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Wealth Management Advice

Top 10 Best Banking Blogs

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(Via The Financial Brand) Congratulations to all of the winners in The Financial Brand’s Best Banking Blog poll. I am honored to count several of the winners amongst my friends. It is a group of smart, kind and funny people– what more could you want?

1. JD Power & Associates Banking Blog – @JDPowerBanking

2. Snarketing 2.0 – Ron Shevlin —  @rshevlin

3. ACTON’s Financial Marketing Insights – @ACTON_Marketing

4. Bank Marketing Strategies – Jim Marous  @JimMarous

5. Banking.com –  @bankingdotcom

6. CU Insight – Randy Smith @CUinsight

7. Bank Innovation – @BankInnovation

8. Netbanker –  @netbanker

9. GonzoBanker –  @GonzoBanker

10. Financial Services Club Blog – @FSClub

Congratulations as well to the Write-Ins & Other Honorable Mentions, along with the nominees, where I again am fortunate to recognize another great group of smart, kind and funny people I call friends. I am also humbled and grateful to even be mentioned in their company.

Again, from The Financial Brand, Write-Ins & Other Honorable Mentions:

Read the entire article, including links to representative posts from the winners at The Financial Brand: Top 10 Best Banking Blogs – Readers Choice 2012 Winners | The Financial Brand: Marketing Insights for Banks & Credit Unions.

Other nominees:

I encourage you to bookmark these sites if you are interested in the future of financial services.

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The Convergence of High Tech and High Touch in Wealth Management

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I wrote a piece for the popular fintech blog netbanker yesterday on how high tech and high touch are converging in wealth management, and what I will be watching for in that convergence zone next week at Finovate Fall 2012 in New York.

In the article, I mentioned that most of the notable traction to date has been in the payments space. One might not think that this “dumb pipe” portion of banks’ business models– moving dollars and data from Point A to Point B– would provide such fertile ground for disruptive innovation, but consider the impact and potential of players such as Finovate alums Dwolla and Simple, as well as Square, PayPal, and others.

I also noted in the article that innovative specialty lenders and crowdsourcing platforms are breaching what had long been banks’ deepest moat–  the ability to monetize their balance sheets. Most simply defined, banks’ primary function is to be a financial intermediary. Besides moving money from one place to the other, they hold excess capital when it is not needed for investment, and lend it out when it is; providing liquidity to all sorts of macro and micro markets along the way.

Oligopolists acting like oligopolists

Even though there are over 7,000 banks (plus a similar number of credit unions) in the U.S. alone, the industry has long operated as an oligopoly. For the most part, it continues to act that way despite disruptive threats from all around. After all, their primary product is the ultimate undifferentiated commodity, money. Bank A’s money isn’t better designed, sturdier or more portable than Bank B’s.

Parenthetically, oligopolists acting like oligopolists has a lot to do with the reason most consumers hold banks in just slightly higher esteem than they do the U.S. Congress. Banks integrated vertically and horizontally, they bought weaker competitors, they raised prices, they made up new fees, they cut costs and maximized profits for shareholders with scant regard to other stakeholders, like, you know, their customers.

Predictably, smart players from outside the industry have visions for better ways of doing business.

As frightening as any of these threats should be to any entrenched bankers who are paying attention, the ongoing march of innovation should be scaring them right out of their moire suspenders. Innovators are moving beyond solving the algorithmic problems of the industry and beginning to tackle more dynamic and heuristic areas, such as wealth management.

I continue to reference a recent American Banker article cited a KPMG survey that said 9 out of 10 banks were considering a major overhaul of their strategy, and that 40% said that wealth management was essential to growing revenue in the future.

Wealth management is an attractive business, and if done right, the business can also be a key differentiator, but it requires the ability to develop, manage and leverage intellectual capital beyond the commodity that is the bulk of many banks’ current business models.

Not all will be able to make the leap.

