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Wealth management goes holistic

Including a financial planning regimen as a core competency is healthy for both clients and banks

Wealth management goes holistic

A primary-care physician, as defined by the American Academy of Family Physicians, is a doctor who focuses on health promotion, disease prevention, health maintenance, counseling, patient education, and diagnosis and treatment, often collaborating with other health professionals. Replace ‘health’ with ‘financial’ and you’ll find that today’s bank financial planner is analogous to the family doc.

Jason Fitzgerald, vice-president, financial planning officer and investment officer, Wealth Strategies Group, at $4.9 billion-assets Canandaigua National Bank and Trust, considers himself and colleagues “stewards of our clients’ financial health.” Adds Richard Henry, president of Boston-based Millennium Consulting, “Financial planning is like the Hippocratic oath for the financial industry.”

For some banks, financial planning has been part of their service mix for years. But given the ongoing need for new sources of revenue, more banks are looking at financial planning as an opportunity to provide a noninterest revenue stream. They should note, however, that the approaches used to generate revenue vary widely—ranging from “relationship income” (free) to fees assessed on the basis of time, transactions, or some other factor. On the latter end of that scale, Barry Dayley, executive vice-president of Money Concepts International, says that financial planning can provide a recurring revenue stream that becomes very meaningful over time.  “A bank with $100 million in assets under management can generate 1%—or $1 million—per year in revenue.”

Often pigeon-holed as a sales function, comprehensive financial planning deemphasizes investment product peddling and is compatible with a bank’s service culture, says Dayley. “Financial planning enables banks to enter the lucrative securities industry without sacrificing the non-sales culture of the bank.” It may seem contradictory, but not focusing on selling products actually increases sales.

Not just investment advice

Financial planning requires a different mindset than product sales, concurs Steve Randolph, a managing partner with Oakbrook Solutions. “Financial planning is aligned with outcomes: ‘Will I have enough money to retire?’ ‘Can I help pay for my kid’s college education?’”

“The benefits of taking a comprehensive approach to a client’s financial situation is compelling for both the bank and the client, in that it supports a collaborative pursuit of desired outcomes versus the promotion of investment or insurance products,” says Derrick Jones, managing director, Nashville Bank and Trust Company ($500 million in assets under management). “It allows us to identify the best strategies for meeting the client’s objectives, and uncover needs.”

Financial planning comes in different flavors, and it’s important that banks gear financial-planning offerings to their client market segment, says Randolph. For example, the mass affluent-market segment has less need for sophisticated financial plans than ultra-high net worth clients. “Building a robust financial-planning platform for clients with modest wealth would be overkill,” he says.

To charge or not to charge

Banks providing a comprehensive financial plan refer to it as the backbone of their wealth-management offerings. Says Eastern Bank’s President and Chief Operating Officer Bob Rivers, “A financial plan is the foundation of our client relationship, and gives us a complete understanding of our clients’ needs and aspirations.” Eastern, a Boston-based mutual institution, has $8.2 billion in total assets.

But while financial planning is valuable for clients, most banks make the mistake of not charging for financial-planning services, says Sophie Schmitt, senior analyst with Aite Group. Some studies suggest that clients are more likely to follow recommendations if they have paid for the plan, says Randolph. Eastern Bank has considered charging for its comprehensive financial plans—not for revenue generation, but to ensure clients understand the plans’ value. So far, it has not. A spokesman says, “We do not charge for the service for our existing clients. We do charge for each comprehensive plan for potential clients. The charge is waived if, at the completion of the plan, an account is established.”

Cadence Bank, $5.4 billion- assets, offers free and fee-based planning. In addition to web-based, self-service financial planning tools and a less in-depth plan as part of the banks’ service offerings, which are free, Cadence Bank charges for its comprehensive financial-planning services with the cost dependent on the plan’s complexity, says Mark Wesson, executive vice-president, Wealth Services. “Clients don’t mind the charge when they see that the savings from tax strategies and risk management far exceeds the cost of the plan.”

Initially, Canandaigua Bank charged for financial plans, notes James Terwilliger, senior vice-president and financial-planning manager with the bank’s Wealth Strategies Group, but it now provides the plan at no cost to the client as part of the wealth-strategy relationship.

One problem with the fee-based model, says Canandaigua Bank’s Fitzgerald: A comprehensive financial plan requires a significant time commitment from clients. “Very few clients want to attack a financial plan all at once. We’ve found that it’s more manageable if we create the plan slowly over the course of three or four years, working on just a few aspects of the client’s entire financial picture each year.”

Key Private Bank, which has $24 billion in assets under management and is part of the $87 billion-assets KeyCorp, does not charge for financial planning. “We want to get to the heart of our client’s financial issues, so we embed the cost of the plan in our overall fee schedule,” says Veena Khanna, director of Wealth Advice.

Talent search 

Advisor expertise and experience are critical in providing financial planning and holistic wealth services, says Nashville’s Jones. “Our professionals need to be well-versed in investments, tax, estate planning, insurance, and real estate. They also have to be client-focused and possess the drive to execute client-approved financial plans.” 

For many banks, the credibility of a professional designation is important. Several years ago, Eastern Bank required that all new financial advisors hold the certified financial planner (CFP) designation. The bank also has required all existing financial planners to earn a CFP.

Cadence Bank also requires financial planners to hold professional designations to ensure they provide a high level of thoughtful advice, says Wesson, noting that the bank attracts financial-planning talent from some of the country’s top ten financial-services companies.

Fitzgerald, himself a CFP, moved into his current position from Canandaigua Bank’s retail business. Retail banking is an ideal starting point for staff wanting to become financial-planning officers, explains Terwilliger. “It’s a very attractive profession because it’s not a sales position. There’s no cold calling. We are all salaried. Our role is to provide education and advice to customers, not sell them products they don’t need or want.”

