ORLANDO - Keycorp is counting on strong growth in sales of financial services to the affluent, a senior executive said at an industry conference here.
Currently, Keycorp, the country's 10th-biggest banking company, gets nearly one-tenth of its profits from lending, investing, trust, and deposit services for affluent families and individuals, said Daniel E. Klimas, an executive vice president and head of the personal financial services unit that deals with the affluent.
The Cleveland-based banking company expects this business to grow at a 20% to 25% annual clip for the foreseeable future, he added. Making such a claim means that Keycorp expects its fortunes to run contrary to the recent experience of other banks.
Payment Systems Inc., a Tampa, Fla., market researcher, has found that banks received only 24% of the money wealthy Americans spent on financial services last year, compared to 34% in 1993. In absolute terms, banks' revenues in this area declined by more than 13% last year, to $14.9 billion.
Though Mr. Klimas said he wouldn't be surprised if banks, in general, were receiving less of the money the rich spend on financial services, he said that trend "isn't true at Keycorp."
He made these comments during an interview at a trust and private banking conference here sponsored by the American Bankers Association.
Keycorp, with branches spanning much of the northern half of the country, as well as Florida, was formed last year by the merger of Society Corp., Cleveland, and Keycorp, Albany, N.Y.
Mr. Klimas explained that one reason Keycorp's dealings with the affluent will grow is that the "demographics are incredibly favorable." In other words, as baby boomers age, they are said to be accumulating wealth that banks and other financial companies can help them manage.
He added that Keycorp is taking a series of steps to focus on the market. "We've made a commitment of resources, dollars, and people we think is significant," he said.
For instance, last year, Keycorp formed three groups to deal with the affluent. One, which currently operates only in what were Society branches in Ohio, Indiana, and Michigan, serves the "emerging affluent" - people with annual incomes of $75,000 to $100,000.
This private banking group consists of more than 150 specially trained branch employees who act as personal bankers and handle basic banking transactions for the emerging affluent. Fees for the service are $60 per year.
Keycorp is considering expanding the private banking group. The first areas for expansion are likely to be sparsely populated states, such as Wyoming, that don't have large clusters of wealthy people.
For wealthier customers - with annual incomes of at least $100,000, and at least $25,000 to invest - Keycorp has created a private banking and investing group. This group has 250 specialists spread throughout the company's operating area who are trained to help the affluent with a full range of financial services.
These specialists work in teams, consisting of brokers, trust specialists, and private bankers who can help clients obtain loans, open checking accounts, establish trusts, or manage investment portfolios. Mr. Klimas said that, in most banks, private banking, trust, and investment specialists work separately. Keycorp expects its different approach to give it a competitive edge, he said.
Customers served by this group will normally pay fees amounting to $100 per year to open a cash management account that automatically sweeps cash balances into money market mutual funds. These accounts also can be used as full-service brokerage accounts, through which customers can trade on margin.
In two years, Keycorp plans to double the number of specialists in this group and expand its ranks to 1,000 specialists by 1999.
Keycorp also has established a wealth management group, based in Cleveland, that is dedicated to catering to the banking, trust, and investment needs of families and individuals with more than $5 million to invest. This group leverages the trust expertise Society acquired through its 1991 merger with Ameritrust. While the employees of this group are based in Cleveland, they will meet with wealthy clients throughout Keycorp's operating area.