Scotia Total Wealth Credit Solution

Scotia-Total-Wealth-Credit-SolutionWe’ve all heard the cliché “It takes money to make money.” Thousands of affluent Canadians follow this adage by borrowing against their existing wealth, investing that money, and building more wealth.

Those well-heeled individuals typically own a broad range of assets with which they can leverage, including: real estate, stocks, bonds, mutual funds, money markets, insurance policies, etc.

Up until now, however, it was difficult to find a single lender to lend against all these different asset classes.

That changed on October 27, when Scotia officially launched its new “Total Wealth Credit Solution” (TWCS).

Basically, TWCS combines all sorts of assets into one pool of collateral. That collateral then backs a single line of credit that clients can tap as needed.

Scotia says it’s the first financial institution in Canada to offer something like this.

The primary advantages of TWCS are efficiency:

  • Clients don’t need to sell or transfer assets to access cash (thus preserving tax and investment strategies)
  • The credit line can be drawn upon at any time
  • Liquid collateral (like stocks and bonds) are automatically re-valued daily. Less liquid assets (like real estate) are appraised as needed.

TWCS is also flexible.

  • It can be linked to a bank account so people can access cash via simple overdraft
  • Collateral can be in the name of the client, spouse, or a holding company.
  • Interest rates can be fixed or variable
  • Payments are in Canadian or US dollars

We asked Andrew Wright (Managing Director and head of Scotia Private Banking) how TWCS interest rates stack up to a typical mortgage or line of credit.

"Pricing is very client dependent and collateral dependent,” Wright said.

“Total Wealth Credit Solution is not priced as finely as conventional mortgages, which are largely commodities. We're not about competing with a conventional mortgage.”

That said, we got the sense that strong borrowers could get as low as prime rate on the credit line (which is great for a line of credit). It depends on the client’s credit profile and assets though.

As for loan-to-value, that too depends on the underlying collateral. For qualified clients, Scotia might lend up to:

  • 90% of the cash surrender value of life insurance policies
  • 70% of value on blue chip stocks trading over $5
  • 90% of value on government bonds
  • 75% LTV on residential properties

There are exceptions to the above so speak with a Scotia Private Banker for numbers applicable to your situation.

Also keep in mind that TWCS is designed for people with a net worth of $1 million and up. (Since last April, 200 such customers have been piloting TWCS.)

TWCS is not available via the broker channel.

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