Manageable Wealth.

Visions of big fee income are luring banks into the rapidly growing market for financial advice and asset management.

But there's lots of competition Banks will need to develop strong business plans and leverage a recognizable brand identity that reinforces an image of 'wealth management experts.'

The financial services industry today is eyeing the assets of the wealthy. Banks face increasing pressure to find additional fee income through the sale of asset management products and services, making the high net-worth customer a natural target. In terms of competition, though, it's a lot like the game of musical chairs--too many financial institutions scrambling for too few clients.

"Every single financial institution is going after them," explains Evan Cooper of New York, co-author of the newly published, "Attract and Retain the Affluent Investor," and editor-in-chief of On Wall Street. "Banks, brokerages, insurance companies and financial planners are all going after the wealthy. Yes, there are a lot of people with [dollar]1 million in investable assets, but there aren't as many rich people as there are those who shop in discount stores."

How does a bank stand out in the asset-management business? It should position itself as a wealth expert, suggests Cooper. He gives the following tips.

* Know your local community. Banks already have a widespread physical presence, not necessarily the case yet with most brokerage firms.

* Use your marketing clout. Banks can capitalize on their very recognizable brand.

* Leverage existing relationships. Don't neglect your own back-yard. You already have the grass, water it once in a while.

* Plumb your commercial banking relationships. Use the knowledge base of business banking relationship for cross-selling.

Setting the course

The revenue pie the industry is battling over is expected to grow to [dollar]45 billion in 2004, 80 percent above current levels, according to a Goldman Sacks study of 22000 entitled, "Driving the Green." No longer will institutions be able to maintain a mind-set of 'build it and they will come, says lana Burkhardt, vice president of marketing for Fulton Financial Advisors in Lancaster, Pa. Banks and other financial institutions will need to develop strategic plans to gain market share of the expanding wealth management business.

To compete, Burkhardt maintains that it's essential that financial institutions do the following:

* Clearly identify their market segments.

* Build product solutions to meet those segment needs.

* Develop an integrated distribution and sales strategy.

* Build and maintain a strong branding strategy.

* Communicate their brand with an integrated marketing communications program.

* Continuously train and enhance the credentials of their staff.

"In many ways, banks are now offered greater flexibility to provide a full range of asset management products and services," she explains, "yet maximizing the return of those initiatives will depend on the institution's ability to develop and execute a strong business plan."

Relevant pursuit

To increase chances of becoming the adviser of choice, Wachovia Bank has focused on pursuing the corporate client. By mining their own commercial database, Wichovia marketing executives are able to generate investment banking, wealth management and financial planning revenue opportunities.

"The historical context is that we own these relationships," explains Bob Newell, executive vice president, Wachovia Bank, Greensboro, N.C. "They're closely held businesses, family-owned businesses, and they've had a lending relationship with our company. You provide a bridge whereby they might choose to liquidate the company or enter into something like an ESOP transaction."

Migrating the client from a commercial banking environment to a wealth management environment requires two new skills for bank staff: an ability to target clients where the bank can be "relevant" and to shift away from traditional bank thinking.

"To become relevant you need to have the same discussion with that CEO that you might have with a trusted family attorney or outside consultant," claims Newell. "So you change yourself from someone who holds traditional loan and deposits cash-management discussions to someone who discusses a company's long-term options, goals or funding sources for the future."

These skill sets are taught during internal training sessions that Wachovia kicked off this year. Printed materials and seminars reinforce the message that the company is capable of doing both capital markets and wealth management.

Set the bait

To capture and retain the high net-worth client, most financial institutions are using similar bait--advice and service. In order to combine bank resources with the high-touch adviser relationship, many are beefing up on advisory and brokerage services. HSBC Bank USA, the U.S. operation of London-based HSBC Holdings PLC, for example, plans to grow the wealth management part of its business by 15 to 20 percent a year. Recently merged with Republic New York Corp., the company proposed to license 600 branch-based advisers in addition to its 1,200 financial planners.

Executives at HSBC Bank USA refer to their wealth management style as "needs-based selling," which allows them to establish long-term relationships with clients. Consultative financial planning can be viewed as a structured approach to identifying the individual needs of the client.

"We're not product or transaction oriented, we're relationship oriented based on the needs of the client," explains Simon P. Moules, executive vice president of wealth management at HSBC, Buffalo, N.Y. "Financial deregulation whereby banks are able to provide an array of services helps the financial planning person take a relationship view."

In order to use financial planning as a competitive tool, he suggests banks have the following:

* People with the right expertise.

* Time to sit with a client to go through their needs in a professional way.

* An array of services that are ultimately going to satisfy those needs.

* Cost effective services, whether proprietary or third party.

Creating the right mix

Adding new investment services through acquisitions and consolidation can lead to integration issues. As the lines between banks, insurance companies and investment firms continue to blur, industries across the board are experiencing culture shocks.

"It will be interesting to see how these organizations blend together," muses Benton E. Gup, professor of Finance who holds a Chair of Banking at the University of Alabama in Tuscaloosa, Ala. "So far Citicorp has done a good job of blending them all. As for the others, it will take time to see who the survivors are going to be."

