ABA Bank Journal - March 2007 - (Page 36)
Trust 3/6/07 4:51 PM Page 36 TRUST/WEALTH MANAGEMENT Wealth management: worth a second look? Market forces and competitive trends suggest that this specialized business may give a needed boost to bottom lines strained by shrinking net interest margins S By Bill Streeter, editor-in-chief Get out from behind the desk Washington Trust is not the only community bank to recognize the profit potential of the trust/wealth management business. In northwest Iowa, Peoples Savings Bank, $230 million in assets, is about eight years into a renewed commitment to the trust business. The bank had activated its trust charter in the ’70s, but had not done much with it—assets under management had grown to only about $15 million. In 1999 the board asked itself, “Is this a business we really want to be in?” Deciding in the affirmative, it brought in an experienced trust banker, Mike McAlpine, to grow the business. In his conversations with the bank’s management, McAlpine—senior vice-president, trust—told them they had to be commit- 36 MARCH 2007 /ABA BANKING JOURNAL www.ababj.com/subscribe.html ILLUSTRATION BY JIM TONIC / IMAGES.COM ay somebody told you that they had a business that would generate fees of 1% of assets, and that the pool of assets, even if you didn’t add to it, was likely to grow, on average, by 8% a year. And further, that you could charge a fee for providing a careful and professional financial plan, and that with that plan in hand, customers would, more often than not, happily turn over their assets to you to manage, adding to that pool you already have. Would you say that such a proposition was a too good be true? b obviously a slick Wall Street deal? or c sounds pretty good? The business just described is quite legit, and is working very nicely for a 207year-old Rhode Island community bank, The Washington Trust Co. It is, in fact, just part of the bank’s wealth management story. The bank also runs a profitable, traditional trust business that’s been around as long as the bank itself— since 1800. Its wealth management business contributed the lion’s share of the company’s noninterest income in 2006, which altogether accounted for 47% of the bank’s total revenue—a huge percentage for all but a handful of specialist banks. Investment assets at the bank total nearly $4 billion, surpassing the traditional bank’s total of $2 billion. Yet Washington Trust remains committed to traditional banking and has no plans to become a Boston Private Bank & Trust or a Mellon Bank. Galan Daukas, executive vice-president of wealth management, says the expectation is for the two parts of the bank to be about equal. But he adds that the wealth management division gives the NASDAQ-traded bank better earnings balance and diversification, which helps its share price. What exactly is “wealth management”? There are numerous definitions, not surprisingly. “Many people think of it as another term for portfolio management,” says Fred Miller, regional sales manager for AccuTech Systems Corp., and a former banker. He believes wealth management is much more comprehensive, including business succession, insurance, estate planning, management of investable assets, tax planning, and more. In other words, it incorporates personal trust and asset management under a larger umbrella. For the purposes of this article, that is the meaning used.
For optimal viewing of this digital publication, please enable JavaScript and then refresh the page. If you would like to try to load the digital publication without using Flash Player detection, please click here.