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USB CEO Davis Gives Advice to Bankers

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Over the past two weeks I have been a Faculty Fellow at the Pacific Coast Banking School, the premier graduate school of banking, held at the University of Washington. It is energizing and humbling to be surrounded by so many talented students and faculty members.

At  last night’s keynote address, U.S. Bancorp CEO, President and Chairman Richard Davis gave his advice to the assembled crowd of over 500 banking leaders. Davis is known to like sports analogies as metaphors for leadership and strategic concepts, and he described the industry as being at halftime in a basketball game.

Richard Davis at PCBS

First, he described the industry in basketball terms:

The Rules: Changing

With Dodd Frank still only roughly one third finalized and work still being done to finalize global capital and liquidity standards, the rules are changing even as the game is being played. He urged the crowd to get with the decision makers and advocate for changes that might be needed, but not to complain. Complaining only gives permission to others to complain, and unless and until things change, the rules are the rules, and the team who executes the best under the rules in place will win the game.

The Venue: Poor

Davis likened the economic and regulatory pressures on the industry to playing in a poorly lit arena with a tilted floor, warped floorboards and where the air conditioning doesn’t work. What’s important to realize though, is that the competition is playing under the exact same conditions, and the team that figures out how to adapt their game to the conditions will win.

The Fans: Confused

The fans represent the customers, and they are confused because they thought they understood the rules of the game and some of their favorite teams didn’t perform very well. Some are fed up for good reason, but they will support a winner.

The Referees: Aggressive

Davis was clear in explaining that legislators and regulators all over the world are keen to prevent another global finanical meltdown, and thus are right in calling a tight game. It’s exactly what he would do if he were in their shoes, he said. Bankers need to understand this, accept it and step up their play to be successful.

The Owners: Seeking Success

Shareholders want their team to win, that’s why they invested in their franchise. Davis cautioned that the ROEs of the past few years for most banks are not covering their cost of capital, and that is unsustainable. Firms need to focus on growing revenue, lest they become takeover targets.

Halftime

He wrapped up his sports analogy by playing one of my all-time favorite clips, from Hoosiers. The undersized  team from little old Hickory, Indiana steps into Indianapolis’s Hinkle Fieldhouse wide-eyed and intimidated about their impending championship game in such a cavernous venue. Coach Dale (Gene Hackman) hands the boys a tape measure and asks them  to measure the distance from the foul line to the basket and from the basket to the floor. The players become visibly more confident as Coach Dale winds up the tape measure and says “I think you’ll find it’s the exact same measurements as our gym back in Hickory”.

In other words, we are all playing by the same rules on the same court. Don’t over-complicate it. Focus on what you need to do to win the game.

Davis then declared the game as being at halftime, and halftime is great because anything is possible. He urged the bankers to use the halftime break to assess what is working and keep it up, and to make the necessary adjustments, and most importantly to rally the team to a strong finish in the second half.

Not Just Another Lame Sports Analogy

Lest you think this is just another shopworn, hackneyed sports reference from just another executive too stupid or lazy to use his own words to describe what’s happening in his industry, you should realize that U.S. Bancorp is widely considered one of the best managed financial institutions on the planet. Their bond ratings, price to book, ROE, ROA and efficiency ratios are all absolutely at the top of the industry, and Davis has been at the helm since 2006, and has been a key senior leader there since 1993. He has a unique knack for using simple words to convey complex concepts, and the crowd gave him a rousing standing ovation.

Of course, I have my own biases. I worked for the bank for twenty years and saw Davis up close in a wide variety of situations, from one-on-one to very large crowds, from broad strategic issue to very deep operational details. He does it all very well, and he is simply one of the best leaders I have ever seen.

Even if sports analogies are not your thing, and even if you are not a banker, I think the core of the message is universal and enduring: Spend less time complaining about the rules, the refs, the venue, the fans, the owners and the other teams– just focus on what you need to do. And win regardless.

As Jim Rohn said:

“Don’t wish it was easier, wish you were better.”

