(First in a two-part series)
In banks' furious scramble for wealthy customers' investments, size is sometimes overrated.
Banks of all sizes are competing to get more of their most affluent customers' asset management business, hoping to lock down a steady source of fee revenues. The market is dominated by the country's largest banks and investment specialists, from JPMorgan Chase (JPM) and Bank of America's Merrill Lynch (BAC) toUBSand Credit Suisse.
Butregional and community banksare also managing to carve out a piece of this lucrative business, in part by offering perks and personalized service to a somewhat less affluent clientele that might not interest bigger institutions.
"It's a jump ball," says Bruce Van Saun, thenew chief executiveof RBS Citizens Group. "I don't think that just because somebody's bigger they're necessarily going to have an advantage."
That sentiment was echoed by several bankers and asset management specialists in recent interviews. For regional and community banks hoping to make a go of the business, they say success involves: picking the right battles, sticking to home turf, offering unique perks and remaining willing to share revenues with outside vendors.
Wealth management is "an attractive business, a good generator of fee income and capital-efficient," says JP Nicols, a partner at the consultancy Bank Solutions Group. "In this new environment we're in, it's a bit of a holy grail."
Small banks that ignore asset management also pass up an opportunity to make more money from their existing affluent customers, says Wayne Cutler, a managing director with the consultancy Novantas.
"The money's already somewhere," he says. "Either it's at a specialty advisor or brokerage firm or it's sitting in nonoptimized products, like CDs and basic savings accounts, and that money is being underutilized."
Many big banks and investment specialists are increasingly concentrating on so-called ultra-high-net-worth customers, who have at least $25 million to $50 million in assets. Now smaller banks are trying to serve the smaller fry among wealthy Americansthose with substantial assets but not enough to rate in the top 1%.
"Our sweet spot on the investment management side is that $500,000 to $3 million range, which is underserved right now by our regional and national competition," says Thomas L. Hall, executive vice president of wealth management and private banking at Seacoast National Bank (SBCF) in Stuart, Fla.
"If they go to some of our competitors, they're not going to be afforded face time. They're going to get a 1-800 number," he adds.
The $2.2 billion-asset Seacoast has branches in Palm Beach and what Hall calls other affluent "Treasure Coast" counties in Florida. It started devoting more resources to the business about a year ago, naming Hall to focus exclusively on running the wealth division and hiring more advisors and a program sales manager on its brokerage side. The investment has paid off: wealth management revenues have grown 25% in the past year, Hall says.
"Our footprint kind of lent itself to an orientation to wealthy clients," says Hall, adding that the bank has identified 18,000 of its 70,000 retail bank customer households today as potential wealth management customers. "We have this unique opportunity right under our noses."
Seacoast is also capitalizing on a long-running marketing program that encompasses some of the exclusive sorts of events and perks that credit card companies offer their top customers. The bank organizes several invitation-only events that customers pay to attendfrom a charity fashion show to a waiting-list-only group retreat on the Mayan Riviera in Mexico, at a cost of $4,000 per couple.
The "softer sell" aspect of these programs yields "account additions, deepening relationships and referrals," Hall says. "If you have one investment management sale out of [one event] like that, the program is more than paid for.
Check back tomorrow for the conclusion of this two-part series.
- 7 Ways to Improve Your Bank's Investment Program
- Inside Look: UBS' Marriage of Wealth Management and Banking
- Bank Reps on the Move
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