Low-tier mass-affluent customerslong shunned by most banksare getting a little bit of love at Regions Bank.
The bank's new brokerage unit is aggressively pursuing modest mass-affluent investors with less than $500,000 in investible assets, a segment of the market banks tend to ignore.
"It's all been wealth and wealth management in our business for a long time, going upstream," said Jim Nonnengard, the head of Regions Investment Services. "We're going to serve the mass market and the mass-affluent client and we're doing it in our branches. A lot of peers and large firms have gone in the opposite direction."
The courtship of the neglected group appears to be paying off. Regions Investment Services has grown at a rapid clip since it launched less than two years ago, generating $12 million in third-quarter revenue, a 20% year-over-year jump, according to the bank's latest earnings release. Its assets under management total an impressive $1.2 billion.
SAVINGS & INVESTMENT PRODUCTS
The unit's growth has come from "regular, everyday" savings, retirement and investment products and services that resonate with mass-affluent customers, such as mutual funds, variable and fixed annuities, and 529 college savings plans, said Nonnengard. "It hasn't been high-end sophisticated stuff," he said.
According to Nonnengard, most of the business has come from existing bank customers who transitioned assets to Regions from other institutions. "We think we figured out a model to serve those people who have needed and wanted these services," he said.
Donnie Ethier, an associate director with research firm Cerulli Associates, said it was smart for Regions to pursue the lower end of the mass affluent market as its the segment where most U.S. households are. Given the strength of its regional brand, the bank has an opportunity to attract younger accumulators who might one day turn into high-net-worth investors. Its encouraging to see a bank sticking its neck out saying, this is what were going after, he said.
ADVISORS FROM ALL OVER
With the help of Cetera Financial Institutions, Regions' third-party broker-dealer, Nonnengard has built an advisor force of 168, which he plans to expand to 200 to 225 by the middle to latter part of next year. The advisors have come from "all over," Nonnengard said, including independent broker dealers where advisors were eager for the referrals and customers leads that Regions' branch network offers. Nonnengard also hired junior advisors from peer banks.
Nonnengard declined to disclose details of the compensation offered advisors, saying only that they received a base salary plus commission, the standard package extended to advisors in bank brokerage units. The "payout" or commission, he said, was neither the highest nor the lowest in the industry.
ADVISOR TRAINING, CHANNEL INTEGRATION AHEAD
With the hiring spree slowing down, Nonnengard is turning his attention to coaching and developing the advisors he's hired. "Now it's going back and making sure that our financial consultants are taking advantage of the planning tools, all the research tools [and] the account management tools that Cetera has," he said.
Nonnengard also wants to start "looking like his peers," he said. For starters, he wants to hire associate financial consultants and grow talent internally, though no specific plans are yet in place. He is also looking to make the unit's services available through mobile and online channels as well as a call center, as its competitors are doing. Calls, he said, are now routed to financial consultants in the branches but licensed people are expected to man the call center in 2015.
"We are integrating into the mobile channel, we're integrating into the online space just as the bank is doing [and] the call centers," Nonnengard said. "It's part of our growth strategy," he said of alternative delivery channels the bank has in the works.