In the heated battle for affluent customers, banks are constantly being reminded that their nonbank competition is working overtime, and usually winning.
And no rivals, it seems, worry banks more than brokerage firms do. At a small conference in New York last week, the names Fidelity, A.G. Edwards, Schwab, and Merrill Lynch were invoked repeatedly as fierce competitors in the trust arena. David Ross Palmer Trust and private banking consultant
"Every print ad Fidelity runs for their trust business gets 100 phone calls that day," said Denise T. Johnson, a senior vice president and marketing director at Bank of Boston's private banking division.
While brokerage firms are gnawing at banks' market share, she said, "Banks have been complacent."
David Ross Palmer, a trust and private banking consultant in New York, painted a dire picture for the dozen or so bankers who attended the two-day meeting on wealth management, sponsored by AIC Conferences.
"The problem you have - and you do have a problem - is that you're losing the (affluent) market," Mr. Palmer said. He cited statistics from Payment Systems Inc, a Tampa-based market research firm, showing that banks' share of the affluent market has dropped to 24%, from 44% in 1992.
Mr. Palmer said banks are giving up as much as $15 billion in private banking revenue alone to brokerages and other money management firms. Indeed, he noted, the number of these firms has mushroomed to 16,000 because their business is so healthy.
Banks that want a slice of this lucrative business need strong support from their chief executives, Mr. Palmer said. They should take a few tips from the brokerage industry.
For instance, he said, brokers spend 40% of their time making calls to customers, but bankers spend only 12% of their time on sales. Brokers also have an edge when it comes to the sales force: The number of bankers catering to the affluent is only a fifth of the 100,000 brokers going after the same market.
The bankers at the gathering got some firsthand evidence of the brokerage industry's aspirations from a wolf among the lambs: Curtis L. Lyman Jr., chief executive of Raymond James Trust Services, St. Petersburg, Fla.
Mr. Lyman said his three-year-old firm, a unit of Raymond James Financial, has been able to capture $300 million of trust assets with just five trust officers, who field leads from 2,300 brokers.
With a nice big smile and a polite demeanor, Mr. Lyman warned those present that he is representative of the whole securities industry in going after the affluent.
"This is war," Mr. Lyman said. "I can tell you that my peers in the brokerage industry see themselves as crusaders. We are nimble, we are well- equipped, and we are opportunistic."
One trust banker attending the conference acknowledged that brokerage firms are making significant inroads in his market.
"The nonbanks are strategically positioned to begin investment relationships much earlier in their customers' lives than conventional banks," said Jay M. Wilson, executive vice president, Mercantile Safe Deposit and Trust Co., Baltimore.