Banks that are successful in cross-selling wealth management products are widely admired by their peers.
But the head of a nonbank wealth management boutique said wealthy families are increasingly repelled by the practice and seeking alternatives in firms like his.
"Many of our clients are coming from larger money-center banks," said Stephen Prostano, the president and operations chief of Silver Bridge Advisors in Boston.
Last year the firm added five clients with more than $20 million of assets, and three of them moved their relationships to it from banks, according to Silver Bridge. Of seven new clients with $10 million to $20 million of assets, five came from banks. And of Silver Bridge's 90 new relationships in 2009 under $10 million of assets, 80% came from banks.
This year, Silver Bridge has so far netted a single relationship exceeding $20 million, and it came from a bank. It has also won three clients with $10 million to $20 million, all from banks. And of Silver Bridge's 45 new clients with less than $10 million each, 75% came from banks.
The lengthy process of courting these clients, especially the wealthiest of them, has shown that they are far more discriminating in selecting new wealth managers than they were before the era of Bernard Madoff and the financial crisis, Prostano said. "The due diligence that families and individuals are going through before making their final decision about a financial adviser is significantly different than in the past," he said.
Potential clients' tougher criteria include assurance that product recommendations are fully objective and not, for instance, part of a bankwide, cross-sell strategy.
"You want an adviser there to understand your needs, not what puts more money in their pockets," Prostano said. "And that adviser should only receive fees from the client."
Kenneth Kehrer, the director of the Kehrer-Limra research firm, said the truth is that most wealth management companies cross-sell. "The key is how it's positioned with the customer," he said.
A good relationship manager does not sell clients products but rather helps them identify needs. Then the manager collaborates with the client to evaluate providers, Kehrer said.
The defections from banks helped Silver Bridge grow by 40% last year, and they mean that its expansion strategy is working out. The 80-year-old firm wants to expand from New England to the Middle Atlantic and other regions with many wealthy residents.
A big part of Silver Bridge's rationale for growing now is the idea that big banks' clients are ready for a change after the tumult of recent years. To help tap this demand, Silver Bridge last fall hired Wilmington Trust veteran Benjamin Ledyard as its director for the Middle Atlantic region and director of wealth strategies.
In July, it agreed to buy H&S Financial Advisors, a San Francisco wealth advisory boutique. The deal, which is expected to close this month, is to bring Silver Bridge's assets under advisement to more than $2 billion and assets under management to $1.8 billion. It wants $6 billion to $7 billion under management by 2015.
It also recently announced it is starting Silver Bridge Family Office Partners, a boutique that will serve "complex and sophisticated families and family offices."
Silver Bridge will continue to consider strategic acquisitions, Prostano said, with Illinois, Texas, Florida and New York as states in which it would make sense to operate. It also plans to get Delaware corporate trust powers, which will let it offer tax advantages to clients nationwide.