Key Private Bank also grooms internal staff as financial planners. The big regional hires new graduates with financial-planning degrees as wealth associates. Associates can then move into a financial-planning role, says Khanna.

Overcoming the transaction mindset

To be successful in financial planning, banks need to overcome the perception that they are more geared toward transactions and product sales. “It may take several years to develop a brand that communicates that the bank is outcome-focused rather than product-focused,” says Oakbrook’s Randolph. “It’s a long-term play rather than a quick solution.”

Kendra Thompson, senior manager in Accenture’s Wealth and Asset Management Practice, agrees that branding hurdles exist: “Most banks focus on commoditized selling, but to really address a client’s holistic financial planning requires a transition in the types of conversations you have with them. It’s a mind shift for both the front lines and senior management.”

The outsourcing option

Some banks choose to offer financial planning by partnering with third-party broker/dealers. These firms provide banks with access to tools such as online brokerage that are attractive to clients, but costly for banks to implement and maintain, says Aite Group’s Schmitt.

A challenge of the outsourced model, she says, is the potential culture-clash between more service-minded bank employees and more sales-oriented investment advisors. “The bankers may be less willing to refer business than the advisors would like,” says Schmitt.

“There is a deeply ingrained banking culture that doesn’t want to sell or to ‘bother’ the client,” agrees Millennium Consulting’s Henry. However, he reminds banks: “Financial planning isn’t about selling, but about fulfilling fiduciary responsibility to clients.”

Money Concepts is an ABA-endorsed financial-planning vendor. Its turnkey program helps banks “navigate the complexities” of financial planning, says Barry Dayley—including finding the right talent. Financial planners are employed by the bank, but to meet licensing requirements, are registered representatives of Money Concepts.

Another third-party provider, LPL Financial, offers recruiting assistance, says Andy Kalbaugh, head of the Institution Services business. Bank financial planners have dual employment with LPL. “We allow banks to leverage what we’ve built and not have to invest their own capital in the infrastructure,” he says.

How you measure success matters

To preserve financial-advisor objectivity, banks tend to compensate advisors as salaried rather than commission-based employees, and use criteria other than volume of products sold to evaluate performance.

“We pride ourselves on great service, so we measure our financial planners based on client retention and satisfaction, and include client survey results in our evaluations,” says Eastern Bank’s Rivers. In an effort to benchmark planner performance against other firms, the bank is moving from a proprietary survey tool to the Net Promoter Score.

It also evaluates financial planners on their ability to engage with other areas of the bank. “The ideal advisor is not only a high-level producer, but works with internal business partners as well,” says Rivers.

Eastern Bank does not hold advisors accountable for fluctuations in client assets due to market moves or factors outside their control. “Measuring assets under management is important for the business as a whole, but not for measuring advisor performance,” concludes Rivers.

Canandaigua Bank measures advisor success based on client retention and share of wallet growth as well as the number of client referrals. It also measures client satisfaction with surveys, and discovered that those clients with an assigned financial-planning officer are more satisfied with the bank overall. The bank’s financial-planning officers meet with clients at least annually, but the bank has an open-door policy for clients seeking advice.

Client phone calls have increased, reports Terwilliger, which is good. “Clients used to call only when the market moved,” he recalls. “Now they call when they want guidance with financial-health issues.”

Partnering with the business

For financial planning to be successful, financial advisors have to be integrated into the rest of the bank’s culture. At Cadence Bank, there’s much overlap with different areas of the bank, including retail, commercial, and business banking, notes Wesson. “We have a lot of cooperation and teamwork between the lines of business to support cross selling and referrals,” he says.

Cadence Bank has created a formalized client-partnership framework to incentivize the partnership between retail and wealth management, and is developing a more formalized referral process for other lines of business, says Wesson.

Key Private Bank’s relationship model for financial planning serves as both a means to enhance the quality of client advice and to sell other bank products. “Our relationship model encompasses both external clients as well as our internal clients.

We consider our relationships with our internal clients to be just as important,” says Khanna.

Adjust to fit your scale

Senior-management support is critical for financial planning, particularly since the bank is adding resources to client-account relationships, explains Terwilliger. “Senior management has to believe that the investment ultimately pays off with more client satisfaction, increased referrals, and a greater share of wallet.”

Due to Eastern Bank’s size, senior-level support is critical for the bank, says Rivers. “With just under $2 billion in assets under management, we can’t say ‘build it and they will come.’ Senior management understands that we just don’t have the scale to compete in asset management. Instead, we have repositioned the business to focus on improving sales and service, such as asset-allocation strategies, and rely on outside investment managers for security selections.”

While the bank uses external asset managers, all securities trading is done in-house. “In the post-Madoff world, our clients appreciate that, at the end of the day, their money is being traded by us,” says Rivers.

Tailored solutions enable banks to capture greater client-share of wallet, but financial planning requires more than acquiring products or adding financial-planning tools. “You have to examine your business and operating model to deliver profitable growth,” says Accenture’s Thompson. “Define what financial planning means for your organization and how you will differentiate your bank from your competition.”

“Don’t view financial planning as a product,” sums up Nashville Bank’s Jones. “View it as a process for building trusted relationships with families that need on-going assistance with their investments, trusts, insurance, or estates.

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Lisa Valentine

ABA Banking Journal Contributing Editor Lisa Valentine has 20 years of experience as a freelance writer and editor, with expertise across the full spectrum of the financial services industry, including banking, insurance, and capital markets. She specializes in interviewing high-level executives about business challenges, strategies, and transformations. She can be reached at

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