First Tennessee Bank's wealth management business has been slowed by the slumping stock market but should be reinvigorated by a new fee-based platform.
The registered investment adviser platform, rolled out a month ago, is meant to help advisers compete with large brokerages by charging fees rather than commissions. Wealthy clients favor the model, said Rhomes Aur, the executive vice president of wealth management at First Tennessee, a Memphis unit of First Horizon National Corp. "A lot of advisers are going the RIA [registered investment adviser] route," he said. "A lot of customers prefer that the bank have something at risk along with them."
The advisers typically are paid a percentage of the client's assets; if those assets grow, the adviser's fees grow. The platform is available to advisers in the private bank and wealth units, Mr. Aur said.
Wealth management revenue at First Tennessee has fallen along with the stock market. The bank normally aims for 10% annual revenue growth, but last year's figure was 8.5%, and this year the business has grown at an annual rate of just 6%, he said.
The business is aiming to reverse that trend by boosting its market share and revenue growth among affluent clients, Mr. Aur said. By better serving clients with investable assets of over $500,000, First Tennessee projects annual revenue growth as high as 15% for the next three years, he said.
The RIA platform, First Tennessee Advisory Services, is part of the effort to snare wealthy clients. Certain advisers are already qualified to use the platform, and a recruitment drive for investment advisory representatives is planned for next year, Mr. Aur said.
Mr. Aur cited customer demand in First Tennessee's adoption of its RIA platform. But Kenneth Kehrer, director of the Princeton, N.J., research and consulting firm Kehrer-Limra, said such platforms are also being adopted because of a recent regulatory ruling on how banks handle managed investment advisory accounts. The options include converting them to brokerage accounts and moving them into RIAs, Mr. Kehrer said.
Mr. Aur said First Tennessee's RIA business should be aided by the team-based wealth management approach the bank rolled out four years ago. The teams cater to clients with $500,000 of assets, excluding real estate. First Tennessee's 52 private bankers are the relationship managers and can sell securities and insurance.
The teams, used by 20,000 private banking clients, include the private banker, a Series 7-licensed investment officer, a trust officer, and a mortgage banker, he said. A salaried financial planner works with the client to define goals and develop a way to reach them.
Banks have long struggled with de-siloing — persuading business units to share customers with one another. First Tennessee has made headway through initiatives such as a commission-sharing arrangement, Mr. Aur said.
To bring wealth management services to more commercial banking clients, First Tennessee pairs commercial and private bankers with advisers, he said.
The RIA platform is not its first foray into fee-based investing. The bank has partnered for the last seven years with FundQuest Inc. to provide managed account services. It plans to keep the FundQuest relationship and recently added several product options. However, First Tennessee says the platform provides more flexibility than it gets through FundQuest.
