Six months after exiting the proprietary fund business, FirstMerit Corp. is keeping its focus on managing clients rather than products by starting a unit targeting wealthy investors.
The Akron banking company said on Monday that it has formed a relationship management services unit for its high-net-worth clients. The unit will offer clients with more than $1 million of investable assets a single point of contact to integrate their trust, private banking, and brokerage services.
"It is our sense that, rather than having groups and units that can offer different services to the wealthy, we needed a wealth unit," said George P. Paidas, the president of FirstMerit Wealth Management. (The new unit is within this group.) "Customers want someone to pull it together and look at it holistically."
The high-net-worth relationship management team will offer financial, estate, retirement, college, risk, and business and succession planning, as well as charitable giving strategies and investment consulting.
Mr. Paidas said the unit's creation was not prompted by a steady increase in customers but by the opportunity to gain wallet share by offering more.
"This unit is a function of our customer base," Mr. Paidas said. "As a super community bank we have 40,000 relationships with owner-managed businesses, and that leaves a lot of low hanging fruit for a wealth unit. These customers are undoubtedly underserved by the northeast Ohio market." The company has 157 sites in Ohio and western Pennsylvania.
FirstMerit has been steadily altering its focus toward financial adviser from product provider during the past year. In August, the $10.5 billion-asset company sold its $250 million proprietary fund business to Federated Investors Inc. of Pittsburgh. Mr. Paidas said it was crucial for the company to offer a wide array of products from a variety of investment managers rather than being shackled to proprietary products.
Earlier in August, FirstMerit had formed an alliance with Answer Financial Inc., an online insurance agency, to offer auto, home, life, health, dental, and long-term-care insurance, as well as prepaid legal service, home warranties, vision and prescription discount plans, travel insurance, pet insurance, and other products. And in the fourth quarter of 2001, First Merit made a deal to sell SEI Investments' separately managed accounts.
Mr. Paidas said the bank wants to focus on reaching customers. It set this goal in 2001 when it began targeting mass-affluent clients with products and services that had traditionally been higher-end, including trust and managed accounts for clients with as little as $250,000 of investable assets.
FirstMerit executives said at the time that the rationale was the fact that clients with $250,000 to invest would have other needs the bank could serve, making them ripe for cross-selling.
The bank never looked at this market in asset segments, Mr. Paidas said. "We saw a hole in our capabilities, and that led to the creation of this unit," he said. "We felt we had the high end covered with Abell & Associates for individuals with more than $5 million, and we had the mass affluent covered. Our gap was between those segments."
Analysts said more small and midsize banks are looking to adopt similar strategies.
"The name of the game is relationship and relationship building," said Geoffrey Thomas, a high-net-worth analyst in Boston. "Small banks know they can't create the same products that Fidelity can or that Putnam can. They have to win the customer relationship, and they offer the best products from there."
Brian Jenner will run the new unit, and James E. Makee Jr., a former investment consultant to KeyBank's high-net-worth clients, is to develop and coordinate the delivery of financial services, including tax planning, financial and investment planning, banking, trusts, and insurance.
FirstMerit Wealth Management is the third-largest bank-owned asset manager in northeast Ohio, with $2.3 billion of assets under management.
Mr. Paidas said the next step is filling the gap between the $250,000 mass-affluent customer and the $1 million high-net-worth customer. To do this, the bank will spend this year training its private bankers on how to serve these customers.
"Our private bankers were oriented in one direction - to sell and deliver banking products. The next step is to upgrade their skill level," he said. "Our private bankers know banking, but they are not as well qualified to deal with the wealthy universe. They need to look at them holistically."
"We have the trust of these customers," he added. "Now we have to add value to the relationship so that they stay with FirstMerit."
