Bank wealth management businesses are slowly crawling back to the revenue levels they enjoyed prior to the financial crisis.
So far this year, they have racked up $45.2 billion in revenue, just $1.7 billion shy of the $46.9 billion they generated in 2007, according to Wayne Cutler, managing director of Novantas, a management consulting firm.
In his presentation at the Raymond James Financial Institutions Division Symposium in Orlando last month, Cutler pointed to other indicators of bank programs' growing health. Wealth penetration ratios which measure how many bank customers have at least one investment product with the bank-are edging up. In 2013, the majority of bank programs (44%) had wealth penetration ratios of 6% to 8%. Historically they've been in the range of 3% to 5%.
Robust growth rates were the most powerful indicator of bank programs' health. On average, revenue increased by 17% this year, in contrast to commercial banking revenue, which grew at an anemic 1.7%, Cutler said.
Growth in coming years will likely come from the appreciation of AUM, as well as cross-selling to the existing retail customer base. Banks are also likely to see growth from hiring new advisors and culling low-performing ones, Culter said in an email.
Firms also will need to increase the productivity of their existing advisors, which is the approach Raymond James appears to be taking.
At the symposium, Scott Curtis, president of Raymond James Financial Services, noted the firm's focus was on the quality, not the quantity, of advisors. "We're not maniacally focused on how many advisors we have affiliated with the firm," he said. "We don't have an objective to have X-number of advisors at some year in the future. Our focus is on asset growth and helping you to be more productive," he said. He noted the firm has seen increases in productivity in recent years. The average annual production level now is $410,000, up from $285,000 four years ago, he said.