By Scott Van Voorhis
Small and mid-sized banks across New England are diving into the business of wealth management, competing for customers in a field long dominated by the mega banks.
Local bankers say wealth management gives them a hot new service needed by a growing number of the affluent and well-off faced with crafting their own retirement plans – valuable customers who would otherwise have to go elsewhere for help, possibly to rival financial institutions. The new offerings have also given banks access to potential new customers with whom they might not have otherwise done business.
Hometown bankers say they offer a sweet spot for consumers, with far more personal service than the wealth management teams at big banks, combined with the institutional stability that many smaller or solo wealth management firms are less likely to offer.
Instead of pushing a particular product or service, the banks, through their wealth management teams, work with their clients on their full range of financial needs, from overseeing their investments to offering financial planning and estate planning services.
“We don’t get all excited when markets go up and we don’t get all depressed when markets go down,” said Bill Cadigan, president of Wellesley Investment Partners, a subsidiary of Wellesley Bank. “We are very different from a very aggressive firm that does well when the market is up and suffers greatly, or goes out of business, when the market goes down.
“We are in the wealth preservation business,” he added.
Here are the experiences of three Massachusetts institutions – Wellesley Bank, Easthampton Savings Bank and BayCoast Bank – that have found success in money management and financial planning.
How they Got Started, and Why
With a history stretching back a century, Wellesley Bank has long offered advice to its customers on how to prudently manage their money and how to “borrow appropriately,” said CEO Tom Fontaine.
But in 2008, Wellesley Bank took a major step to build upon that tradition and meet current market demand, launching a separate wealth management subsidiary, Wellesley Investment Partners. Seven years later, the bank’s wealth management group has $125 million in assets under management and seven employees.
“It’s gone very well,” Fontaine said. “The growth has been phenomenal for us.”
Plimoth Investment Advisors got its start in 2005, when it was launched by what is now Fall River-based BayCoast Bank as a limited purpose trust company.
The bank long had a trust department, but realized that demand on part of customers was shifting towards a broader array of wealth management services, noted George Oliveira, Plimoth’s chief executive.
The business took off and by 2011, Plimoth was offering its wealth management services to other local banks as well. Dedham Institution for Savings then made the jump from client to part owner, buying a 20 percent stake in Plimoth, with BayCoast retaining the remaining 80 percent.
Today Plimoth has 17 employees and $600 million under management.
“We do everything, from soup to nuts,” Oliveira said.
For its part, Easthampton Savings Bank launched a wealth management team back in 1999, said Tom Brown, a senior vice president at the bank. Easthampton got tired of referring customers to outside financial advisors when they need various wealth management services. Today the bank’s wealth management group has a $76 million portfolio.
“We needed to be more well-rounded,” Brown said. “It’s a bigger scope than just about alternative investments” or any other individual product, he added.
“It’s about the whole financial picture of our customer and financial planning,” he said.
Financial Planning as Loss Leader
Wealth management executives at the banks say they are more than happy to talk over finances with their potential clients.
Raymond Lacourse, certified financial planner and vice president at Easthampton Savings Bank, says he frequently has such casual discussions. The hope is that the conversations might lead result in a new client joining the practice.
Drawing up a formal financial plan might be part of the overall process of managing the new client’s portfolio. But Easthampton’s wealth management group does not offer one-off financial plans. The group earns its keep through a fee based on a percentage of a client’s assets under management.
“We talk to anybody,” Lacourse said. “I love to have conversations with younger people right out of college – I wish I had done then, in my 20s, some of the things I recommend people to do,” he said.
Both Wellesley Investment and Plimoth Investment say their doors are always open to potential clients looking to chat, but they don’t separately offer financial plans. Instead, like Easthampton, they earn a fee based on the amount of money they manage for a client.
“If we do a financial plan for our client, we are really not charging them for it,” Plimoth’s Oliveira said.
Who the Customers are
Wealth management practices often have a minimum asset requirement when it comes to prospecting for and working with potential clients. That’s the amount of money available for investment, beyond the value of a house or condo.
Plimoth doesn’t have a hard and fast minimum, but its average client has a portfolio ranging from $750,000 to $1 million. Most of the group’s clients are individuals, though it does work with some charitable foundations, endowments and company retirement plans, Oliveira said.
At Wellesley Investment, the minimum required is $500,000, though the typical client has a portfolio worth between $1 million to $5 million, Cadigan said.
Eastern Massachusetts is Wellesley Investment’s market territory, fertile ground given the high income and asset levels in the Boston and its far-flung suburbs.
“We are trying to stay in our back yard,” Cadigan said. “We are not going to start calling on people in California.”
All three groups have a mix of clients, some referred by their bank parents, others from the general community.
Easthampton works with a range of individuals and small businesses, moving beyond portfolio management to help draft buy/sell agreements and estate plans, Lacourse said. He estimates about 2 percent of the bank’s customers are clients of Easthampton’s Savings wealth management group. Lacourse would like to boost that number to 4 percent, the industry average.
That said, Easthampton’s wealth management group puts a big emphasis on finding ways to serve all its clients financial needs, including banking. As he works with new clients, Lacourse and his fellow wealth team members drill down to get an accurate as possible view of their full financial picture, not just stock market investments, but insurance and mortgages and everything else.
So while the percentage of bank customers using Easthampton’s wealth management services might be smaller, they are much more likely to have most or all their financial affairs centered at the bank, Brown said.
“We are their primary financial advisor,” he said.
Profiting from Synergies
Another upside of the wealth management business for New England banks are the multiple synergies that can result. Instead of having to refer customers out of the bank to various wealth management operations, banks can send them down the aisle to their own groups.
But it works in reverse as well, with wealth management clients, like everyone else, in need of a range of banking services. Wealth management customers may also very well be business owners in need of a commercial loan, a mortgage or a car loan, Plimoth’s Oliveira said.
Easthampton takes a similar approach.
“When a customer comes through our door, we want to be one-stop banking,” Brown said. “We want to be able to do it all.”
Wellesley, by contrast, takes a little bit more of a subdued approach when it comes to the synergy question. There is no cross-selling at Wellesley Investment of Wellesley Bank products. No sales commissions flow back to the wealth management group if a client takes out a Wellesley Bank mortgage, Fontaine said.
“We show that we can provide the best value,” Fontaine said. “We are not forcing people to do things that are not in their best interest.”
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