Attempting to mix traditional banking and asset management will result in a lot more failures than successes, according to Bob Smith, managing director of Smith & Crowley Inc., of Los Angeles, and former chairman of the board for Security Pacific Corp. "They are different cultures," says Smith, who wrote the book "Dead Bank Walking." "The investment management company gets a solid core of analysts and professionals with a track record of performance. Banks continue to struggle with what it takes to have that quality of a staff."

It can be done, he says, providing the cultures remain independent, and the bank customers aren't suddenly hit with a dizzying array of new investment products.

"The investment side has a strong branding and a different way of building its reputation," he explains. "If I was a marketing person, I'd want to go with the institution that had developed a track record with diversified investment products and then make sure the investment products fit the customers."

What is the right variety of products? Besides mutual funds and variable annuities, traditional fare for banks, Chip Roame, principal of Tiburon Strategic Advisors in California says there are other essentials for the product menu. "I would add on to that separate accounts, exchange traded funds (ETF), folios and wrap programs," he says. "Those are what's booming right now."

Asset management industry dynamics

Building revenue through the sale of asset management products and services makes sense, according to Lana Burkhardt. Since most clients consider their primary financial service provider to be that firm that holds most of their assets, banks are strategically poised to service the whole customer.

Burkhardt proposes that several trends that have shaped the asset management industry will continue to change the foundation upon which banks are building their asset management business lines.

"Each trend has an implication that will affect how successful the strategy development is in reaching the firm's financial goal," claims Burkhardt.

These trends are as follows:

The Internet. Information and research available to clients today on the World Wide Web has increased their level of investment knowledge and sophistication.

"In turn, their expectations of service providers delivery of products, service, information and technology have risen tremendously."

Explosion of service providers. High-end providers have moved down market; low-end providers have moved up market; and firms that historically provided leads to the banking industry are now offering services directly to their clients.

"This has created a competitive environment that will force providers to develop strong brand strategies as they try to differentiate themselves in the market."

Economic prosperity. A new, large, mass market of affluent clients is very different from the affluent market of the past. The emerging market is very diverse and difficult to characterize without further segmentation.

"These individuals are primarily first-generation wealth and have unique product and service preferences from their parent's generation."

Aging baby boomers. Over the next 20 years there will be a mass outflow of assets from corporate retirement plans. "Services providers will need to be prepared to help them with the tax planning, investment planning and management of their assets as they move their money."

Objective advice as the focal point of the asset management business model. The complexity of the product choices, increasing asset levels of clients and personal time constraints have shifted the way clients select providers. Instead of selecting them based on product choices, customers are now scrutinizing the provider's ability to give advice that is both comprehensive and objective.

"The training and education of advisers within a firm will have to be greatly enhanced to offer the level of advice needed by clients."

Financial Modernization Act. Banks now have greater flexibility to offer a wide range of asset management products and services. "Banks can choose to form strategic alliances with product manufacturers or third party marketers. If they have adequate size, they can build their own products and distribution channels or form partnerships with other institutions."

Janet Bigham Bernstel is a freelance writer based in Jupiter, Fla.

Let us know by filling out and returning the postage-free Reader Opinion Card found between pages 44 and 45.

Marketing to the Mature

There has been a steady shift in household assets way from traditional bank products and into securities for almost a decade. The Federal Reserve Board's 1998 Survey of Consumer Finances shows the greatest growth concentrated in stocks, mutual funds, tax-deferred retirement accounts and other managed assets. In 1989, these assets accounted for 48.4 percent of financial assets, by the end of 1998, they accounted for 71.3 percent.

Which households are holding the assets are also identified in the survey--the 55+ mature market. They have a higher net worth, they own more investment products than other age groups and their accounts have a higher value.

If age equals assets, then targeting the mature audience is your basic no-brainer. Watch your step, though, an individual in the over 50 group is a very different animal from their younger counterparts, according to Michael P. Sullivan, principal of 50-Plus Communications Consulting in Charlotte, N.C.

"First of all, being older means they've had a lot of people come at them over the years," warns Sullivan, who also produces a quarterly drive-time audiotape for financial advisers, Mike Sullivan's Graying Investor Report. "You have to be different, and being different means building and deepening relationships with older clients. You don't deepen relationships by calling them up and telling them how they can double their money."

Also, he explains, older individuals have more--and different--life experiences than younger people. These experiences are what create that special slant on the world we each possess. Many matures came through World War II and the Depression, very different times than exist today. During the baby boomers' formative years, the nation experienced the Vietnam War, the drug culture and the assassination of major public figures.

So one of the things that happens is that the boomers trust the economy and not the government," explains Sullivan, "and matures trust the government but not the economy."

Which means you probably haven't seen all of the business of your current mature clients. They learned at their parent's knee not to put all their eggs in one basket.

"If they have $30,000 with you, they'll have $30,000 with two other institutions," says Sullivan. "It's a natural extension of their formative years."

