American Banker: Poaching Required in Wealth Management Business

Tuesday, 09 Jul 2013 12:55 PM

By Michelle Smith

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There are many opportunities in wealth management, but the competition is fierce as banks squeeze their way into the business, according to the American Banker.

Consumer sentiment has improved and people are increasingly looking to put more money to work. Interest is not limited to those with high-incomes; a growing number of middle-income Americans are also looking to take control of their assets.

This is opening up opportunities for the brokerage houses, mutual fund firms and scores of independent financial advisers who are in the race for clientele. But competition is already stiff and the American Banker says banks of all sizes are also now looking to cash in on wealth management.

Editor's Note: Startling Proof of the End of America’s Middle Class. Details in the Video

Banks are attracted to the possibility of earning revenues from wealth management fees at a time when stricter regulations, weak loan demand and low interest rates are weighing on their normal sources of revenue, the American Banker explained.

And as banks eye these opportunities they are recognizing the need to open up their services to a broader range of clients.

Many banks are targeting the so-called "mass-affluent," people with investable assets of $100,000 to $1 million. In the past, many financial professionals didn't feel these individuals were worth the time or expense.

An average household with less than $100,000 in investable assets pays their financial advisor only approximately $30 per month, according a PriceMetrix report.

"This return is hardly enough to cover basic account costs, and barely enough to justify time spent with the client," Amrita Mathur, PriceMetrix's marketing director, told FinancialPlanning.com.

Even clients with $250,000 or less in assets "directly and negatively affect an advisors' growth rate," another recent PriceMetrix report found.

"An advisor needs to make room and have the capacity to attract and serve the more complex needs of high-net-worth clients," Pat Kennedy, vice president of product and client services for PriceMetrix, told FinancialPlanning.

But Steve Lockshin, chairman of Convergent Wealth Advisors, said efficiency is the key to working with smaller clients. There is opportunity for firms with a lot of smaller clients to run to make a profit, he told FinancialPlanning.

Technological advancements help and wealth managers will increasingly need to be more savvy to fit the lifestyles of even the wealthy.

In fact, 75 million digitally savvy, relatively high-income investors have approximately $27 trillion in assets, according to Accenture data cited by American Banker.

Banks are adapting both in terms of the packages of products being offered and the way customers are able to manage their investments.

Still, even once the net is cast wider to accommodate changes in the wealth management industry, there is only so much new business out there. If banks really want to break into the wealth management market in a meaningful way, they must poach other firms' customers.

"This is all about stealing share now. It's not about telling people to bring money from your mattress," Wayne Cutler of consulting firm Novantas told the American Banker.

Editor's Note: Startling Proof of the End of America’s Middle Class. Details in the Video

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