SEI Investments Inc. says it wants to increase market share and assets under advisement by developing outsourcing deals with community and small regional banks.
The Oaks, Pa., asset management and investment services company said it will add 20 to 25 advisory relationships a year by targeting small banks in the wealthiest markets in the country.
Brandon Sharrett, a managing director for regional and community banks at SEI Investments, said it will get in the back door by offering back-office services and then cross-selling front-office investment management services.
“This is not a quantity game, it is a quality game,” Mr. Sharrett said. “We want clients that will adopt more of our value proposition. We want our back-office opportunities to turn into front-office opportunities.” SEI is trying to cross-sell its wealth management platform to smaller banks, he said.
“Bank trust departments are beginning to recognize that product is not going to win the game,” he said. “At the end of the day, having access to more products and trying to sell different products won’t bring enough value and won’t differentiate you from other providers in the marketplace. Community bank trust departments have to be better advisers. Not investment advisers, but life advisers.”
He said SEI plans to target wealthy markets in Florida, Texas, Arizona, New York, Connecticut, Pennsylvania, California, and North Carolina. His company’s sweet spot is banks with $100 million to $2 billion of trust assets.
Mr. Sharrett said SEI’s wealth management platform depends on getting advisers to work closely with customers. “It is a different approach than what advisers in banks have historically delivered,” he said. “This is a much more intimate relationship. If you build a good relationship, you aren’t selling anything anymore.”
SEI has been outsourcing technology solutions to banks since the 1960s. In 1989 it started a trust company and began offering back-office trust services to banks. In 1994 the trust company began outsourcing services to small banks when it created its community trust group, which serves banks with less than $15 billion of assets.
The Pennsylvania company administered $291.1 billion of mutual fund and pooled assets at March 31, managed $123.9 billion, and operated 22 offices in 12 countries. Mr. Sharrett said one-third of the assets under administration are in small banks.
“Community banks and regional banks have become the predominant market for these types of services,” Mr. Sharrett said. “There are plenty of market opportunities with regional banks and community banks. We [serve] 100 clients with our full back-office services platform, and we have 1,000 other prospects out there.”
Last week, SEI announced a multiyear agreement with South Carolina Bank and Trust for back-office trust department processing. SEI will also offer the South Carolina bank its wealth management platform.
David Tittsworth, the executive director of the Investment Adviser Association, a Washington-based trade group, said more small and regional banks are interested in offering advice.
“They want to sell advice rather than a variable annuity; banks don’t want to look like brokers,” he said. “There is a big cultural distinction between people that sell products and firms that offer solutions and advice.”
“Banks want to offer it because this is what consumers want,” Mr. Tittsworth added. “No one wants to go to a broker or a bank and be pushed a product. I’d rather have a disinterested third party who analyzes the situation and creates a customized portfolio to serve my needs. Disinterested advice is at the core of what banks want to do because this is what consumers want and what they will pay for.”
Mr. Sharrett agreed.
Community banks “cannot make themselves stand out with a new separately managed account, or lower fees, or more managers because there is always someone with better fees, or more managers, or better performance,” he said. “There are too many companies that that is the game they play every day. Community banks have to decide what they do to stand out, and that’s client relationships.”
SEI wants to develop the products, services, and platforms that let community banks focus on developing relationships, Mr. Sharrett said.
“There is very little additional value that is being derived for clients from back-office services and products,” he said. “Banks want to outsource because we can do it better, faster, and cheaper than the bank can do it for themselves.”
