Julie Castle, the president of the wealth management arm at First Interstate BancSystem in Billings, Mont., said she was worried at the beginning of the year that the unit might become another casualty of poor economic conditions.
In the second half of 2008, when many small banks were divesting ancillary wealth management businesses, First Interstate Wealth Management's assets under management fell 20.1%, to $2.716 billion. That was just $16,000 more than it had under management when the banking company hired Castle in July 2007.
"The concerns were more from me than the leadership at the bank," said Castle, who spent 20 years at Bank of America Corp. before joining First Interstate. "It is probably indicative of my background at a publicly traded company, where when you have a bad month you feel the squeeze."
But the wealth unit's fortunes have started to turn, and Castle credits her bosses with patiently backing her strategy to increase profits by cross-selling to wealthy bank customers of First Interstate.
Analysts said companies like First Interstate that are able to remain committed to small — and at times unprofitable — wealth units are rare. "It is just easier for most small banks to get these services from third-party providers like Raymond James," said Burton Greenwald of BJ Greenwald Associates in Philadelphia. "At a certain point, it needs to be profitable."
Castle said she had thought First Interstate might cut her staff or eliminate the unit, "but they said immediately that they didn't want to do that. They told me, 'Why would we want to cut staffing in a business we are trying to rework and grow and make a more important part of our company?' "
Castle said the wealth unit, which now has $3 billion of assets under management, turned a profit in July after running at about "break-even" for the first six months of the year. She said she expects to increase assets under management to $10 billion by cross-selling investment products and services to the $7 billion-asset parent's customers in Montana, Wyoming and South Dakota.
Castle brought with her a relationship management approach she used at B of A, where she ran its New England premier banking and investment division. It required more cohesion among First Interstate's groups that provided trust services, brokerage services, asset management, insurance products and retirement plan services.
"There was not a lot of interaction between the groups," she said. "It was just poor integration. There wasn't a lot of talking or collaborating with each other or the bank."
Castle made 11 executives relationship managers and has since promoted or hired eight more. She said she wants them to focus initially on "high-potential customers" — the "wealthy" with more than $3.2 million of investable assets, the "affluent" with more than $900,000 of investable assets and the "mass affluent" with more than $700,000 of investable assets.
First Interstate manages 4% of its customers' assets, Castle said. She said that she would like to manage up to 40% within five years. "With my history, we know it is possible," she said. "At B of A, we were able to penetrate up to 80% over a four- to five-year period with our premier banking services. I think we are starting from a great position here. Customers like and trust our banks, and we have a tremendous community bank feel and focus."