© JP Nicols – 2012

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Wealth Management 3.0 Is Here– Are You Ready? (Part 3 of 3)

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Over the past couple of posts we took a fairly irreverent whirlwind tour through the last 150+ years of those financial services oriented specifically towards helping successful families grow, protect and share their wealth– the very essence of wealth management. [See Wealth Management 1.0 (1853-1982) and Wealth Management 2.0 (1982-2008)]

Today we will bring this three part series to a close, but we will revisit often the idea of the changing nature of the wealth management business and discuss how firms and advisors must adapt to compete in this new era.

Wealth Management 3.0 (2008-?)

If the forces of change burgeoning at the beginning of this current decade stuck out their collective feet and tripped the industry and sent it reeling, then the global financial crisis begun in 2008 and its resulting round of bank failures, mega-mergers and new regulations knelt down behind the backs of the industry’s knees and sent it tumbling noisily and unwillingly into the latest era, Wealth Management 3.0.

More banks failed in the last four years than the prior 15 years combined. Financial giants like Bear Sterns and Washington Mutual went out of business, once swaggering players like Merrill Lynch and Countrywide Mortgage ran to the protective arms of a lowly commercial bank, and Masters of the Universe like Goldman Sachs and Morgan Stanley actually sought bank charters.

Brokerage firms all but hired costumed characters to stand outside suburban strip malls and dance and twirl signs that said “Giant Clearance Sale! Stocks as much as 80% off!”. It was, as Bill Murray’s character Peter Venkman said in Ghostbusters, a “disaster of biblical proportions”.

“Human sacrifice, dogs and cats living together… mass hysteria!”

–Dr. Peter Venkman, Ghostbusters

Frogs in boiling water

Even firms that weren’t dying from mortal wounds– self-inflicted, or otherwise– began to realize that they were like the proverbial frogs in water that was approaching the boiling point. The persistent bull market and deregulation of the previous era had masked the steadily rising water temperature.

Former Citigroup Chairman Chuck Prince famously remarked in 2007 that “..as long as the music is playing you’ve to get up and dance”. But even MC Bernanke’s extended dance mix had to spin down sometime. And when it did, even firms without severe asset quality or liquidity issues came to realize that they had a problem in their cost structure.

The troubled airline industry provides an apt, if unfortunate, analogy. All clients deserve a safe, courteous and on-time flight, but wealth management groups were designed to deliver an experience above and beyond the minimum– they are the first class cabin of the firm. But many firms began to realize that in their blind quest for growth that their gate agents had been allowing some holders of deep-discount coach tickets to take up first class seats and drink all the champagne.

In other words, there was not always the discipline to ensure an appropriate matching of marginal expenses to marginal revenue. Worse, the industry conditioned clients to expect the first class experience for blue-light special pricing. The talent and technology needed to provide comprehensive wealth management services are not cheap; and providing them economically is a challenge (though not impossible).

But the crude cost cutting axes swung in the prior era won’t work today. Managers instead must skillfully wield a discriminating scalpel to trim away unjustified and unproductive expenses, while simultaneously investing in the things that matter to the clients. (Hint: It won’t be mahogany, marble and fine china for the clients of the future.) Firms that cannot do that will likely attract a new management team that can. (See Is Bank Merger Mania Imminent?)

Reregulation

Just as deregulation was a driving force in Wealth Management 2.0, reregulation will be a driving force in Wealth Management 3.0. This past Saturday, July 21, marked the two year anniversary of President Obama’s signing into law the Dodd-Frank Wall Street Reform and Consumer Protection Act.

So far Washington’s paper multiplication machinery has managed to turn the 848 pages of the bill into 8,843 pages of rules– and they are only 30% done with writing the rules and regulations! If this pace continues, we will have nearly 30,000 pages of new rules for firms to wade through by the time they’re done– likely sometime early in 2017.

When I was a young boy I was always intrigued with the ad in the back of my Archie comics for the machine that turned ordinary pieces of paper into $5, $10, even $20 bills! They have that machine’s evil twin in Washington. It turns massive stacks of money into prodigious piles of dense prose.

