Allfirst Financial Inc., a Baltimore subsidiary of Allied Irish Banks PLC, has launched a wealth management services division for its high-net-worth clients, but with a twist: The division offers philanthropic services and charitable asset administration.
The Baltimore bank's division also offers investment management, tax, and estate planning advice; trust and estate administration, private banking and brokerage services; insurance through Allfirst Financial's Allfirst Trust unit; and specialized services such as wealth concentration - administering a family's assets as one pool - and business succession strategies.
The unit, launched Friday by $18 billion-asset Allfirst, is aimed at customers with assets of at least $1 million.
William J. McCarthy, executive vice president for wealth management at Allfirst and the head of the new division, said the added offerings are timely.
"There is a great need in the high-net-worth community for charitable and philanthropic services," he said. "A lot of banks offer philanthropic services, but very few offer charitable asset administration. Planned giving and charitable assets have more than tripled over the past nine years, and customers who use these strategies need administrative services ranging from grant screenings and reviews to setting up giving parameters."
For the last 18 years Mr. McCarthy was a senior vice president in Allfirst's trust department and ran several of the services that have been incorporated into the wealth management division.
The unit will initially focus on Allfirst's client base, which includes 142,000 households with more than $1 million of assets and are served by such units as Allfirst Trust and Allfirst Investment Advisors, he said.
The company also plans to market its wealth management services to other qualified individuals in Maryland, Washington, northern Virginia, and eastern Pennsylvania.
Though the division is starting with a ready-made client base, it might have a tough row to hoe on the charitable side. Analysts say most high-net-worth clients do not take advantage of charitable estate planning strategies unless they are at the very top end of the market, with more than $10 million of assets.
Banks really need "to have a good top edge" - a large base of very wealthy clients - "to offer charitable administrative services," said David Ross Palmer, a banking industry consultant with Lobue Associates Inc. in Northbrook, Ill. "Few banks are really getting a significant amount of business in this area."
Harold "Skip" Gianopulos, executive vice president of wealth management services at Harris Bankcorp in Chicago, said Allfirst is at a "competitive disadvantage" entering the high-net-worth market now. "In order to reach the high-net-worth community, even your own high-net worth-customers, you have to be with them from the beginning," he said.
Allfirst is also late in getting into charitable asset services, Mr. Gianopulos said. "In order to administer charitable assets, you need to have the scale necessary to justify investing in all of the technology and all of the systems required."
Harris Bank and Northern Trust, both in Chicago, are among the few banking institutions that handle charitable asset administration internally. Mr. Gianopulos said most banking companies outsource their charitable account administration to firms that specialize in the business, such as Caspec Inc. in San Francisco and Renaissance Inc. in Carmel, Ind.
"Everyone needs a differentiator, and to their credit, this is theirs," he said. "This, by all measures, is going to be an area of significant growth for the financial services industry. In terms of leading a trend, they are right there."
Mr. McCarthy said he knows Allfirst's efforts to reach the wealthy are belated, but that he believes offering philanthropic services aimed at administrating the customers' charitable giving will make up for that tardiness.
"We have found that most high-net-worth individuals use between five and six financial service providers," he said. "They rely on multiple relationships at many money centers. I think with our strategy to reach them by serving their charitable needs, we have a definitive position."
The division will also offer alternative investment products such as hedge funds, depending on the customer's needs. "We aren't going to pretend we will have the capacity or the demand to build our own exchange-traded funds or hedge funds," Mr. McCarthy said. "But we will get them, and we will tailor them to whatever our clients need."
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