Bank of America Corp. says it has gathered a wealth of assets by assembling teams of bankers and investment advisers to target the mass affluent.
Pat Phillips, the president of Bank of America’s premier banking and investments division, said that working in teams has enabled the group to develop relationships with customers that have $100,000 to $3 million of investable assets, increase the assets these people invest with the bank, and help improve cross-selling to them.
“Typically these clients fall just below the radar of our private banking group,” he said. “Frequently, their transactional service needs were being handled, but their more sophisticated needs were not, and we were vulnerable to losing these customers to other providers.”
Since the Charlotte banking company increased its focus on this group, balances in the division’s accounts — including deposits, loans, and brokerage assets — have grown from $98 billion, in 2002, to more than $250 billion as of this March 31.
“Investment growth has been phenomenally better,” Mr. Phillips said, since the teams began to be formed in January 2004 to focus on the mass affluent. “We are demonstrating that we are meeting their needs, and they are giving us business that otherwise they wouldn’t have given us,” he said.
From Aug. 31 through Feb. 8, Bank of America has expanded its force of bankers and advisers for the mass affluent by 10%, to 4,000. It has five geographical divisions covering its national footprint. The company will continue to hire as it builds the business, he said.
“We will continue to grow significantly,” he said. “We have hired externally and promoted internally, and we will continue to do that to grow this business.”
Analysts said most private banks are so focused on ultra-wealthy customers — those with more than $5 million of investable assets — that clients with $1 million to $3 million to invest can be lost in the shuffle. Burton Greenwald, an analyst at BJ Greenwald Associates in Philadelphia, said large banking companies like JPMorgan Chase & Co., Wachovia Corp., and Bank of New York Co. Inc. also have groups that target the mass affluent.
Private banking customers need at least $1 million of investable assets, Mr. Phillips said, but this does not necessarily mean they will get the right level of service.
“Investors with $1 million to $3 million in investable assets are sometimes better served by a team of a banker and an adviser that typically serve someone with $500,000 in assets,” he said. “It isn’t that our private bank doesn’t value these customers, but we wanted to offer a better service model to insure that they would continue to invest with us.”
Spectrem Group, a Chicago research firm, has said that banks still trail most financial services companies in managing wealth for the mass affluent. A 2005 Spectrem survey said that bankers were considered the primary adviser by just 7% of the mass-affluent investors queried, whereas full-service brokers were the primary advisers for 23%; investment advisers, 21%; independent financial planners, 16%; investment managers, 9%; and discount/online brokers, 8%.
Mr. Phillips said he knows competition is getting stiffer as more banks reach out to the mass affluent — a segment that banks typically have not pursued — but that an opportunity is there. Bank of America has relationships with 44% of the 18 million affluent households in its geographic footprint, he said, and 50% more premier banking households have brokerage relationships than a year ago.
