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Spread the wealth: now that margins are slim and fees are meager wealth management has taken on a new appeal as a source of noninterest income. This approach comes with a new business model that focuses on financial planning for a wider variety of retail customers--not just the very affluent.

IS NOW A GOOD TIME FOR COMMUNITY BANKS to enter the wealth management business--or to focus more intensely on their existing business line?

Yes, is the quick answer from Carolyn Paul, president of Investment Management and Trust for ANB Bank (assets: $1.7 billion), Colorado Springs, Colo. "Margins are thin, and fees are hard to come by; this is a great way to add noninterest income." And she knows, having built a very successful wealth management business for a mid-sized bank, she is now starting again--building out a robust wealth management business at ANB Bank.

"When you're starting out or rebuilding, you need to ensure that you have a firm foundation. You need to be confident about your products, pricing, value proposition and compliance infrastructure before you start inviting customers into your house. Next, you need to find the right people. People who fit with your team and culture, who have the skills and have the ability to build relationships," Paul explains.

"Above all, to succeed in this business, you need to always keep the customer's best interest at heart. If you're doing the right thing, you'll be rewarded," Paul continues.

"Keep the customer's best interest at heart"--this phrase is repeated by wealth management leaders from across the industry. How it manifests itself in their business strategy varies, but several common themes emerge:

* Using financial planning as a key to understanding customer needs in greater depth and building deep, long-lasting relationships.

* Understanding that your existing client base is key to growing your business for the future--in a variety of ways.

* Recognizing whom you're competing with and crafting the appropriate competitive response.

Focus on the customer

In 2008, Canandaigua National Bank & Trust Co., (assets: $1.7 billion), Canandaigua, N.Y., made a fundamental shift in its wealth management business model. The bank moved from providing fee-only comprehensive financial plans for a few clients to one in which financial planners are integrated into all retail and wealth-management investment account relationships, with costs covered by investment account fees. This shifted the client experience from an investment-only focus to one centered on the client's overall financial well-being.

"When we made this shift, we created two immediate needs--the need for trained financial planners and the need for an efficient way to manage clients' portfolios in light of their overall financial picture" says Jim Terwilliger, who is a Certified Financial Planner and senior vice president, financial planning manager at Wealth Strategies Group.

"We require our financial planners to have earned the Certified Financial Planner certification. And, we have staffed the majority of these positions internally. This ensures a cultural fit, an understanding of our company and provides a career path for our branch associates. In terms of improving our efficiency in portfolio management, we have moved to a passive portfolio approach--this allows our financial planners to focus on matching well-defined client needs to highly structured, actively managed portfolios. After five years, the flow of referrals from the retail network has not slowed, with most referrals now coming through existing clients.

"In our financial planner role, we see ourselves as general practitioners. We stay at the table with our clients as we introduce specialists in business banking, mortgage or any other area. It's this high-touch approach that has driven a [wealth management] attrition rate of less than 2 percent since our change in strategy," explains Jason Fitzgerald a Certified Financial Planner and vice president, investment officer and financial planning officer at Wealth Strategies Group.

"We commit to doing annual plan reviews with our clients and will refund their fees if we don't keep that promise. Reviews are focused on client-centric goals and results--there are not reams of paper--just relevant information to craft plans for the next year. When we moved to this strategy, we made the financial planner the center of our relationships--now it is even the center of our brand--bringing new meaning to our institutional tag. Investing in You."

KeyBank (assets: $85 billion), Cleveland, has also put financial planning at the center of its wealth management strategy and has developed a whole new delivery model to ensure that high-quality advice can he delivered to its clients in a way that is scalable and creates a consistent customer experience. The key to this model is to build a smooth connection between the firm's advisory teams and the sales teams delivering product to the customer in the field.

"As we looked at our opportunity in these advisory services, we knew that we needed two things--added capacity in the field and a way to speak to prospects in terms that ascribed real, tangible benefits to financial planning," explains Chad Hamilton, a Certified Financial Planner and director of financial planning at Key Private Bank. "We built capacity by adding at least one financial planner and "para-planner" to all of our markets; their goal is to work more effectively with our line-of-business partners, especially in middle market and business banking."

"Advisory services are by their nature highly customized and, therefore, inconsistent in their delivery--we felt there was a way to bring both improved quality and consistency to financial planning while making its value more apparent to customers and prospects From the first conversation," says Brian Jaros, a Certified Financial Planner, and senior vice president, regional financial planning manager and national strategic advice lead at Key Private Bank.

"We realized the vast amount of institutional intelligence available to address this challenge. That intelligence forms the basis for our Key Planning Innovator, a tool that facilitates development of customer-segment-specific conversations and plans. This tool brings a planner through a series of questions about his or her client or prospect. It looks at the client's segment (business owner, retiree, physician, executive or other), goals organized by 13 wealth issues, life events and information gleaned from tax returns and other sources and uses predictive analytics to ensure that a planner walks into his or her next client meeting fully prepared.

"We find that planners arrive at the client's pain points much more quickly and begin meaningful conversations on next steps. The importance of getting to meaningful content quickly is becoming even more important as Gen X customers become our target--we will have less time than ever to demonstrate value with this group."

The approach is continued in reporting to clients--in annual reviews; goals in each of the 13 wealth-issue categories are compared to results and flagged as green, yellow or red. This approach takes the conversation beyond purely one of investment performance to a comprehensive look at the clients' financial well-being. "Our financial planners are now focused on identifying client issues. The two- or three-page summary reviews facilitate meaningful conversation with their clients and clear steps for the coming year," says Jaros.

