Wachovia Corp. says it plans to develop assets by aggressively cross-selling retirement products and services across its business lines.
Robert L. Reid, an executive vice president and the director of the Charlotte banking company's strategic retirement initiative, said that developing small-business relationships, increasing IRA rollovers, and creating advisory business with customers could increase Wachovia's retirement assets by 9% to 12% annually in the next five to 10 years.
"The defined benefit business is going 8% to 9% annually," he said. "We want to maintain pace and exceed what others are getting from this market. We want to enhance our market share. That is our overarching objective."
The retirement plan business has $64 billion of Wachovia's $249 billion of assets under management.
Mr. Reid said Ken Thompson, Wachovia's president and chief executive officer, created the strategic retirement initiative 18 months ago to look at Wachovia as a whole and figure out ways to cross-sell retirement services products in each of the company's distribution channels.
"There is a lot of dynamic activity in the retirement market," he said, "and we wanted to find a way to harness that."
With the industry expecting $1.9 trillion of assets to move from defined benefit and defined contribution plans, Mr. Reid said, it was essential to begin forming advisory relationships with customers.
"This business doesn't start when someone says they want to retire," Mr. Reid said. "We have to develop relationships with people when they are 35 to 40 years old and they are starting to make significant purchases and they are relying on financial advisers. We have to develop that trusted relationship so we can become their financial services company."
The company began by offering, through a direct mailing campaign, free retirement consultation to 600,000 customers. Mr. Reid said his unit also started a monthly magazine to increase awareness and knowledge and bought more print and television advertising.
However, Mr. Reid said, the real opportunity is in cross-selling Wachovia's retirement services through the general bank, its wealth division, the corporate investment bank, commercial bank, and the brokerage channel.
"We knew we had to develop an advisory approach rather than a selling approach. Clients don't want to be sold to," he said. "Clients want to be advised. That is the important piece. This business must be personalized."
Wachovia introduced its Envision investment planning system this year. This planning tool is offered by Wachovia Securities to mass-affluent customers with at least $250,000 of assets. It creates investment portfolios based on a customer's investment goals.
Mr. Reid said the system was developed to create an advisory relationship with clients. "We want to gain their trust and help them achieve what they want to achieve," he said.
To develop business, the retirement unit needs to intensify its focus on companies with up to 150 employees, Mr. Reid said. From 90% to 95% of midsize and large companies already have retirement plans, he said, but small businesses are potentially a growth market.
Financial Research Corp. has estimated that the $3 billion of assets in small-business retirement plans would reach $120 billion by 2012. Wachovia started its Evergreen OnePlan this year as a retirement plan option for sole proprietors and has increased sales and support staff for this business.
Analysts said that Wachovia has the potential to succeed at cross-selling simply because of its size but that, with investors wary and market conditions difficult, meeting expectations would not be a slam-dunk.
"Identifying where the opportunities are is easy," said Kevin Daniels, a Boston analyst. "Putting a plan into action is hard. Banks like Wachovia have to do more than put a plan on paper to be effective."
Mr. Reid said he believes his plan can be realized.
"Executing the plan into the market is where the rubber is burnt," he said. "We have a very capable execution strategy. What is important is to get the clients to be able to do business how they want to do business. That is how we will build relationships."
Mr. Reid said he sees many opportunities to cross-sell through the bank. "What the client wants is research online, a face-to-face discussion when they want to," he said, "and when that relationship is more comfortable, to use the phone and online to buy products and services. We have all of that in one in Wachovia, and that is an important advantage."
Wachovia is steadily looking for new products and services to support continued growth, Mr. Reid said, noting that the bank expects to unveil a health savings account next year.
"The foundation for our growth is financial planning and financial advice," he said. "If you don't provide that in a competent way, you cannot build a trusted advisory relationship. If you don't have that, then the client will not put their assets with you."
