Banks beef up wealth management services

Special to The Daily Record//November 17, 2011

Banks beef up wealth management services

By Amy Burroughs

//Special to The Daily Record

//November 17, 2011

While some quarters of the banking industry still struggle, others have their eye on a silver lining: wealth management.

Attracted by the prospect of high profits and aging baby boomers preparing to pass on their wealth to the next generation, banks are seeing increased opportunity — and heated competition — in high and ultra-high net worth customers.

In Maryland, the stakes are even higher, as banks compete for per-capita wealth that’s among the nation’s highest, said Trent Williams, regional director for Wells Fargo Private Bank in Baltimore.

“It’s a ripe market for us,” he said.

On Nov. 1, Wells Fargo announced the launch of a new brand, Abbot Downing, which will cater to ultra-high net worth clients when it launches in April 2012.

Other large banks are moving aggressively in this area as well. M&T Bank has acquired Wilmington Trust to boost its wealth management services. PNC Bank is launching a new product, Wealth Insight, to provide real-time, aggregate financial information to wealth management customers. And Bank of America’s new service, Merrill Edge, targets newly affluent mid-range investors.

The complexities of succession planning, multiplied by population demographics, have sparked banks’ interest, said Mark Graham, executive vice president of Wilmington Trust, who is in charge of combined wealth advisory business for M&T and Wilmington Trust.

“Everybody is trying to get in the middle of that wealth transfer,” he said.

While some observers say banks are motivated by revenue lost because of fee reform, Maryann Johnson, senior vice president of Wealth Management & Trust Market for the American Bankers Association, said a bigger reason is simply that wealth management makes money. In addition to collecting fees, wealth managers may encourage customers to aggregate their assets at the bank, which brings in additional deposits.

In fact, she said, many customers with $1 million to $5 million in investable assets have been managing their own money but now realize they need help. As a result, they want not only traditional investment management, but also guidance in selling family businesses, creating charitable foundations, negotiating tax and insurance, and navigating the tricky waters of multigenerational inheritances.

“I think in large part, what banks are doing is responding to a growing and very profitable market need,” she said. “It’s — I’ll underscore the word ‘very’ — profitable.”

Bank of America

While Bank of America serves high and ultra-high net worth individuals through Merrill Lynch Private Banking & Investment Group and U.S. Trust, its new line, Merrill Edge, targets newly affluent investors with between $50,000 and $250,000 in investable assets.

Tony Burns, Merrill Edge regional sales executive for Mid-Atlantic states, said the bank has identified an underserved but growing market.

“They have needs that go beyond standard retail, but they really don’t fit the profile that requires a full-service advisor,” he said, adding that the bank already has some 8 million customers fitting that profile.

Unveiled in a pilot program in 2009, Merrill Edge has been rolled out nationally. Customers can tap the bank’s investment expertise in an online, self-directed format, via call centers staffed with financial solutions advisors or in person.

The bank has hired more than 500 advisors for branches and another 650 for call centers, Burns said. Forty of those positions are in Baltimore.

For Merrill Edge clients, many of whom may not have had financial planning assistance, the financial service advisors will direct them to the best channels based on individual profiles, Burns said. Customers with more-sophisticated needs will be referred to Merrill Lynch advisors. “Where we focus, on $50,000 to $250,000, there are a lot of individuals who have not had the opportunity to sit down with someone who has the tools and resources we have and really help them,” Burns said.

Spokeswoman Selena Morris said Bank of America has a total of $2 trillion in assets under management.

M&T Bank

M&T solidified its wealth management stake by acquiring Wilmington Trust, a deal finalized in May. The bank has $81 billion in assets under management and will continue using the Wilmington Trust brand.

Graham, executive vice president in charge of the combined wealth advisory business, said Wilmington Trust had two healthy lines of business that attracted M&T: legacy wealth owned by multigenerational families and created wealth from entrepreneurs.

“The brands are highly complementary,” said Chris Randall, president of the Mid-Atlantic region for Wilmington Trust, “in that we, the bank, are helping them grow their business, but we now can provide leading, cutting-edge advice on how to protect and transfer those assets.”

Randall said M&T will promote a community bank approach alongside Wilmington Trust’s emphasis on customer relationships.

PNC Bank

At PNC Bank, services are delivered through PNC Wealth Management and the Hawthorn brand, which caters to the ultra-affluent. The bank has $103 billion in assets under management.

Louis Cestello, regional president for the Greater Maryland market, said PNC just began a national rollout of a new product, Wealth Insight.

A portal into a PNC platform, it aggregates information about income, investment holdings, asset allocations, net worth and other data, giving customers real-time data and customizable reporting no matter where their assets are held.

“We’ve actually had the test phase here in Maryland and it went exceedingly well,” Cestello said.

PNC also has been promoting its wealth management services in a recent advertising campaign.

Customers from boutique firms sometimes ask if they will receive enough attention at a large bank, Cestello said, but a bank’s size also can be reassuring.

In the wake of Bernie Madoff-type scandals, he said, “I think people are doing more due diligence on their financial service providers than they would have five years ago.”

Cestello agreed that Maryland is fertile ground. In addition to faring comparatively well in the recession, Maryland is home to many multigenerational families who have deep ties to the state and intend to keep their money here, he said.

“There’s been a lot of wealth that’s been created and passed down over time, so we think it’s a fantastic market for PNC in general, but also especially for our wealth business,” he said.

Wells Fargo

Abbot Downing will serve households with at least $50 million. According to Sandy Deem, senior vice president for family wealth communications, that represents approximately 10,000 U.S. households controlling more than $1 trillion.

Deem said Abbot Downing wants to distinguish itself by serving the unique needs of ultra-wealthy families and helping customers create meaningful legacies.

“Families from this level have more money than they are able to spend in their lifetime, so they really have to think about what impact they want to make in the broader community with their money,” Deem said.

In a large family, such decisions can be complicated, so advisors will emphasize helping families sort through issues, with on-staff psychologists if needed.

The bank expects increased mergers and acquisitions activity to create newly wealthy clients in need of guidance. Deem cited a Thomson Financial report that middle-market M&A activity was up 30 percent in the first half of 2011 compared to the same period last year.

“There are a lot of factors at play that make this an exciting time to be in this business,” she said.

She attributes most of the push to demographic changes. “You’re going to see a tremendous transfer of wealth in the country, so that’s something that’s going to make a really big impact,” she explained.

With $27.5 billion in assets, Abbot Downing will serve customers in 15 cities.

The Mid-Atlantic corridor is one of Wells Fargo’s most important markets, Williams said, because of its high concentration of wealthy individuals. Accordingly, the bank added an investment manager and a financial planner in Baltimore in 2010.

“We’ve added that resource in part because of the opportunities we see here, but also because we wanted to demonstrate to this market we were serious about delivering private banking and wealth management services,” Williams said.

Competing with brokerage houses and boutique firms, banks tout themselves as teams with deep benches, capable of advising clients on everything from tax planning to philanthropy.

“The days of having one individual provider be the subject matter expert across all of those disciplines have started to wane,” Williams said.

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