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White Paper: Holistic Wealth Management

Money Concepts

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  • Written by  Barry L. Dayley
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White Paper: Holistic Wealth Management

Structural changes in the banking industry initiated by consumer demand and convergence of financial services have forever changed the face of community banking. In the past two and a half decades, the banking industry’s share of total U.S. household financial assets fell 44 percent to 12.4 percent, while the share of mutual funds increased 16 times to 11.4 percent. This fact, coupled with the ever increasing commoditization of traditional banking products and banking services offered by non-bank competitors pose a real threat to a community bank that is not able to address wealth management needs.

Now, nearly every large bank in the world offers some semblance of what they refer to as Wealth Management as part of their Private Banking platform. They provide very sophisticated services for their most wealthy customers.

In fact, wealth management services are reportedly being provided by 83% of large banks, 63% of medium-sized banks, and 49% of small banks. However, many of these organizations count offering investment products or access to online financial planning calculators as their source for wealth management services. However, to compete in this space, a community bank must offer real and practical wealth management solutions.

So what is wealth management and what impact can it have on community banking? Wealth management is a specialty of financial planning. The wealth manager’s focus is the client and his efforts are devoted to helping clients achieve life goals through the proper management of their financial resources. The practice of wealth management is holistic and individually customized. Success is not measured by investment performance relative to other managers, but rather by the client’s success in meeting life goals.

Key factors for the choice of a community bank to offer wealth management services are still discretion and safety, image and reputation, service quality and performance. Many clients still have classic needs from the financial planning and investment management perspective.

However, customer expectations of wealth management services are changing. “Client experience” has become a differentiator for success, and requires a new generation of relationship managers who embody not only competence but encourage trust and confidence.

To illustrate the impact of true wealth management services, delivered by a highly professional relationship manager, let me introduce you to Gerald Friedel, Vice President of Wealth Management at Itasca Bank & Trust in Itasca, Illinois. In 2000, Itasca Bank & Trust established a wealth management program working in connection with Money Concepts International, Inc. Gerry, who had been a lending Vice President and Bank President Jack Mensching, introduced the concepts of Wealth Management services to the bank and Gerry built the program from scratch. The philosophy of Itasca Bank was to offer valuable services targeting their best customers with a commitment to take all comers. Offering the customer a truly unique and holistic experience was to be the approach with an emphasis on gathering assets and fee based services. A unique client experience customized to each individual is delivered through their systematic process of services, communications, and experiences that make the client feel appreciated or special as well as building greater confidence in achieving their life goals.

Since the launch of the Itasca Bank & Trust wealth management program; the bank has achieved or exceeded every initial goal it set for itself though they raise the bar each year. Customer loyalty has increased, revenues are growing at a rate of 35.31% annually, and over 70% of their new clients come from referrals. In addition, they have developed a book of business totaling more than $36 million in fee based assets under management. Not bad for a former loan officer! Recently they added Bridget Han and Joseph Book as additional advisors to their staff in support their growing program.

Their success can be traced back to several things, but delivering a unique experience has accentuated the client-oriented value of their services developing a loyal, referral giving client base.

Another example is from a relatively new wealth management program at River Valley Financial Bank in Madison, Indiana. Matthew Forrester, President of the bank, caught the vision of what Wealth Management Services could do for their customer base, and he aligned the bank with the Money Concepts wealth management program. He assisted in the recruitment of a successful financial planner in the community, Bill Hensler, to serve as their Vice President of Wealth Management. Because of strong ties in the community and commitment to a client centered holistic approach, River Valley Financial Bank gathered over $25 million in assets under management during their first 8 months in the business.

Client acquisition and retention are still imperative for successful participation in this market battlefield. Knowledge both of markets and of clients, and their “financial personality”, are vital factors for sustainable performance. These, along with the integration of all of the divisions operating in the bank, are essential for a successful program.

Most community banks operate through a traditional banking platform providing depository or savings products, lending products and services, and in many cases investment and insurance products are also available. Without exceptional leadership and vision, these three divisions become self-serving silos with little or no interaction and communication. See Figure 1.
In order to build a robust wealth management program, it is essential that the focus be placed on the needs of the customer and an alignment take place to break down the silo walls for a fully integrated life planning approach. See Figure 2. No matter the size of the community bank, this approach can enhance relationships, increase sales volume and product count per customer, and increase and diversify the revenue stream. In addition, the Life Planning approach can set a community bank apart through the delivery of a “Client Centered” experience that will raise your bank to the top in the competitive investment arena.
If your bank is not offering wealth management services, or if your program is not as successful as it should be, consider offering wealth management services and aligning your bank with an organization that can help you deliver these services in a way that will set your bank apart from the competition. Position your bank as your customer’s wealth mentor. This approach will broaden relationships with your customer base while enhancing banking and wealth management income and profits.

Barry Dayley is Executive Vice President of Money Concepts International, Inc. and heads up their Financial Institution Program. Money Concepts International, Inc. is a full service wealth management organization. Money Concepts has been helping independent financial advisors and financial institutions deliver professional financial planning and wealth management services since 1979. E-mail: This email address is being protected from spambots. You need JavaScript enabled to view it.
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