Wealth Management: Worth a Second Look? Market Forces and Competitive Trends Suggest That This Specialized Business May Give a Needed Boost to Bottom Lines Strained by Shrinking Net Interest Margins
2007; American Bankers Association; Volume: 99; Issue: 3 Linguagem: Inglês
ISSN
0194-5947
Autores Tópico(s)Banking stability, regulation, efficiency
ResumoSay somebody told you that they had a business that would generate fees of 1% of assets, and that the pool of assets, even if you didn't add to it, was likely to grow, on average, by 8% a year. And further, that you could charge a fee for providing a careful and professional financial plan, and that with that plan in hand, customers would, more often than not, happily turn over their assets to you to manage, adding to that pool you already have. Would you say that such a proposition was (a) too good be true? (b) obviously a slick Wall Street deal? or (c) sounds pretty good? The business just described is quite legit, and is working very nicely for a 207-year-old Rhode Island community bank, The Washington Trust Co. It is, in fact, just part of the bank's wealth management story. The bank also runs a profitable, traditional trust business that's been around as long as the bank itself--since 1800. Its wealth management business contributed the lion's share of the company's noninterest income in 2006, which altogether accounted for 47% of the bank's total revenue--a huge percentage for all a handful of specialist banks. Investment assets at the bank total nearly $4 billion, surpassing the traditional bank's total of $2 billion. Yet Washington Trust remains committed to traditional banking and has no plans to become a Boston Private Bank & Trust or a Mellon Bank. Galan Daukas, executive vice-president of wealth management, says the expectation is for the two parts of the bank to be about equal. But he adds that the wealth management division gives the NASDAQ-traded bank better earnings balance and diversification, which helps its share price. Get out from behind the desk Washington Trust is not the only community bank to recognize the profit potential of the trust/wealth management business. In northwest Iowa, Peoples Savings Bank, $230 million in assets, is about eight years into a renewed commitment to the trust business. The bank had activated its trust charter in the '70s, had not done much with it--assets under management had grown to only about $15 million. In 1999 the board asked itself, Is this a business we really want to be in? Deciding in the affirmative, it brought in an experienced trust banker, Mike McAlpine, to grow the business. In his conversations with the bank's management, McAlpine--senior vice-president, trust--told them they had to be committed to the and that it would take time to build it to profitability. said, 'If we're going to do this, let's do it right', he recalls. Since then, McAlpine, initially a one-man rainmaker, now with a staff of four and a half (FTE), grew trust assets from $15 to $87 million, exceeding expectations. Of this, 28% is personal trust about 41% is investment management, with the remainder being retirement plan administration and some conservatorships. The growth was accomplished almost totally in rural community markets, such as Sioux Center, Iowa, population 6,000, where McAlpine is based. His secret to growth is hardly a secret: You need to get out from behind the desk and go see prospects, and market your business, he says. He spends two to three days a week meeting with people outside the bank, building referrals. One source of referrals is customers. McAlpine and his staff are not shy about asking satisfied customers, Do you know someone who we could talk to? They rarely give you the names directly, says McAlpine, but they talk to people they know. On a full P&L basis, Peoples' trust/wealth management unit is not yet profitable, it's close. If credits for deposits to the bank were included, it would be, says McAlpine. Without that, you really need $100 million in trust assets to turn the corner, he says. (Depending on whom you speak with, that number may be higher, reflecting regional labor costs and other factors.) McAlpine uses TrustCompare, a product of Financial Services Associates, Niles, Mich. …
Referência(s)