Triangle banks target affluent customers with wealth management services

dranii@newsobserver.comMarch 22, 2014 

With baby boomers entering their retirement years and investment portfolios expanding thanks to the surging stock market, Triangle banks are intent on helping the affluent manage their wealth.

“Banks go where affluent consumers are,” said Tony Plath, a finance professor at UNC Charlotte. “The affluent consumers are the ones in need of wealth management” services.

Factors such as so-so demand for loans and increased regulations have squeezed banks’ profit margins on so-called transactional businesses such as loans and deposits, Plath said. Consequently, “the banks are evolving into being more service-oriented than transaction-oriented.”

That includes wealth management, which encompasses a range of offerings such as: financial planning; investment management; “private banking” services that cater to the special needs of the wealthy; and trusts and estate planning.

“When you talk about wealth management, it’s such a broad umbrella,” said Scott Custer, president and CEO of Raleigh-based VantageSouth Bank.

By definition, wealth management isn’t for the hoi polloi. Many bank wealth management divisions focus on individuals and families with at least $1 million in “investable assets.”

In the Triangle, a number of banks have been upping their game in the wealth management space. A few examples:

• SunTrust Bank recently unveiled a Web-based financial planning tool for its well-heeled clients.

• PNC Bank, which entered the Triangle market two years ago when it acquired RBC Bank, has been diligently building up its wealth management business in the region.

• Wells Fargo added 10 financial advisers for its wealth management business in the eastern half of the state over the past 12 months, a 16 percent increase. And its Wilmington wealth management office anticipates adding five or six new employees after it moves into new, expanded space this summer.

“It’s a business that we’re really focused on expanding in a thoughtful way,” said Greg Carr, regional managing director for Wells Fargo Private Bank.

Improved profitability

The closely watched Standard & Poor’s 500 index jumped 30 percent last year, its best performance since 1997. So it’s no wonder that a recent study by management consulting firm Booz & Co. found that the total assets under management by North American wealth managers now exceeds the levels achieved before the financial crisis.

In addition, profit margins for wealth managers, which took a hit during the recession, are on the upswing, the study found.

That improved profitability stems in part from the advances in the stock market in recent years, because fees for managing investments typically are tied to the amount of assets under management, said Arjun Saxena, a Booz partner. So fees grow as the portfolio grows.

Wealth management also is attractive for banks because “you don’t have the capital requirements and the regulatory constraints that you have in some of the other businesses,” Saxena said. “So they are all looking to scale that business up.”

It’s a crowded field where banks compete with the likes of brokerage firms, financial advisers and stand-alone businesses that focus on wealth management.

The lines are blurred at times. Merrill Lynch, for example, is owned by Bank of America. Wells Fargo owns Abbot Downing, a wealth management business for the ultra-rich – individuals and families with at least $50 million in investable assets.

But, Plath said, banks “have a competitive advantage because they are financial advisers that develop relationships with their client base.”

Michael Wilson, who heads wealth management at Raleigh-based First Citizens Bank, noted that many clients are successful entrepreneurs whose businesses also bank with First Citizens.

“That’s really where the wealth is made,” Wilson said.

Forging relationships

Wilson, who joined First Citizens in December, said the bank has been beefing up its wealth management staff in the Triangle – but he’s not disclosing numbers – and intends to unveil a new advertising campaign before the end of the year that focuses on wealth management.

Pittsburgh-based PNC also is intent on getting out the word about its wealth management business.

It had to start from scratch when it acquired RBC Bank from Royal Bank of Canada because RBC’s wealth management business wasn’t part of the sale. In addition, PNC signed a noncompete clause that prevents it from wooing RBC’s wealth management customers.

To build up its clientele, PNC has held marketing events such as bringing in an appraiser from the popular PBS series “Antiques Roadshow” to evaluate antiques at the N.C. Museum of Art for select individuals. And it hosts clients and potential clients “on a weekly basis” at events ranging from concerts to hockey and basketball games at one of its two suites at the PNC Arena in Raleigh, said Dennis Blue, regional director of wealth management services.

PNC also has focused on forging relationships with trust and estate attorneys who refer clients to the bank – and vice versa.

“It’s competitive because when we work with high-net-worth individuals and families, the scope of our market is limited,” Blue said.

Smaller community banks compete in the wealth management space as well, but they frequently outsource the work.

Raleigh-based Paragon Bank, for example, relies on Raleigh’s Rick Gardner & Associates for wealth management – that is, financial planning and investment management – but handles private banking for its affluent clients in-house.

Unique needs

Paragon previously was known as Paragon Commercial Bank, but it dropped the “Commercial” from its name in December to stress that it has expanded its focus beyond business customers to include catering to the wealthy.

“A lot of times, individuals with wealth have very unique needs,” Brian Reid, Triangle market president, said of Paragon’s private banking business. “A lot of times they may have assets that are tied up in companies, that are tied up in LLCs (limited liability companies) and other things. They need someone who understands that and is able to create a credit product for them that is specific to their needs.”

Paragon currently has four private bankers at its Raleigh office and will add at least two more when it opens its second Triangle branch this summer in Cary.

SunTrust is trying to differentiate itself in the crowded wealth management field with its new SummitView Web-based tool for clients.

“You can access it from your home, your iPad, your mobile device,” said Joseph Sicchitano, senior vice president and head of financial planning.

Although designed to be used in conjunction with SunTrust advisers, SummitView enables clients “to have more interaction and be engaged in the (financial) planning process,” said Tom Hodges, division executive for wealth management in North and South Carolina and Tennessee. Among other things, clients can run what-if scenarios and obtain nightly updates on the performance of their investment portfolio.

That update includes an up-to-date overview of their entire portfolio, including investments that weren’t channeled through SunTrust.

That’s important because the wealthy frequently work with more than one financial adviser.

Ranii: 919-829-4877

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