Union Bank of California's wealth management business has not increased its assets under management for three years, but you wouldn't know it from the unit's overall growth.
Revenue and profits from wealth management — which includes private banking, trust, special assets management, private wealth planning and investments — each grew by double digits last year and are on track to grow at least that much in 2010, according to Mary Curran, executive vice president of the wealth management group at Union Bank.
Much of the growth in the wealth management unit came from loans and deposits, said Curran. Asset management has been challenging because clients have been keeping their funds in safer, lower-margin products.
The business' $6 billion of assets under administration and $4.6 billion of assets under management are about where they were in 2007, she said.
Union Bank is a unit of UnionBanCal Corp., and both are mostly owned by Mitsubishi UFJ Financial Group Inc. Two recent bank acquisitions by the holding company, adding a combined $3.8 billion of assets in Washington, Oregon and California, could help fuel continued growth for the next few years, Curran said.
Including anticipated growth in investment management, the wealth management division could post a 20% compound annual organic growth rate during the coming four to five years, she said.
"We want to be a key contributor to the bank," Curran said.
The recent results are, in large part, the fruit of an initiative that was begun in 2008. That was when the unit started testing a team-based approach to serving clients.
The initial two pilot teams have been expanded to 14, and plans call for adding three more. Most of the teams combine a private banker, a trust officer, a portfolio manager, a senior wealth adviser and a broker.
Such teams, which are steadily being adopted at many banks, are an attempt to eliminate turf wars and give clients the most suitable products and services.
Done successfully, these teams can increase the amount of business each customer does with his or her bank.
Union Bank has hired selectively in recent years in order to create rounded-out teams, said Curran. "In many areas we had to bring in expertise we didn't have," she said. "We had to add the right people where they were needed."
The bank has worked to build referrals of wealthy clients from private bankers and commercial bankers. And it has built a pay system in which team members earn compensation even if they do not directly serve a client.
Union Bank's commitment to improving its wealth management business comes as many banks are grappling with how important wealth management really is to their business, said Kenneth Kehrer, director of the research firm Kehrer-Limra.
"Wealth management tends to have a small profit margin because of the expense of providing the offering," he said.
Union Bank's backing of the business has to do in part with the recurring fee income it provides, and in part with client retention, Curran said.
"If Union Bank of California had no wealth business and no way to address corporate executives, business owners and others in that target market," she said, "I think you would run the risk of losing control of that relationship."
Regardless of concerns about profit margin, wealth management is a strategic objective for many banks, said Paul Werlin, the president of Human Capital Resources Inc., a recruiting company.
"They understand market segmentation," Werlin said.
"And they want to provide the right solution for everyone from millennials to large family businesses with $5 million to $10 million minimums to invest."