Many of the new rules will, at best, fight the last war in 20/80 hindsight; and it is very likely that the next crisis will not be anticipated therein, let alone thwarted. Nonetheless, today’s firms and and advisors are already spending time, money and cultural energy ensuring compliance with all of the new rules and regulations.

Firms and advisors also need to devise new ways to generate revenue, as some provisions severely curtail some of the most profitable business practices of the past. No wonder so many firms are looking to new wealth management initiatives to offset these challenges. (See Banker Jones and the Last Crusade: Is Wealth Management the New Holy Grail?)

For extensive reporting and resources on Dodd-Frank, excellent information is available from the law firm DavisPolk, and this infographic is a good primer on the current status.

The next generations

As formidable as are the heaving changes wrought from within the industry, those generational and technological changes from the outside may be even more profound and devastating if firms and advisors do not embrace the winds of change rustling through their own Rolodexes.

Advisors: Generation Y, the Millennials (born roughly from 1982-2000), are joining your workforce and your client base, and they will not even consider your firm’s services if you aren’t relevant to them. As my friend David Stillman likes to say:

“This is the most connected and most collaborative generation ever… They not only accept diversity, the expect it… Millennials will experience as many as 10 career changes in there lifetimes. That’s career changes, not job changes.”

— David Stillman, co-author, When Generations Collide

They have all but ditched email because it’s too slow. They communicate not only with their peers, but with other modern firms, via text messages and directly through Facebook. Your paternal smile and shake of the head as you explain that those things really aren’t your style will only confirm their suspicions of your paleontology.

They “crowdsource” recommendations for everything from restaurants to car purchases and they trust the wisdom of the crowd far more than any marketing message you can possibly craft. If other people they trust aren’t talking about you, they will will look at you like someone crashing their favorite hipster music festival in sandals and black socks (which is to say, you actually have a shot if you are cool enough to pull it off).

If they are unhappy with their experience with you, it can hit their Twitter feed and their Facebook wall, and in the matter of minutes, you and/or your firm have some viral bad PR on your hands before you can even say “Do you want those funds wired, or do you want a check”? And no, they do not want a check, thank you.

Some firms still aren’t even present on these social networks, so they aren’t even aware of the conversations underway about their brand (good or bad). Others are present, but mistake social media as merely a soapbox to push their own one-way marketing messages.

The firms best positioned to thrive in this social era are actively participating in the conversations and using these interactions as ways to build relationships and deepen client engagement.

Key attributes of Wealth Management 3.0

  • Key characteristics: disruptive innovation is the new norm; rise of mobile, social media, big data and analytics; reregulation
  • Key firm capabilities: transparency; acting in clients’ best interests; active and relevant social media presence; clear value propositions; goals-based advice
  • Key client goals: mass luxury; seamless integration for self service and full service; social responsibility (in many forms), capital preservation; social and peer validation of advisors and strategies
  • Key advisor skills: comfort with technology; social media literacy; not being lame
  • Key advisor activities: customized client intimacy; monitoring social media for risks and opportunities; tailoring holistic advice (and reporting) to relevant goals

 Coming Up: Becoming an Advisor 3.0

In upcoming posts we will continue to explore the rapidly changing landscape and discuss the skills and activities needed to move beyond Advisor 1.0 or 2.0. To be relevant and successful in the new era, you must be an Advisor 3.0.

© JP Nicols – 2012

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Wealth Management 3.0 Is Here– Are You Ready? (Part 2 of 3)

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Last week in Wealth Management 1.0, we explored the origins of the wealth management business in America. As in that post, I will again disclaim any notion of deep academic research and thorough economic analysis in favor of getting to the point.

The most important formula in banking used to be the 3-6-3 rule. Bankers brought in deposits by paying 3%, they lent that money back out at 6%, and they were out on the golf course by 3PM. Economic conditions were generally supportive of this plan. Periods of high unemployment had the good manners not to be associated with such distasteful concepts as high inflation. But they joined the same commune in the 60’s and 70’s, and Keynesian economists shook their heads and clucked their tongues as disapprovingly as if a Jefferson Airplane concert had broken out down at the local VFW hall.

