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First Republic Bank in San Francisco has agreed to buy Luminous Capital Holdings. Luminous, an independent wealth advisor based in Los Angeles, provides investment advice and asset allocation, including alternative investments, to high-net-worth individuals, family offices and foundations.
November 2 -
Center Bancorp (CNBC) of Union, N.J., has taken another step in its plan to bulk up in northern New Jersey.
June 18
A difficult environment can make for strange bedfellows, particularly for banks that are eager to find new ways to make money.
The latest odd couple in financial services pairs a bank with a family office, groups that have historically competed for employees and business.
Earlier this week, Center Bancorp (CNBC) in Union, N.J., agreed to partner with Alexander, Troy & Co., a family office in Katonah, N.Y. Center hopes the move will provide referrals for private banking, mortgages and other services.
"Hopefully, that's where we will be the wealth manager of choice," says Anthony Weagley, Center's president and chief executive. The $1.6 billion-asset company's private banking unit, formed about two years ago, has roughly $100 million in assets under management.
Such partnerships could become more commonplace as banks and family offices tackle issues such as cost structure, revenue growth and regulation, industry observers say.
"Banks should be scrambling to find niches and fee income any way that they can," says Lee Burrows, the chief executive of Banks Street Partners in Atlanta, which advises banks on acquisitions and raising capital.
"The idea of joint ventures has taken on new meaning since the financial crisis," says Tom Livergood, the chief executive of Family Wealth Alliance, a research and consulting firm in Wheaton, Ill., that focuses on family offices. "It is really on the upswing."
There are two big challenges for family offices, which handle finances and other daily tasks for affluent clients "First,
Defining what constitutes a family office isn't an exact science, either. Based on various studies, there are anywhere from 3,000 and 5,000 family offices in the United States, says Marvin Pollack, managing director for marketing at the Family Office Exchange in Chicago.
Family offices can include everything from a firm that manages money for a single family, to groups that handle all types of financial services for a number of wealthy families. Those services could range from buying insurance and managing kids' college plans to preparing taxes and handling the management of vacation homes.
"They can provide a wide range of services," Pollack says. "Investing is just part of it."
Some, but not all, family offices handle asset management internally. Alexander, Troy does not offer that service, which helped spur the agreement with Center.
There is still potential for community banks to compete against family offices for business. Smaller banks have a built-in edge when it comes to handling the affairs of wealthy families, since most emphasize
But it remains unclear whether smaller banks can make adequate headway against long-established players in the wealth-management area such as Charles Schwab and Vanguard Group. "It will be a fight for community banks to get a piece of those affluent customers," Johnson says.
Alexander, Troy's services do not overlap with those offered by Center's wealth-management division, so there is no threat of stealing clients, Weagley says. He would not provide projections for how much fee revenue Center could generate from the partnership.
Center also wants to grow on its own. It opened a
Bryn Mawr Bank (BMTC) in Pennsylvania gets referrals from its own family office, says Ted Peters, the company's chairman, president and chief executive. He says the barriers of entry for starting a family office are fairly high, particularly for products such as trust services.
"It's a very hard business to get into," Peters says. "We have seven lawyers on our trust staff and five" certified public accountants.