A new strategic priority

This year we added cross-platform leverage as a fourth key priority in recognition of the fact that at an integrated financial services company such as ours, the whole has the potential to be much greater than the sum of the individual parts. In simple terms, cross-platform leverage is about working across our businesses and functions to grow revenues by sharing best practices and offering our broad array of products and solutions in an integrated fashion to our clients. It’s also about cutting costs by eliminating duplication that arises when businesses and functions are run autonomously and not in an integrated fashion. Through product integration we can better serve the needs of our clients while at the same time improving client retention, revenue growth, efficiency and profitability.

Building on past success

We have been successful in cross-selling between platforms in Canada, with business referrals of $9.3 billion between different parts of RBC generating over $16.8 billion of new business between 1997 and 2002. That is, for every dollar of business that was referred to another part of RBC, we have garnered an additional $1.82 of new business. Most of the business referred to date has been from RBC Banking to RBC Investments. By referring the client to the “home of best fit,” we have improved client satisfaction and as a result been rewarded with more of their business.

We are ideally positioned to cross-sell with our complementary broad range of product and service offerings, sizeable client base, strength in CRM, established philosophy of doing what is in the best interests of the client, strong market position in Canada and a platform for growth in the U.S. We intend to intensify cross-selling initiatives in Canada and, over time, place increased importance on this initiative in the U.S. To this end, effective November 1, 2002, we introduced an updated referral initiative – RBC Referrals. Under this program, we have expanded the number of businesses and employees participating in referrals and have extended the program to include referrals between businesses pertaining to both the personal and business needs of our clients. By the end of the first quarter of 2003, all businesses across the organization should be participating in RBC Referrals. Referrals are fundamental to the way we do business, and will be integrated into all business unit strategies including those relating to sales management, performance measurement, training and development, employee recognition and client and employee satisfaction measures.

To identify potential areas for improvement in operational efficiency and growth in revenues, we have undertaken a number of initiatives in the recent past, including the E2 initiative. E2 stands for efficiency and effectiveness. This initiative is headed by senior management from our business platforms and functions who meet regularly to break down barriers between platforms and between businesses within platforms, eliminate duplication and identify centres of expertise that can be leveraged to enhance efficiency and revenues. To date, E2 has identified over 55 projects that will result in cost savings and additional revenue.We are also currently undertaking a firm-wide review of our functions to identify areas where we can improve our agility and productivity.

RBC Banking

Perhaps the most notable example to date of two platforms collaborating in a way that leverages their respective competencies is RBC Banking and RBC Investments joining forces to deliver financial planning services through RBC Investments Financial Planning. We are well-positioned as “first-time” advice providers for clients at the beginning of their investment life cycles. However, as their investable assets grow and the complexity of their investment situation increases, they often look to independent financial planners for financial advice. This is reflected in our relatively low penetration in the Builders & Borrowers and Wealth Accumulators segments – two client segments we understand well through our CRM and market research work. The Builders & Borrowers segment comprises personal clients who are in the borrowing phase of their life cycle, whereas the Wealth Accumulator segment comprises clients whose focus is on growing investments prior to their retirement and preserving their capital. Given that an estimated $80 to $140 billion will transfer from one generation to the next on an annual basis in Canada for the next 50 years, we are working more proactively to develop relationships with clients in these two key segments, meet their more complex advice needs and retain them as our clients over their investment life cycle.

Under the RBC Investments Financial Planning initiative, RBC Investments is providing its expertise in compliance and investment products, whereas RBC Banking is providing the client base, sales force, business premises and sales effectiveness expertise. With over 1,600 accredited financial planners, RBC Investments Financial Planning is ideally positioned to deliver custom tailored financial planning solutions. We are in the process of implementing this initiative and have initially targeted approximately 370,000 RBC Banking high-potential clients with a focus on investment retention and wealth transfer opportunities. Approximately one-half of these clients have been contacted to ensure we are providing an appropriate level of service that suits their financial needs, with the balance expected to be contacted by the end of the first quarter of 2003. We are currently offering proprietary products and expect to introduce third-party product offerings by the end of 2003.

RBC Insurance

RBC Insurance announced the decision to add Royal Mutual Funds, RBC Advisor Funds and RBC Royal Bank GICs to its product portfolio commencing in 2003, pending regulatory approval. The addition of these products expands the range of products available to our insurance representatives to address the investment needs of our clients and provides a new and important distribution channel for RBC Funds and RBC Royal Bank GICs.

In the U.S., RBC Liberty Insurance launched the life specialist program to offer insurance solutions to RBC Centura Bank clients. Under this initiative, each mobile RBC Liberty Life Insurance specialist is assigned approximately five RBC Centura branch locations where they are designated as the life insurance professional to whom branch personnel refer qualified life insurance sales leads. This is a highly effective approach as RBC Liberty Insurance is able to leverage established banking relationships to better meet clients’ life insurance needs.

RBC Investments

RBC Global Asset Management collaborated with RBC Capital Markets to develop the RBC Investments Focus List Trust to satisfy the demands of clients for a proprietary investment product whose composition and performance approximates that of the RBC Investments Focus List. Sales totalled $321 million.

RBC Capital Markets

RBC Capital Markets and RBC Global Services worked together to develop the new RBC LinC product. This offering provides institutional investors with one-stop trade execution, clearing and custody in the Canadian market. RBC LinC simplifies the trading and settlement cycle by enabling clients to send just one set of instructions to RBC Capital Markets for settlement and clearance, with an automatic link to RBC Global Services for investment administration services.

RBC Global Services

RBC Global Private Banking, a division of RBC Investments, sourced most of its Jersey, British Isles fund administration and custody business to Institutional & Investor Services, a division of RBC Global Services. This change freed up RBC Global Private Banking resources to focus on developing new business, while at the same time leveraging Institutional & Investor Services’ efficiency in the provision of investment administration services. Our clients also benefited from higher service levels.