Things got so bad that we had to invent a new formula to describe the economic mess– the misery index, which combined the unemployment and inflation rates. It peaked in 1980 at 20.76 (7.18% unemployment + 13.58% inflation), as did the U.S. Prime Rate, at 21.5%. Bankers, particularly those of the S&L variety, found themselves stuck with paying double digit deposit rates while they still had 4% 30-year mortgages on the books. Presumably, golf handicaps spiked as well.

Wealth Management 2.0 (1982-2008)

A 1982 reduction of income tax rates, combined with various rounds of deregulation for financial firms and markets, ushered in the next era of wealth management; amidst a booming stock market and falling interest rates. Most experts agree that the launch of MTV on 8/1/81 did not have an appreciable impact on  financial flows, even as it was implicated in the death of the radio star.

Demographics also came in to play as Baby Boomers moved into the management ranks and characteristically began to make sweeping changes to the institutions they encounter– financial institutions, in this case. Formalized bank training programs were cut in favor of higher profit margins, and branch banking became more focused on the mainstream consumer. Branch automation– everything from ATMs to electronic ledgers and loan accounting systems meant that you could now sell home equity lines to suburbanites without having to spend 10 years working your way up from Assistant Cashier to Associate Loan Teller.

This rapidly grew the profitability of consumer banking, but it also meant that the wealthy business owner who was used to his three martini lunch with the local bank VP down at the club was now seeing his 23 year old ‘Branch Sales Manager’ carrying his tuna melt into the branch break room after the owner renewed his term note.

The rise of comprehensive wealth management

Those local businesses were important to the commercial side of the bank, so teams of experienced bankers were assembled to take care of those business owners and other VIPs, often as a loss leader. ‘Private banking’ departments for the affluent became widespread in U.S. commercial banks, though they were not typically built for purposes of secrecy and private investment arrangements like their Swiss inspiration. A typical day in a U.S. firms was much more likely to involve converting a Kroger executive’s bonus into a Swiss chalet style vacation home, rather than converting Krugerrands into Swiss Francs.

Before long, private banking departments were being merged with trust departments and investment operations (many of which also managed the investment of the banks’ own assets), and even brokerage and insurance subsidiaries. Bank trust departments whose most sophisticated investment strategies to date were a couple of variations of domestic stocks, bonds and cash now had to confront the rise and proliferation of mutual funds. Financial innovation continued on throughout the era to include a panoply of packaged and structured products– hedge funds, funds of funds, separately managed accounts, unified management accounts, etc.

The more innovative firms began separating ‘manufacturing’ of financial products from ‘distribution’. This meant a tremendous expansion of choice and capabilities; as if the local diner with a blue plate special and three standard entrees on the menu could now suddenly serve you virtually any meal, prepared by your favorite celebrity chef from the other side of the country. This was great news for the clients, but the advisor now needed a lot more than a green ticket pad and a pen behind her ear to be successful.

Exogenous factors

Consolidation was a driving force in the industry throughout the era– banks, brokerage firms, insurance companies, investment advisors and financial planners established competing operations and bought one another in every combination imaginable. As in other industries, the strong bought the weak and the big got bigger, but there were lots of strategic drivers as well. Firms sought capabilities they didn’t have to retain and attract clients.

Other factors exogenous to the industry also begin to chip away at traditional ways of doing business. Large firms established modes of self-service during the era such as ATMs and online banking and brokerage, usually to reduce operating costs. Now, Generation X , whether through their stereotypical skepticism of large institutions or by necessity, embraced the control and flexibility of doing things themselves. Technology pioneers such as Quicken, Fidelity, Schwab, Ameritrade and others began to build new business models. Suddenly many traditional firms were bloated with too many people who couldn’t do enough of the things their clients were actually willing to pay for.

