Umpqua Holdings Corp.'s new asset management unit may soon find that even a local bank will have a hard time getting people to invest during the current economic climate.
The company wants to develop business in the Pacific Northwest by relying on its "hometown presence" and cross-selling to its parent's customers, its top executive said. "In our industry, periods of incredible turmoil are also periods of incredible opportunity," Kelly Johnson, hired by Umpqua to run the unit as executive vice president of asset management, said in an interview Tuesday,
He said Umpqua, which has $8.3 billion of bank assets, has sold private-client services for decades but the new unit will let the Portland, Ore., banking company add trust and asset management services to its menu. He said the unit will complement the services offered by Umpqua's brokerage subsidiary, Strand Atkinson, Williams, and York; it looks to cross-sell wealth management services to both the bank and its brokerage unit. "Customers are looking for all of their asset management services from one company," he said.
Analysts said the approach is not new. Many banks have entered wealth management in recent years — and left it because cross-selling can be difficult "Most wealthy and mass-affluent customers that these banks want to target already have an adviser somewhere else," said Burton Greenwald, an analyst at BJ Greenwald Associates. "You can't hang a shingle and expect assets to flood in."
Mr. Johnson, who was a senior managing director at Royal Bank of Canada's RBC Wealth Management unit in Oregon, central Washington, and Reno, Nev., agreed many banks are divesting. "Most banks, without being too specific, decided to get out of asset management to shore up their capital," he said. "We are not in that situation. Our capital levels are strong. This is a real opportunity for us. While everyone else is ebbing, we are flowing."
Umpqua, which has a Tier 1 capital ratio of 14%, will plans to target investors in Oregon, Washington, and northern California.
"Umpqua is the largest community bank in Oregon, and people in this region like to work with people in their backyard," he said. "There are few Oregon-based banks that can provide their customers with asset management services."
"With all of the divestitures and acquisitions going on," he said, "banks are losing touch with their clients. We are seeing a lot of mega-institutions that are rising up and falling down. We want to help customers get financial advice from an institution closer to home."
Mr. Bobroff said Umpqua can play the "hometown card" in Oregon, since many other banks in the region are "part of banking conglomerates" owned by Wells Fargo & Co., U.S. Bancorp, or Bank of America Corp. "A lot of smaller banks are trying to gain customers and assets with this type of local approach," he said. "I'm not saying they can't do it, but the question is how important is it in the overall scheme. The bigger challenge is getting investors to even want to invest at all in this market."
Mr. Johnson said Umpqua wants to expand its asset management business organically but would consider acquiring if the right deal came along. "We want to focus on our customers, and that means both individuals and businesses," he said. "We have been providing them with lending and banking services, and this is a natural progression to the next level for a well-capitalized bank."
Mr. Bobroff said Umpqua should have "reasoned expectations" as it tries to develop the business in the midst of a recession. "It is hard to make a splash with a new business because there just isn't enough water right now to generate a splash," he said.
