Affluent and wealthy Americans have never had so many choices about where to invest. So the banking industry's declining share of household assets was probably inevitable, given the laws and traditions shaping financial services in this country.
Experts agree that reversing, or even halting, that long-term trend is a formidable challenge. A perception lingers that banks' investment performance pales next to that of nonbanks. Competitors, ranging from giants like Merrill Lynch and Fidelity Investments to asset management boutiques, are in many cases ahead of banks in creating the right mix of products and service levels to appeal to the affluent.
But there is some bright news. The number of affluent households is growing by 10% a year, according to Payment Systems Inc. And the wealthiest - those with investable assets exceeding $1 million - are growing even faster, said the Tampa research firm.
Bankers also hold a potential trump card, in that just about every affluent household has a banking relationship. Mining their customer data could lead them to gold.
Further, many banks have been tearing down the walls that separate trust and private banking departments. But execution will be a key to success.
As John J. DeMarco of Payment Systems noted, "It's one thing for senior executives to sit down and put boxes on a piece of paper. It's another to take two or three different departments that have been separate for a hundred years and get them to act like one cohesive unit."
In this issue of Management Strategies, we explore some key issues affecting this dynamic business. As always, we invite you to let us know what you think.