"Automated tracking systems help to ensure that agreed to steps are acted upon by both bankers and clients. We've effectively moved our intellectual capital to the front line and enhanced efficiency and sales effectiveness considerably. Our compensation schema has not changed, but goals are now more achievable and we're seeing increases in sales," Jaros concludes.

Growing your client base

Paul reminds us, "The bank clients love the bank--when a client is introduced, it's a warm hand-off--there is no need for high pressure. It's the bank's great reputation and client relationships that you're enhancing in partnership with business bankers and personal bankers. The customer knows that you're on their side of the table.

"As these relationships are solidified, the question of how to leverage these relationships to acquire new ones comes into focus. The traditional 'write down three names whom you think I should contact' seems inconsistent with this commitment to keep our clients' needs first," says Paul. So how are bankers generating high-quality referrals while-staying true to this guiding principle?

"We know that when asked, 80 percent to 85 percent of wealth management clients say that they would provide referrals, while only about 15 percent will do so without being asked," says Richard Henry, president of Millennium Consulting Group.

"An approach that is being used with great effectiveness is the idea of extended family awareness marketing. At the heart of this idea is the fact that you can do a better job for your clients if you understand what is happening in their broader family picture and what recommendations are coming from other key advisors, such as attorneys and accountants. This changes an 'ask for a referral' into 'an offer to provide financial advice to a loved one,'" Henry continues.

"It all goes back to how you take care of your clients--are they better served when you know the key people surrounding them? The answer is almost always yes. And the result of this improved service is development of a very large network for the financial planner or adviser. Too many advisers today are relying on "hope" when they think about transferring wealth. By proactively making heirs a part of the overall planning conversation, you have established the basis for an ongoing relationship--a feeling that you are adding value to their family's overall financial well-being," Henry continues. "And adding value to the clients' network can extend beyond family and advisers--offering advice to a business owner's employees through bank-at-work seminars effectively helps them while rapidly growing the adviser's network."

What comes next?

So what happens next? Will Generation X, the first group to grow up in the digital age, redefine "affluent service" as we know it? Opinions vary.

Alex Sion, president of Movenbank, an online bank with headquarters in New York, sees affluent expectations morphing to include some degree of empowered self-direction and access. "One constant has been conversation for wealth management--it's emotional, complex. Those human conversations are not scalable. So, how do you have a conversation in a digital world? Bankers can't resist tablets, mobile; tethering bankers to their desks is no longer acceptable--the characteristics of the conversation must evolve.. Also, rethink the content of the conversation--focus more on the emotional as these clients already have access to the rationale. We need: to recognize that "advice" is inherently social--and make that a part of the new wealth management space. We are moving toward a series of micro-interactions creating the voice--we need to ensure that it doesn't seem random. The job of wealth managers of the future will be as a curator of the financial experience--bringing together the best ideas and tactics for consumers.

"When issues become complex, people want to talk to other people--the nature of that conversation will change to include tablets or other devices. But the primary role of professionals is as problem finders, not as problem solvers will remain--people really don't know what their financial issues are--so the need to uncover them through planning won't go away," says KeyBank's Hamilton.

"The next generation will experience all sorts of life and market changes, as this one has. And relationships are key to helping clients through these changes. Communication helps clients through rough market cycles. Prospects often become clients when current advisers don't say anything during a rough cycle. Not necessarily a performance issue--it's a trust issue--it's a people issue," concludes Paul.

RELATED ARTICLE: What's the Competition for the Wealth Management Space?

The size and immediacy of this market opportunity has not gone unnoticed. Market segmentation strategies of many of the largest banks have opened new business opportunities in the lower end (less than $3 million to $5 million) of the wealth management market for community banks and other institutions. Wealth management offices in smaller cities were commonly consolidated into larger markets.

But who are competitors For this new opportunity hand? Not necessarily the bank down the street. "The biggest winners in recent years have been the Registered Investment Advisors (RIAs). We run into them frequently--some in a specific niche such as large-cap core for example--but all are active in the communities and are effectively forming relationships," says Carolyn Paul, president of Investment Management and Trust for ANB Bank, Colorado Springs, Colo.

"An RIA won't get promoted and move to a new town," says Steve Randolph, managing partner, Oakbrook Solutions. "A client with less than $3 million wont get the attention of a larger hank, but can establish a relationship with someone he or she knows and trusts through an RIA. Although RIAs have traditionally not offered trust services, new working models are enabling them to become trust companies with a limited bank charter. Outsourcing firms are also offering trust services and other technology services to these companies that till some previous gaps."

As banks move to a financial-planning-centric model, they actually become more similar to the RIM, which have had financial planning at their core historically. How do you compete?

* Build successful, locally focused business units that give your employees a reason to stay.

* Reward your employees for building their book of business.

* Keep them out in the market, not in meetings.

* Ensure that your financial planning offering is robust.

* Provide the tools and culture to establish and maintain quality relationships--that will do far more than traditional advertising or other marketing tactics.


DEB STEWART of Charlotte, N.C., is an independent consultant working for the financial services industry. Telephone: (704) 759-1633; email:
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Comment:Spread the wealth: now that margins are slim and fees are meager wealth management has taken on a new appeal as a source of noninterest income.
Author:Stewart, Deb
Publication:ABA Bank Marketing
Article Type:Cover story
Geographic Code:1USA
Date:Jun 1, 2013
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