Some of the best advisors established their own Registered Investment Advisor (RIA) firms to cater to niches and the industry simultaneously became even more fragmented even as it continued to consolidate.

Key attributes of Wealth Management 2.0

  • Key characteristics: Consolidation of services into ‘financial supermarkets’, separation of manufacturing from distribution, rise of self-service
  • Key firm capabilities: Distributing and coordinating a broad array of products, eventually from multiple partners
  • Key client goals: Accumulation of wealth, rise of investment niches and specialists, philanthropy for the masses
  • Key advisor skills: Holistic financial planning, coordination of multiple specialists and strategies, sales  and ‘cross-selling’ skills
  • Key advisor activities: New client acquisition and expansion of existing relationships from transactions to fee-based business, dealing with the pressure of sales and cross-sell goals

Up Next: Wealth Management 3.0 (2008-?) Where do we go from here?

Wealth Management 3.0 Is Here– Are You Ready? (Part 1 of 3)

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Most banks today have wealth management clients with an average age somewhere between 70 and dead (no offense, Mom). Their books of business were largely built in bygone eras, from fortunes made in companies and industries that no longer exist.

These clients (and many of their advisors) are really not sure about this whole “interweb” fad, and they think Betty White is a great young talent.

The fact is, the world has changed and most banks have not caught up. Most probably never will. They will instead quietly slide off into obscurity like Don Johnson. Or worse, Philip Michael Thomas. At least Don Johnson had Nash Bridges. (Warning: if you readily recognize those names, you may very well be part of the problem.)

The segment of financial services we think of as ‘wealth management’ in the U.S. banking and brokerage industries today has evolved over a couple of broad eras, and too many advisors and executives don’t even realize that we’ve already entered another new era– one I call Wealth Management 3.0.

The term ‘wealth management’  is, of course, Latin for ‘don’t lose my pile of money, and make it bigger if you can’. It is also a term that was coined by the industry without its clients’ permission. Multiple surveys show that clients don’t like the term. Surveys also show that most clients define ‘wealthy’ as someone who has a pile of money at least twice as high as theirs. Maybe that’s because, as P.J. O’Rourke says;

Everyone enjoys pretending to be what he isn’t. It’s poor men who wear flashy and expensive clothes, pretending to have money. Rich men wear sturdy and practical clothes, pretending to have brains.

Nonetheless, today we begin an exploration of this industry evolution that is rapidly becoming a revolution, and we will lay out some imperatives for firms and advisors who want to survive and thrive in the new era

Meticulous researchers and conscientious historians labor considerably to deeply understand precipitating events and underlying causes. Readers of this blog know that I am neither, and therefore not burdened with such inconvenient details. I am purposely ignoring the long history of true ‘private’ banking in Europe and lumping many generations and iterations of evolution into three distinct (if arguable) eras for purposes of brevity and general laziness. Besides, sweeping generalizations are real time-savers.

Wealth Management 1.0 (1853-1982)

In 1853, some 61 years after the stockbrokers first began trading under a buttonwood tree (and presumably had since moved to more sensible indoor trading floors), some of the wealthiest men in America decided that their control of their respective piles of money ought not to cease with such trivial nonsense such as their own deaths. So they founded U.S. Trust, the first financial firm to act in a fiduciary capacity on the behalf of its clients’ trusts and estates.

Wealthy men hate to be left out of good ideas to protect and grow their own piles of cash, so over the next hundred years, other firms sprang up to facilitate all sorts of services related to the accumulation, preservation and distribution of personal wealth.

The wealthy denizens at the turn of the 20th century had to endure such annoyances as trust-busting, the advent of personal income tax in 1913 and the stock market crash of 1929. These indignations created many opportunities for firms to put their best ideas into practice to help the rich stay that way.

Much to the chagrin of more than one plutocratic robber baron, the post-World War II financial boom began to spread the wealth. The number of millionaires mushroomed from a few thousand to more than a half million by 1980, and wealth management practices spread beyond the ‘white shoe firms‘. Even to, egads, mere commercial banks.

