From professional athletes to musicians to doctors and lawyers, bank-owned private wealth management firms have long been successful targeting wealthy niche markets.
ICBA Financial Services, the Independent Community Bankers of America's retail investment and insurance services arm, did not have to look far for prospects in a niche it started pursuing recently: community bankers.
In March, ICBA Financial Services began offering private wealth management services through its investment banking partner, Howe Barnes Hoefer & Arnett of Chicago, to community bank owners, executives, and directors. Executives say ICBA Financial has started to generate leads through the new initiative.
"This is a small but a very important niche for us to target," William W. Reid Jr., the president and chief executive of ICBA Financial Services, said in an interview last week. "There are thousands of community banks out there and thousands of bankers that are running them. Their business has some unique characteristics, and we want to help them manage their wealth."
Ronald A. Sirt, a senior vice president of private client services at Howe Barnes, said the initiative combines his firm's two biggest strengths — its well-established relationships with community bankers and its private wealth management services.
Mr. Sirt said Howe Barnes has provided community bankers with corporate financial services and institutional trading services, among others, for 90 years. It has also offered private financial services to niche markets for several decades.
"We can really speak the same language as most community bankers," Mr. Sirt said. "Working with us is different than working with an adviser at Goldman Sachs or UBS, because those advisers could care less about dealing with a banker from a $50 million bank in Iowa."
Mr. Reid said the program was introduced at the Washington trade group's annual convention in March in Honolulu after a year of development.
"Our initial goal was to have 60 potential relationships in our first 60 days, and we have already surpassed that," he said. "We are finding penetration almost uniformly nationally."
The program offers financial planning and estate planning services for owners of closely held, family-owned banks and executives at community banks, Mr. Reid said.
"These individuals have a significant amount of illiquid assets," he said. "Their financial planning needs are different than that of executives, even executives at publicly traded banks. A significant amount of their net worth is held in stock at their banks."
Mr. Sirt said Howe Barnes does a free portfolio review for each banker it works with. Then, it creates a "quasi-financial plan" that can be cleared through Wachovia Securities, a unit of Charlotte's Wachovia Corp., if the customer decides to use the plan.
Mr. Reid said an adviser begins each financial plan by taking an inventory of the banker's assets before examining the assets to determine the income that they produce.
"Sometimes it can be quite difficult for an adviser to get his arms around all of the assets that these individuals have," he said. "It can be quite complex."
Mr. Reid said one goal is to help these community bankers with retirement and succession planning.
"We want to benefit the banker and preserve the continuity of community banking," Mr. Reid said.
"The ICBA has a vested interest in keeping community banking flourishing and keep its executives as strong as possible," he said. "We want to keep these folks that are community bankers in community banking."
Analysts said many bank-owned private wealth managers have generated a significant portion of their business by pursuing niche markets and speciality groups that can generate additional assets under management.
For example, SunTrust Banks Inc. of Atlanta has units that target doctors and lawyers, professional athletes, country music performers, and race car drivers.
The units, which have been introduced over the past five years, offer private banking, lending, and investment management services to each group.
Mr. Sirt said he hopes to continue to increase the number of relationships the rest of the year, but also to deepen its current relationships.
He said Howe Barnes has two advisers along the West Coast, one in the Midwest, one in the Southeast, and one — Mr. Sirt — in the Northeast.
He said he wants to add another adviser in the Midwest by the end of the year.
Mr. Sirt said interest has not been as keen in the Northeast as in the other regions.
"We don't have a physical presence in the Northeast, and the ICBA is pretty heavily concentrated in those other geographies," he said.
Mr. Sirt said Howe Barnes has done well with community bankers because it delivers "European-style private banking services" to these individuals.
"These bankers want to know that everything they do with their private banker is kept confidential," he said. "Many are worried about working with the … broker in their town, because maybe that gentleman is going to go to a barbecue in his town and maybe he'll share something that is highly sensitive or highly confidential."
It is too early to estimate the amount of assets the program can generate, Mr. Sirt said.
"The ICBA is looking at this as a value-added service for its members, and that may mean a great deal of estate planning that may lead to little in assets under management," Mr. Sirt said. "And that is just fine as long as the bankers are happy."
Mr. Reid said: "This is a niche private wealth management program in a niche that is very important to us. Community banking is a very specialized business, and its executives need to be handled differently than other executives when it comes to financial planning and estate planning."
