Get 'em while they're young.

That's the approach New York banks are taking to reaching the area's millionaires. In addition to targeting the most upper-crust consumers with their asset management services, the Big Apple's bankers are falling all over themselves to serve people who aren't rich yet but will probably wind up that way.

These so-called emerging affluent are under 40, earn six-figure salaries, and have set aside significant money to invest.

More importantly, they are likely to be the millionaires of tomorrow.

"The key is gathering assets from the emerging wealthy, because if you don't get it then, you're not going to get it when they have the big numbers," said James W. Scanlan, a senior vice president for new business development at the Bank of New York Co.

"If they're going to someone else, we're not going to stand a chance of getting them when they get to $750,000."

With that in mind, Bank of New York this spring rolled out an asset allocation account with a $100,000 minimum. Chase Manhattan Corp., which posts a $1 million private banking minimum, serves people with $500,000 to invest through an "affluent markets group."

And Fleet Financial Group, which beefed up its New York presence with its National Westminster acquisition last year, is mining its small business customer list for well-heeled investment clients.

These initiatives are all designed to provide special products for the nearly rich-and to give them a reason to invest with banks.

"If we don't have it they're going to walk over to Merrill Lynch and open a CMA account," said Mr. Scanlan, referring to the brokerage's popular all-in-one cash management account.

New York City and parts of neighboring New Jersey and Long Island boast 164,000 households headed by people under the age of 40 whose annual incomes exceed $100,000, according to Payment Systems Inc., a Tampa-based research firm.

The problem, however, is that there is no guarantee these people will blossom into private banking clients. And serving them in the interim is a costly proposition.

Emerging affluent units are typically housed separately from a financial institution's retail and private banks. While bankers say these divisions enable them to dote on the affluent, some clients complain they are not getting the attention they deserve.

"No one is really happy in emerging affluent," said Michael P. Kostoff, managing director of the VIP Forum of the Advisory Board, a Washington private banking consulting firm.

"Clients are unhappy because if they are making a commitment of a substantial part of their liquid assets they want a nice relationship," he said."Bankers are unhappy because they can't afford or find a way to manage them they way they like."

Indeed, Mr. Kostoff estimated the cost of serving the affluent in New York to be approximately $250,000 per relationship manager. To make that expense worthwhile, each manager would need to generate $1 million in revenues.

"If you had 300 clients you need them to each have $500,000 at the bank," Mr. Kostoff said.

Many bankers say they have found ways to keep their costs down. Rather than devote marketing dollars to drumming up new clients, Chase Manhattan, for example, mines its current customer base for emerging affluent prospects.

In addition to its affluent markets group, which provides clients with personal financial managers, Chase offers a service dubbed SelectDirect to account holders with more than $25,000 at the bank. That service is handled primarily over the phone.

"It would be easy to do a run off the computer of people that have $500,000 with Chase," said Gail Schneider, senior vice president and executive in charge of Affluent Markets for Chase. "But, my interest is looking at someone with $20,000 with Chase and $500,000 elsewhere.

"Moving money around Chase is good for the client," she added. "It's the same money for the bank, that's why we clearly want to attract new clients."

When it comes to serving the emerging affluent, bankers say they've learned from past mistakes. The most important lesson: it is not possible to handle emerging affluent clients with the same kid gloves as millionaires.

"In the '80s and early '90s everybody was giving the same service to people they were making $50,000 on as they were to people they were really losing money on," said Susan H. Petree, senior vice president and regional manager for Fleet Investment Services.

Things have clearly changed. The Advisory Board estimates that at money- center and regional banks, private banking relationship managers each serve 100 to 150 clients. Their colleagues who work on accounts with less than $1 million handle between 250 to 400 clients.

At Fleet, customers with less than $500,000 at the bank do not even have a relationship manager. They are serviced via telephone, and, according to Ms. Petree, serviced well.

"There is no 'press one.' A human being picks up the phone. What they are getting is service on demand. They are being treated differently than in a branch somewhere," she said.

To further help it compete, Fleet is trying to draw emerging affluent investors from the small and middle market business lending clientele of Natwest. Such cross-selling is becoming increasingly common when going after the emerging affluent.

Most of the current profits from serving that market come from jumbo mortgages, checking and other deposits as well as small business loans. Bankers are now using those relationships to capture investment dollars.

New Jersey's Summit Bancorp, for instance, is now touting a an individually managed account to clients who have $500,000 to invest. Most banks and other money managers ask that clients pony up at least $1 million for a such an account.

"We think it is a substantial advantage," said Summit vice president Timothy G. Madden, a private banker in New York.

Dime Savings Bank of New York offers an investment advisory account with a $200,000 minimum that is managed by A.R. Schneider & Co., a New York money manager. And clients with at least $50,000 can put their money into a mutual fund wrap program managed by the thrift.

Observers say products like these, while expensive, are worth their costs because of the potential they have for future fees.

"Is everybody gonna turn out to be some meal ticket guy? No," said investment management, private banking and trust consultant Robert M. Tetenbaum, executive vice president of First Manhattan Consulting Group.

But these clients "have a propensity for earnings. Investable assets will rise, they will pay off their mortgage and will become more of a private banking and trust client," he added. "It's the prospective revenue stream on the investment side."

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.