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Some banks have been successful in serving a client base that ranges from mom-and-pop operations to multinational conglomerates, but the most profitable and efficient ones tend to have more targeted strategies, according to a new report from McKinsey & Co.
November 6 -
Regional and community banks are carving out niches as asset managers by offering perks and personal services to affluent customers whom bigger rivals often overlook.
October 11
First Republic Bank (FRC) has been lending to high-net-worth clients for decades, but co-founder and Chief Executive James Herbert admits that it only recently became adept at managing its customers' money.
Over the past year, the San Francisco bank's wealth assets under management have increased by more than 56%, to $38.2 billion at Sept. 30. Some of that growth can be attributed to its December 2012
Speaking at an investor conference in New York on Tuesday, Herbert traced the banks' recent success in wealth management to its short-lived affiliation with Merrill Lynch, which owned First Republic from 2007 to 2010. Management, led by Herbert, bought the bank back from Merrill after the brokerage firm was acquired by Bank of America (BAC).
"We got our act together, quite frankly, when we were inside Merrill Lynch," Herbert said. "We learned a lot from them."
The $41 billion-asset First Republic has roughly doubled the size of its wealth-management staff since July 2010, and it continues to open offices in affluent markets including the campuses of Facebook and Twitter.
The investment is paying off in more than the growth of wealth assets and accompanying fees, but also in products per customer.
First Republic's strategy is to lead with a jumbo mortgage and then use the jumbo as the platform for selling additional products and services. According to its presentation Tuesday, a customer who received a mortgage loan from First Republic last year has, on average, eight other products and services with the bank.
"You can think of [the jumbo loan] as a home loan, or you can think of it as a relationship," Herbert said. "We choose the latter."
Other bankers at the conference also discussed the importance of cross-selling wealth products as a driver of income and revenue growth. City National Bank (CYN) in Los Angeles, for example, derives roughly 50% of its fee revenue from trust and investment management, and it continues to add staff and new products in an effort to offer more investment options to its wealthy clients.
It also recently rolled out an online portal that allows clients to access all of their loan, deposit, brokerage, credit card and other accounts in one place largely to accommodate wealth customers who want to be able to move money around easily.
Bank of America takes a "stair-step" sales approach, CEO Brian Moynihan said Tuesday during the kickoff to the conference.
Checking accountholders over time are repeatedly pitched cards and then investment products, he said. B of A needs to mine its existing customer base, and take advantage of its big deposit business and branch network, to feed its higher-margin operations, he explains.
"Eight million people come to our branches a week," of which more than 1 million are affluent, he says. "We are driving engagement levels. The conversation goes on with them" in the teller line or with personal bankers.
B of A benefits from the fact that it owns two strong wealth management brands, Merrill Lynch and U.S. Trust. There is a lot upheaval among financial advisors, as many have left big banks and brokerages to form their own firms, but Moynihan says B of A has "the lowest attrition rate among experienced advisors that we have had in a long time." It also has a strong program to recruit new advisors, embed them in branches and help them establish client relationships, he says.
With scores of new and repeat customers coming through B of A's doors each week, advisors and other employees have to be constantly "working 'em and working 'em," Moynihan says.
"That's where the growth is going to come from," he says.