Key attributes of Wealth Management 1.0

  • Key characteristics: Fragmented offerings- banking, trust, investment, brokerage and insurance services provided largely by specialists
  • Key firm capabilities: Creating and selling proprietary products and strategies, stock-picking, trust administration
  • Key client goals: Preservation of wealth, with eventual distribution to family members or large endowments
  • Key advisor skills: Narrowly focused subject matter expertise, membership in the right private clubs
  • Key advisor activity: Client retention, tying their rep tie into a perfect half-windsor knot

Evolving to 2.0

Most firms have had to evolve their business models beyond 1.0 to survive to this point; but as we shall see, many still depend on revenue streams attached to legacy clients that is not self-sustaining. Depending on which research you read, anywhere between $18 trillion and $54 trillion of assets owned by the Traditionalist Generation (those born before 1946) and Baby Boomers (born 1946-1964) will pass down to Generations X and Y (no doubt with nary a trace of appreciation).

Business models and value propositions that worked for older generations are, at best, punch lines to the younger generations. At worst, they are powerful motivators to innovate their own disruptive start-ups to put grandpa’s firm out of business. Yet, many firms and advisors continue to whistle past their own graveyard.

Up next: Part 2– Wealth Management 2.0 (1982-2008)

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Banker Jones and the Last Crusade: Is Wealth Management the New Holy Grail?

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In my June 6 post 9 of 10 Banks Are Mulling an Overhaul I linked to the American Banker article that cited the findings from a KPMG study that also said:

“Forty percent of the respondents said that asset and wealth management would be essential to expand revenue over the next few years.”

But another article in the same issue of  American Banker (Missed Opportunities Abound in the Bank Channel) reported from the Prudential Wealth Management Leaders Forum in New York, which I also attended:

“…banks haven’t exploited the opportunity too well. From 2009 to 2010 banks’ and insurance broker-dealers’ assets under management shrank to $600 billion, less than 5% of the $14.5 trillion wealth management market. Meanwhile, discount brokers grew to $2.5 trillion, cornering 19% of the market. Also growing in that time were registered investment advisors, which command 13% of the market, and private banks and trust firms, which command 8%.”

Buried in papers

Is Wealth Management the New Holy Grail?

Bankers seem to be acting like Indiana Jones in his Last Crusade (…well, last until he sought the Kingdom of the Crystal Skull, but that’s another post… OK, probably not.) in their pursuit of the Holy Grail and its promise of immortality.

A flat (and further flattening) yield curve, low loan demand and regulatory pressures on fee income and capital needs are causing bankers to seek new avenues for growth. (See also Is Bank Merger Mania Imminent?)

It’s easy to be attracted to the net overall growth of the affluent, high net worth and ultra high net worth segments and the impending transfer of $41 trillion in wealth from the baby boomers to younger generations.

But as the American Banker article points out, there is a huge gulf between “opportunity” and “success”. Over the past thirty years, a ‘build it and they will come’ strategy worked at some level for nearly everyone. Those days are long gone and they won’t be coming back.

No Easy Fix

Firms that want to gain market share from others will need to deliver true value to clients.

At the same Prudential Wealth Management Leaders Forum, Wallace Blankenbaker of the VIP Forum described the key drivers to loyalty– serve, tailor and teach. Clients want firms that are easy to do business with, firms that look out for their best interests and firms that can help them make better decisions.

If firms fail to deliver on those key drivers, funds will continue to flow from them to competitors that can deliver.

Wealth management isn’t the Holy Grail. It’s a specific set of services designed to solve the unique issues and meet the unique goals of a specific set of clients.

As I have said before, Don’t repaint the walls when you need to fix a cracked foundation.

“You must choose, but choose wisely. For as the true Grail will bring you life, the false Grail will take it from you.”

-The Templar Knight guarding the Holy Grail in Indiana Jones and the Last Crusade