Banks may finally be getting serious about integrating their wealth management units.
I think now the focus on serving customers and really listening to customer feedback and surveys is making this more realistic than ever, Catherine Bonneau, president and CEO of Cetera Financial Institutions, said of the industrys long-time efforts to integrate bank wealth management groups.
Each of the three big units that typically make up a banks wealth business private banking, trust and brokeragehas at different times exercised great power within their banks, Bonneau noted. There were points in time in history where lending and deposit gathering was all important and thats when the private bank was stronger than the other arms together, she said. The trust department and investment services also had periods of time when they were powerful within their organizations.
But now no one group is more important than the other, Bonneau contends. Now were seeing a world where all of those things are coming together. Not anyone is so over-powerful that its dwarfing the others, she said, adding that consumers need all three areas of service.
Nevertheless, integration continues to elude many banks. Cultural frictions between private banking, trust and brokerage units have created silos that have been difficult to break down.
The cost to banks is substantial. In a recent white paper, Cetera helps quantify how much banks are leaving on the table by not integrating their private banking, trust and brokerage units. A bank, for example, with 100 private banking clients, could have some $25.2 million more in assets under management, if its wealth management businesses were integrated, according to rough calculations provided in the report.
Much of the tension stems from the fact that the bankers or wealth advisors in the private banking and trust departments are paid differently from the brokers or financial advisors in the investment services department.
Bonneau concedes that compensation differences is a big impediment to integration, but emphasizes that it only one part of the problem. She says lack of systems integration and what she calls dynamic teaming are preventing groups from working together to serve clients holistically.
Bonneau encourages banks to integrate systems and to make data and asset allocation methodologies uniform across the board. Clients want a holistic approach. They dont want a radically different experience to have their needs met, Bonneau said.
As an example, Bonneau used a clients initial discovery interview. The kinds of customer data collected by each of the groups during that initial interview should not be inconsistent. They should be clones of each other, she said, with maybe a little different emphasis or angle.
She also proposed that banks foster an environment that leads to dynamic teaming whereby different groups would be willing to pass the client relationship to where it is best served. The trick is to develop a rewards system that would not penalize a private banker, lets say, for passing a client relationship to an investment advisor.
The institution that thinks broadly about delivering these services and looks for ways to remove what Ill call the organizational grit between these areas and departments will move the needle faster toward delivering this holistic client approach, Bonneau said.