Heartland Financial USA Inc. of Dubuque, Iowa, has an aggressive goal for its wealth management businesses: to bring their assets under management to $3.1 billion, the banking company's current overall asset total.
Meeting that goal will mean more than doubling the wealth management assets, which now stand at $1.4 billion, said John K. Schmidt, Heartland's chief operating officer and chief financial officer.
The wealth management businesses have "a fairly lofty goal in front of them," he said in an interview.
But there is good reason for aiming high, Mr. Schmidt said; net interest margins are likely to continue shrinking, because of competition from banks both large and small.
"We do want to be less reliant on margin," he said.
Wealth management operations, which do not include retail brokerage, likely will generate revenue of $1.4 million to $1.5 million for Heartland this year, Mr. Schmidt predicted.
Michael White, the president of the Radnor, Pa., research firm Michael White Associates, said Heartland's wealth management operations are already quite respectable for an institution of its size.
Last year Heartland reported fiduciary income of $7.3 million, placing it 42nd among 232 bank holding companies with assets of $1 billion to $10 billion, according to White Associates' Fee Income Ratings Report. Fiduciary income typically includes trust and wealth management.
The wealth management units across Heartland's nine banks in the Midwest and West will have to hustle to ensure their asset growth keeps pace with the company's overall growth. The multibank holding company has stated a goal of doubling its assets every five to seven years. It's trying to do that largely by entering fast-growth markets in the interior West.
In November it opened Summit Bank and Trust in the Denver suburb of Broomfield, Colo. In March, Summit bought a local book of business from Sun Life Financial Inc.'s Independent Financial Marketing Group Inc. for $650,000 and moved the six-person operation into its Broomfield office.
That operation's brokers and staff served 8,800 investment clients.
The acquisition was Heartland's third in the wealth management area.
Three years ago it bought the wealth management assets of Colonial Trust Co. of Phoenix and put them under its Arizona Bank and Trust subsidiary. In 1998 Heartland bought a $40 million book of business from Bank One Corp., now part of JPMorgan Chase & Co., and put them under its subsidiary, Wisconsin Community Bank.
Wealth management at Heartland's banks includes investment, fiduciary, and retirement services. The company does not have a private banking business, but Mr. Schmidt said it is "No. 1 on our product development committee list."
The retail brokerage business, HTLF Investment Services, offers securities through the broker-dealer IFMG Securities Inc. Heartland's gross income from that business totaled $1.3 million last year, and it is on track to meet or exceed $2 million this year, Mr. Schmidt said.
Heartland envisions developing the retail brokerage into a "feeder" for the wealth management business, he said.
The majority of wealth management clients' money is managed in-house. Most individuals' accounts are at least $200,000, with the "sweet spot" in the range of $750,000 to $1 million, Mr. Schmidt said.
Heartland operates independently chartered and branded banks under different names in Wisconsin, Illinois, Iowa, New Mexico, Colorado, Montana, and Arizona. Mr. Schmidt said the product arrays and target customers are the same across the company. Back-office operations, as well as many of the investment decisions, are centralized in Dubuque.
"The administrators and salespeople by and large sell what was developed and modeled in Dubuque," he said.
