The top executive of Marshall & Ilsley Corp.'s wealth management business said the unit cannot rely solely on organic growth if it is to increase its contribution to its parent company's bottom line to 10% from 7%.
"Really, it is going to require a long-term combination of both acquisitions and organic expansion," said Ken Krei, M&I Wealth Management's chief executive officer. "Our organic growth rate has improved as we have invested in the business, but a combination of both will be necessary for us to reach our goal."
M&I Wealth Management was started in early 2004 and has posted double-digit organic growth each year to reach $24 billion of assets under management and $100 billion of assets under administration. But "we are looking at acquisitions and expansion to be a bigger part of our company longer-term," Mr. Krei said.
M&I Wealth Management has made some small acquisitions to gain assets and investment management capabilities. It started with $15.7 billion of assets under management and $66.9 billion under administration, Mr. Krei said.
In its first year M&I Wealth Management bought the employee benefits business of UMB Bank NA of Kansas City, Mo. In October 2005 it bought FirstTrust Indiana from First Indiana Bank. The Indianapolis trust company had $1 billion of assets under administration; buying it gave M&I Wealth Management trust capabilities and a beachhead in Indiana.
In late June of this year M&I Wealth Management got its first operations in Chicago by acquiring the wealth manager North Star Financial Corp. for $21 million. The Chicago firm had $1.6 billion of assets under administration.
"We want to remain consistent with the corporate strategy," Mr. Krei said. "We want to expand into regions where we have banks and we want to add capabilities that will enhance our banking and wealth management approach. We have really been consistent with that strategy all along."
Analysts said M&I Wealth Management has expanded since its inception by cross-selling through Midwest branches of the $58.3 billion-asset Marshall & Ilsley. (Marshall & Ilsley and the wealth management unit are both based in Milwaukee.)
Mr. Krei said much of his unit's growth has come from improved cross-selling.
"Previously, we were not leveraging our customer relationships as effectively as we could have been or should have been," he said. "We had customers that were using wealth management products and we were weren't considering how we could connect them to private banking products or to asset management or trust services or financial planning. And on the trust side, we weren't offering them enough banking services."
Mr. Krei said the company worked out a "more logical, integrated approach" in which it looked at each customer individually rather than selling to them on a product-by-product basis.
Analysts said this model is being used by a lot of banks to increase wallet share, but most have coupled the approach with a total open architecture product array. M&I has kept the Marshall Funds, its family of 13 proprietary funds, while others have divested.
Mr. Krei said M&I Wealth Management has kept its funds but is committed to open architecture.
"We believe in providing the best in terms of returns to our clients' base and we have made sure that our funds' performance can measure up," he said. "The Marshall Funds' performance figures have remained strong and they have attracted assets because of it."
To keep bringing in assets, M&I Wealth Management plans to roll out new products and go after new customers. Mr. Krei said it will expand its money management product line to complement its existing investment vehicles.
It launched Cedar Street Advisors in 2005 to increase its penetration with the ultrawealthy. The unit was branded separately to attract customers both inside and outside M&I's traditional territory, and is designed to provide more complex financial planning services to individuals with assets of more than $5 million. These include family office services and trust services.
"We wanted to create a unit that told wealthy customers that we are focused on high-end clients and we could provide the services that they need," Mr. Krei said.
On Aug. 30, M&I Wealth Management hired Robert W. Harless as director of its investment arm. Mr. Harless, who was the managing director of corporate risk management services at Huntington National Bank in Columbus, Ohio, leads a division that provides liquidity and fixed-income securities, interest rate derivatives and risk management services, and foreign exchange products.
"Longer-term, our goal is to provide a larger percentage to M&I bottom line," Mr. Krei said.