The key is to work your current customer base assuming you don't have all the business. Do some profiling on existing clients and find out their interests and passions because "as we age we become less peer-group driven and far more individualistic." Once you understand them, you can advise them on specific life issues and life events. After you get the business, ask for referrals.

WHAT AGE GROUP OWNS WHAT INVESTMENTS

Median value of financial holdings
(in thousands of dollars) by age group.


Age     CDs  Bonds  Stocks  Mutuals Funds  Other [*]

35-44   8.0   55.3    12.0           14.0       25.0
45-54  11.5   31.7    24.0           30.0       39.0
55-64  17.0  100.0    21.0           58.0       65.0
65-74  20.0   52.0    50.0           60.0       41.3
75+    30.0   18.8    50.0           59.0       30.0



(*)Other managed assets include personal annuities,
trusts with equity interest and managed
investment accounts.
HOUSEHOLD MEAN NET WORTH


Age       Net Worth

55-64      $530,200
65-74      $465,500
75+        $310,200
All Ages   $282,500



Source: Federal Reserve Board's
1998 Survey of Consumer Finances

Ten Tips for Doing Business with the Older Investor

Carry a wide-barrel pen. It's easier for an older adult to use. The Arthritis Foundation reports that arthritis affects 50 percent of people over age 65. Also, squeezing hard on handshakes could cost you business.

Display patriotic symbols. Wear an American flag lapel pin. It is a subtle but powerful value symbol for the generations that fought in World War II and Korea.

Establish trust first. Older customers are relationship-oriented. Take the time to show how you truly care about your older client. On occasion, give a small, thoughtful gift. The cost is not important; it is the thought.

Display pictures of your children or grandchildren. Talk about them. More than 80 percent of people over age 60 are grandparents and a third are great-grandparents. Funding college education is a reasonable goal for grandparents.

Keep a pillow in your office. Many older people use a chair pillow to support them when they are sitting. Leave one on a chair they are likely to sit on. If they ask what it is for, tell them you use it occasionally and they are welcome to use it. Avoid commenting on their limitations.

Don't call them "senior citizens." About one-third don't like the term. In fact, don't use labels when talking with them. If you must, refer to them as "people like yourself."

Understand what age they think they are. Chronological age does not match cognitive age (the age people feel they are). Most older people see themselves as 15 years younger than their actual age.

Create a positive physical setting. Eliminate glaring outdoor and internal lighting. Reduce background noises. Don't seat them in a drafty area, such as under a heating or air conditioning vent. Note that hearing loss affects many older people.

Use metaphors. When describing financial products, use figures of speech, such as, "Financial planning is like going down a river in a boat. Sometimes it's rough; other times it's smooth. Sometimes there are rocks (or difficulties) ahead to be avoided."

Draw them a picture. As people age, they remember things much better from what they see than any other way. Draw it out for them. Use icons (nest eggs, trees, scales, faucet with buckets) to illustrate abstract ideas. Reinforce by writing down key words. These serve as visual cues to help them better understand concepts or product features.

Source: 50-Plus Communications Consulting, Greensboro, N. C.

Is Your Office A Turn-Off?

If you've got an office, or a branch, or even a lobby, you'd better it tells a story to everyone who walks into it. That's why Mitchell Anthony and Scott West, authors of "Storyselling for Financial Advisors," suggest you perform an "office audit" before you turn away a potential client unwittingly.

Through research, the team found that successful advisers were able to get a client's personal story first, and then explain financial product objectives in terms the client could understand. But to get to that story, you first have to make a personal connection.

"You want to be sure your office is sensitized to do two things: to garner the right story from your clients, and communicate the type of story that you want to tell about yourself or business," advises West, senior vice president and director of marketing programs for VanKampen Consulting in Chicago. "The way you decorate your office has to be intentional."

The team hands most advisers a four-page audit to conduct. Of course, the audit can also be conducted by branch office managers or marketing executives. Here is a simplified version of the top five top categories they say need to be displayed or represented. Make special note of the order:

Family: even if it's you and your dog. You show your human side and spark conversation.

Personal interest and hobbies: From golfing to hot air ballooning, people like to talk about what they like to do.

Faith/patriotism: Every office needs to have a flag or a globe in it, says Anthony. This is aimed especially at the mature, affluent WW II crowd. Also, travelers will begin conversations about where they like to go, what they like to do.

Education: Your school shows something about your roots. You may also meet fellow alumni.

Recognition and awards: These are important, but not in your office. Try placing them in a hallway or waiting room, instead.

"You go in most adviser offices, and that list is flip-flopped," claims Anthony, president of Peer Power Communications, a Rochester, Minn.-based company that specializes in relationship building strategies. "How important you are really isn't important. Make sure the atmosphere is a stimulator of conversation."

This isn't accidental decorating. By learning the client's individual story you uncover two things:

Land mines: These are biases, prejudices and deeply held negative feelings as relates to investing or money. Step on these accidentally and you're done.

Gold mines: These are positive experiences for the customer as relates to investing or money. You can reference these later when you attempt to sell products.