On the heels of announcing its deal for A.G. Edwards Inc. to beef up its brokerage arm, Wachovia Corp. said Thursday that it plans to more than double its private banking staff within three years.
The Charlotte banking company said it plans to add 300 private bankers to its roster of 240 by hiring in "high-growth" markets in Florida, Texas, California, and New York.
Morrison Creech, who was promoted to managing executive of private banking to run the unit, said Wachovia will start its expansion in California by expanding its team covering Los Angeles, San Diego, and Orange County and by adding a team in Northern California to cover the Oakland and San Francisco region.
"When you talk about doubling, you are really talking about adding people in most markets," Mr. Creech said in an interview on Thursday. "In the East Coast we are going to add to existing locations, but there are also pockets where we are going to deploy people where we don't have anyone today. In California and Arizona, we are going to add a lot of locations as well."
Mr. Creech said Wachovia has a detailed "deployment model" for how and where it will add private bankers this year and next but "wants to keep competitors as in the dark as possible."
Richard X. Bove, an analyst at Punk, Ziegel & Co., said that, by announcing plans to add to its private banking unit a week after announcing its deal for A.G. Edwards, Wachovia is clearly working to develop its wealth management business from both ends of the market. The Edwards deal would give Wachovia Securities more than 3,300 brokerage offices nationally, more than $1.1 trillion of client assets, and nearly 15,000 financial advisers
"Wachovia's strategy is driven by the belief that there will be continued growth in the financial services market," Mr. Bove said, "and the company wants to get at each level of the market."
A.G. Edwards brokers are oriented toward mass-market investors, he said, and clearly are not reaching more affluent clients.
"With these two announcements, Wachovia clearly is saying that they are willing to spend whatever is necessary to reach different market segments," Mr. Bove said.
Mr. Creech said the decision to add private bankers had nothing to do with the $6.8 billion deal for A.G. Edwards (which is expected to close in the third quarter).
A.G. Edwards "is a brokerage house, and we are primarily a bank," Mr. Creech said. "We partner with Wachovia Securities to deliver investment solutions, but we are certainly a distinct and separate area."
Wachovia, which had $706.4 billion of assets at March 31, is the fifth-largest wealth manager in the country, according to the Barron's 2006 ranking. Mr. Creech reports to Stanhope Kelly, the president of Wachovia's wealth management division. Previously, Wachovia's private banking unit reported to the retail bank. Before his promotion, Mr. Creech was the managing executive of credit and deposit services in the wealth management unit.
Mr. Kelly said in a press release that bringing private banking into wealth management makes it easier for Wachovia to move clients "through each stage of their financial life cycle and positions us to grow with clients over time."
Mr. Creech, who joined Wachovia in 2003 from Bank of America Corp., is to lead the company's "private banking relationship managers," previously known as the private advisory group. The private bankers will work with the 1,300 financial advisers in Wachovia Securities' investment services group to serve affluent people, those with $250,000 to $5 million of investable assets. With the private banking group in place for affluent clients, the company's threshold for new wealth management clients will move up in January from $2 million to $5 million or more.
"We found that customers with $2 million in assets were dealing with a lot of the same issues as customers with $5 million in assets," Mr. Creech said. "Both are dealing with issues around asset accumulation. This enables our wealth markets group to focus on wealthier customers."
The number of U.S. households with $250,000 to $5 million of investable assets is projected to grow 30%, to 18 million by 2010, from 14 million in 2005, according to data from Financial Research Corp.
Since 2004, Wachovia's private advisory group has added 30,000 clients and reported double-digit annual growth in loans, deposits, revenue, and investment revenue. Mr. Creech said bringing in clients that do not already have a relationship with Wachovia will remain a primary focus of his group and that private bankers will work closely with Wachovia bankers to generate cross-selling opportunities.
"Wachovia has served many of these companies for decades, but their executives often are not aware that we have a sophisticated private bank to serve their personal financial needs," Mr. Creech said. "Many of them have their net worth tied up in their businesses and need advice on succession planning as they [move] to retirement."
