Archive

Smaller banks positioned to build wealth management business

Community and regional banks are scrambling to take advantage of the perceived misfortunes of larger competitors to expand their wealth management businesses.

“This is the greatest opportunity we may ever have to grow this [wealth management] business,” said Galan Daukas, executive vice president of wealth management for The Washington Trust Co. in Westerly, R.I. “Our primary competition is at least distracted, if not potentially fatally injured.”

That gives smaller banks an opening to hire new staff, open new offices and ramp up marketing to build their wealth management businesses.

“Community and regional banks can build on their local reputation and the fact that they don’t have institutional exposure to subprime loans and didn’t take [Troubled Asset Relief Program] money from the government,” said Tim Welsh, president of Larkspur, Calif.-based Nexus Strategy LLC, a wealth management industry consultant. “They can position themselves as, ‘We’re not them.’”

Washington Trust, which has $3 billion in assets, has hired a new chief investment officer, a senior portfolio manager and a senior sales representative for its wealth management unit this year, Mr. Daukas said. He said he also plans to hire two more sales reps.

Mr. Daukas hired the investment officer from Citizens Bank in Providence, R.I. and the portfolio manager came from a large family office.

To persuade wealth managers to move over from larger banks and investment firms, Washington Trust had to adjust its pay scale, he said.

“It was a reality that smaller banks did not pay at the same level, but that has changed,” Mr. Daukas said. “We are competing for the same talent as our bigger competitors, and our board has given us the ability to offer competitive and attractive compensation plans.”

One of the country’s largest regional banks, San Francisco-based Union Bank NA, has boosted its wealth management staff by 10% to 350 in the past year and plans to hire another 30 to 40 professionals before the end of this year, said Mary Curran, executive vice president of the bank’s wealth management group, which has $6 billion in assets under management.

“We do think there’s more opportunity out there now,” she said.

“Customers are referring friends more than ever, and people are coming to us and saying, ‘Here’s my [wealth management] relationship. Please take it over.’ That’s different than in the past,” Ms. Curran said.

Union Bank’s wealth management group has opened one new office near Los Angeles this year and plans to open more next year in California, Washington and Oregon, Ms. Curran said.

The bank is also stepping up its niche marketing efforts in wealth management, she said. To that point, Ms. Curran said the bank is actively pursuing high-net-worth lawyers and law firms.

Meanwhile, other industry ob-servers are more skeptical of the aggressive push into wealth management by regional and community banks.

“In my view, it doesn’t make any sense,” said Richard Bove, a bank industry analyst for Rochdale Securities LLC of Stamford, Conn. “Big banks with wealth management divisions have developed skill sets and expertise that high-net-worth clients value. Small banks have no skill sets unique to wealth management. People who let small banks manage their money are making a big mistake. They can buy mutual funds on their own.”

The problems of Bank of America Corp. of Charlotte, N.C., New York-based Citigroup Inc. and others are undeniable, said Arnold Danielson, founder and chairman of Danielson Capital LLC, a Vienna Va., research and consulting firm that specializes in the banking industry. But those difficulties, he said, represent an opportunity for breakaway brokers setting up boutique wealth management firms, not smaller banks.

“Anyone who has money still wants to go to big banks because that’s where the expertise is,” Mr. Danielson said. “A businessman may not trust a big bank for his firm’s business right now, but when it comes to his investments, that’s totally different.”

Officials at smaller banks, obviously, see things differently.

“We think this is a good time for us to be expanding our business,” said Robert Boon, managing director of Ledyard Financial Advisers, the wealth management unit of Ledyard National Bank of Hanover, N.H., which has about $610 million in assets under management.

Last month, just three days after Bank of America’s U.S. Trust wealth management unit closed its office in Hanover, Ledyard National, a community bank less than 1% the size of its giant competitor, swooped in to hire two of U.S. Trust’s senior executives.

“We’re in discussions with a number of clients from bigger institutions, and they’ve become very uneasy with advisers they can’t reach out to and don’t know very well,” Mr. Boon said.

E-mail Charles Paikert at [email protected].