Value for Money


By Brian Nixon

In today’s hotly competitive wealth management environment, one key to retaining and growing wealth management relationships is to provide value to customers—and to make sure they know it.

That’s the assessment of Tony Fadool, SVP and chief sales strategist for Pittsburgh-based Federated Investors Inc. By doing so, Fadool says wealth managers and trust officers can decrease or remove price as a factor in the minds of clients. “It’s about us establishing with consumers our value,” he says. “Price is always an issue in the absence of value.”
With the wealth management world awash with options and approaches—including robo-advisers and DIY solutions, the challenge is on. “Your clients are being inundated with offers,” adds Fadool.

Banks of all sizes with wealth management and trust units confront this competitive challenge, but it hits smaller institutions particularly hard. “One of the issues that faces our industry today is that community bankers with small trust departments have to look at the question of ‘How do I build assets under management in order to be profitable?’” says Jay Isaacs, president of FirstCapital Bank of Texas in Midland.

Another challenge is that trust and wealth management is changing, with more of an emphasis on the latter and less on the former. “In today’s world, it’s more focused on investment management than it is on managing trusts,” Isaacs says. “It takes a different skill set. The trust officer today is probably more focused on the investment side of what their client relationship is about more than administering a trust.”

That’s not to say that a bank cannot carve out a competitive edge in the business.

“Our area in Midland, Texas, [is]the center hub of oil and gas production in the United States,” says Isaacs. “Therefore, there’s a lot of oil and gas processing needs for folks who can utilize a wealth management and trust division like ours where we have expertise.”

FirstCapital’s wealth management and trust unit, which was started in 2001, has grown to $80 million in assets under management. “We’ve always been a fee-based provider,” Isaacs says. “All of our fees are structured toward the management of various types of assets, whether you’re talking about investments or real estate assets, or oil and gas assets.”

The management of oil and gas assets is very technical, Isaac says. It requires someone who can hold oil and gas assets, negotiate leases, process monthly oil and gas receipts, manage tax payments and provide record-keeping. (Along with serving the Midland markets, the bank also serves Texas clients in Amarillo, Lubbock and Horseshoe Bay.)

When it comes to developing new customer relationships, Isaac says the bank starts at the core. “Your current customer base tends to be your best referral source,” he says. “The first place we go to is our current depositors and borrowers. The second area is to work with various centers of influence within any community, whether that be CPAs, attorneys or community foundations. Those all help to pick up trust prospects or investment management prospects.”

It’s also important to hire trained staff who can help you build assets under management, he says. That team expertise also must recognize that trusts are not viewed in the same way by families as they were in the past.

Fees are a critical piece of what the customer looks at when they’re deciding who they want to provide their investment management services. “With the advent of all the discount brokerage services that are out there, a lot of folks will look at their investment portfolios and think that’s their peer group—discount brokerage versus the trust department,” Isaacs says. “They really are completely different.”

It’s that difference that can spell—and sell—value to wealth management clients. That’s the assessment of Barry Dayley, EVP at Money Concepts, which is endorsed by ABA for the wealth management and financial planning services it provides to the banking community.

Three key elements speak to the value of bank wealth management advisers, Dayley says. One is that an adviser can help clients stay the course by providing a dose of courage during uncertain times. “When things are going well, who needs an adviser?” he notes. However, economic headwinds—or even personal issues—can create conditions in which clients may make poor decisions without the guidance of a trusted adviser. That positive influence is both powerful and “something a machine can’t duplicate.”

Second, according to Dayley, “people don’t know what they don’t know.” Without the help of an adviser, they may make poor decisions.

Third is motivation. An adviser can help clients prepare and stick to their plan for the long term. While robo-advisers have their place—“we have it and encourage it,” Dayley notes—the human relationship factor continues to be important. “Really what your client wants is access to you,” he says.

Communication is also an important factor in retaining customer relationships, especially in building bridges between generations of clients. “Sometimes a trust terminates when a beneficiary passes away,” Isaacs says. “In other situations where you may have a grantor or beneficiary pass away, and a secondary beneficiary steps in, the allegiance to the bank of that grantor or that primary beneficiary doesn’t necessarily translate to that second generation. It’s critical that you have developed relationships over multi-generational levels to retain the trust business when the second or third generation arrives.”

Isaacs says FirstCapital Bank shares the common challenge with other banks in the need to have an experienced team that can build mass and make wealth management and trust a more profitable and positive contributor to the bottom line. “In today’s world, you’re really looking for someone with skills in both trust and investment management,” says Isaacs. “You’ve got to have a plan, hire the right people and execute the plan.”

ABA’s 2018 Wealth Management and Trust Conference takes place Feb. 25-27 in Orlando, Fla. Conference participants will see, hear and interact with leading wealth management professionals and experts. Sessions will cover building and deepening customer relationships, making full use of the latest technologies and becoming a forward-focused adviser for your clients.