Community banks have had varying degrees of success with wealth management, and some have yet to venture into the business.
To clarify the term wealth management, as it is not universally understood: It refers to the ability to offer a broad spectrum of investment and insurance products capable of serving complex individual and institutional clients.
There are some community bankers who have chosen to stay true to their roots and focus on their core competency of "banking," this while their margins continue to erode. Some feel that wealth management is not banking, and from a literal regulatory perspective, it is not. While providing customers' access to a broader array of financial products is not pure banking, it positions your institution to service and support your customers' needs and to be competitive with larger banks. Doing what's right for customers and helping them pursue their goals is at the very foundation of the community bank model.
A bank's most valuable assets are its customers, and banks are rightfully very protective of their customer base. They do not want to expose them to investment sales professionals who could undermine their relationship. That is why some banks are hesitant to implementing a wealth management program. Others have taken the leap and but are not achieving the results they anticipated and fail to recognize why.
The keys to success to any wealth management program are:
Leadership. The most effective programs tend to reflect the quality of the executive leadership and support.
Business-line management. Manage it as you would any other line of business such as commercial lending, retail, etc. Have a business plan, management and board reports, meetings, monitor and review for results, etc.
Knowing your customers. Understand the demographic profile, market distribution, segmentation and business mix, retail/commercial, growth versus mature markets to develop marketing strategies and approaches
Alignment. The broker-dealer organization and investment sales professionals must be a good fit with your organization, associates and your customers, in terms of individual personalities and organizational values, for the program to excel.
Teamwork. Instill a team-oriented approach, where the investment professional is a partner with your retail and commercial personnel. No one person should 'own' a customer.
Sharing the wealth. Work with your investment partner and human-resources folks to develop proper reward systems. There may be certain industry and regulatory differences for individual compensation and incentives, consider annual divisional and branch-level incentives that are compliant but promote teamwork. The investment folks should have deposit and loan business development goals and rewards as well.
Note that none of these factors relate to product breadth, asset management pricing, portfolio analysis, asset allocation, financial planning, etc. Stay focused on the customer, have the right people on your team and reward them appropriately.
Bankers and investment professionals may not speak the same language, but the successful ones realize that relationships are essential to business success.
