In January, when we ran our Industry Outlook for 2010, “What Does the Future Hold?” we predicted, that the combination of low loan demand and new regulations limiting banks’ ability to collect unlimited fees and penalties on retail accounts, would cause banks to turn more attention to and pour more resources into their investment programs. That finally seems to be happening. Bank of America, JPMorgan Chase,  PNC and  other big banks are looking to offset losses in large part by investing  more in businesses that don’t depend on lending, like investment advising.

This should be good news for bank advisors and it will drive bank efforts to cross-sell their services. Bank of America (BofA) and Wells Fargo, for example, are initiating efforts to tap their legions of depositors and mortgage holders for investment business. BofA CEO Brian Moynihan recently announced at an investor conference that Merrill Lynch is looking to expand its wealth management business in the $7 trillion that its affluent banking clients have at other institutions.  For some brokers this is even going the other way. Many of them are offering retail banking services to their investment clients. Indeed, the percentage of Merrill's 15,000 financial advisers who sold four or more traditional banking products is 61%, and the number of traditional banking products sold to Merrill wealth-management clients is 171,690 year to date, up from 28,615 during the same period in 2009. 

At the same time BofA has made some changes on the retail banking side: Instead of slapping hefty overdraft fees onto debit purchases, something BofA was notorious for and which infuriated card-holders, it now disallow purchases from overdrawn accounts. This is considered a step forward in trying to win back trust of banking customers. It’s also costing the company a lot in those lucrative fees. But BofA, like other banks, will try to make up the difference for loss of such fees with other fees. For example, Moynihan recently announced that BofA will charge new monthly fees on accounts that don’t meet a minimum monthly balance. No surprise there. Cut fees in one place and they’ll pop up in another. But the thing banks should probably keep in mind as they tap their depositors and loan holders for investment products is that such fees do erode goodwill.  Instead of slapping fees on accounts that customers previously didn’t pay for and clearly won’t appreciate, why not ramp up product offerings customers will pay for, such as brokerage products where the advisors’ fee is in line with the client’s success.