a certain amount of hikes over the next year as you can tell by looking at the short-term rates market. You can find out how many hikes are being priced in at any given moment by either using a Bloomberg terminal (if you have one) or just finding a recently updated free Bloomberg article (as Bloomberg constantly has stories on the Canadian rates market).

After stating what the market is pricing in, you can say whether you think the market is pricing in too many rate hikes relative to what the BoC will ultimately do or not enough. It's perfectly fine to give your opinion at the end of this question. However, what you must do is make it clear at the outset that you realize that markets price in rate hikes before they happen, which allows you to infer roughly where the market is thinking that the overnight rate will be going over the next year.

Can you name one alternative asset class and discuss their pros and cons?

Alternative asset classes are types of assets outside of equities and bonds (such as private equity, commodities, crypto, hedge funds, etc.).

One of the benefits of joining a large wealth management shop is that they often have the ability to place client funds into some types of alternative asset classes that clients would not otherwise have access to.

So one example of an alternative asset class with clear pros and cons is private equity. The pros of private equity are that top funds have returns (net of fees) significantly higher than the S&P 500. Further, because private equity funds don't mark their investments mark-to-market, this creates a more smooth returns profile.

The major con of private equity is that when you invest directly in PE funds, you're required to lockup your capital for an extended period of time so you don't have the benefit of instant liquidity (like you do if you buy regular equities or government bonds). 

Summary

Over the past few years, most of the Big Five banks in Canada - but, in particular, BMO and RBC - have been on a wealth manager hiring spree while simultaneously raising salaries. Further, there has never been a time in which firms have invested more into the training and support of junior wealth managers (which, as I've mentioned in other posts, used to be a bit of an oddity). 

If you're currently gearing up for interviews, be sure to take a look at all the other wealth management interview questions I've written about. If you're looking for even more questions, I've also put together a wealth management guide with 180+ interview questions that will help ensure you're as prepared as possible.

As a final piece of advice, be sure to take notice of what I mentioned in the introduction to this post: when interviewing for wealth management positions in Canada you need to have a general idea of where markets are in both Canada and in the United States.