As most investment products have become commoditized, bank-owned wealth managers pursue ways to distinguish themselves.
Executives at Northern Trust Corp., Bank of New York Co., and the capital markets unit of Commerce Bancorp have taken different paths toward becoming the "trusted adviser" to high-net-worth investors.
"We all look alike. I guarantee that we all look alike because we are all trying to do the same thing," said Alan Robertson, a senior vice president and head of the wealth advisory group at Chicago's Northern Trust. "We bring … different cards to the table," he told a Microsoft and Knightsbridge Advisors wealth management conference in New York on Thursday, "and it becomes increasingly important to segment our market and determine what we do best so that we can stand out."
Allan Starkie, a partner at Knightsbridge Advisors Inc., said another million American millionaires will be created by 2010 and $3.44 trillion of assets will be added to the market.
"As a whole we are all losing wallet share," he said, "and we are losing wallet share to the independent advisory firms who are growing at a pace of 40% organic growth, … perhaps because they are able to be more client-centric."
"The most profound change in wealth management is the commoditization of the wealth management products," he said, but this just means that companies can no longer rely on their products to attract business, so the challenge to industry participants is to create attractive business models.
Stan Gregor, the president and chief executive officer of Commerce Capital Markets in Cherry Hill, N.J., said his bank is using an innovative platform to bolster it as a trusted adviser.
In January, Commerce bought eMoney Advisor Inc. of Conshohocken, Pa. - which had developed a virtual private banking system that enables the bank to create a nightly financial statement for a customer's assets both with the bank and with 3,100 other firms.
This provides a daily snapshot of the client's financial picture, Mr. Gregor said, adding, " … when I think of the trusted adviser, that is the individual sitting on the same side of the table with the client reviewing their entire financial picture."
Mr. Robertson said Northern Trust is using its strong brand appeal and a pinpoint focus on people with at least $25 million of assets. About 27,000 to 30,000 families in the country have that kind of wealth, he said, but for companies with a brand like Northern Trust's it is possible to grow.
"Shampoo is shampoo, but it is a matter of getting your brand in the market," he said. "We're going to do more advertising, and Bank of New York is going to do more."
Stephen Doty, a managing director at Bank of New York, said that, as wealthy investors move toward retirement and shift from wealth accumulation to preservation, it will be crucial for banks to broaden their open architecture platforms.
Outcome-oriented products such as principal-protected annuities are gaining popularity, he said, adding, "Guess who's playing in that sandbox - insurance companies." Mr. Doty said wealth managers must offer products from a diversified group of managers.
"Everyone has some form of open architecture … but there are some internal managers at Bank of New York that have done well," he said. "We are complementing that and creating a strong hybrid solution."
