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TRUST CUSTODIAL RETIREMENT ASSET MANAGEMENT |
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SERVICES |
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CUSTOMERS > COMMUNITY BANKERS > RETIREMENT |
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Private Wealth Services |
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Banks target customers' retirement $ |
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By Lisa Shidler |
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Banks are starting to make a heavy push to fight for retirement assets after lagging investment firms for years. In the past, banks haven't focused on retirement assets, satisfied to attract deposits, sell home equity loans and offer certificates of deposit. That strategy, however, is no longer good enough: Deposit bases are shrinking, and the strategy to bolster business is to pursue retirement accounts of current customers. "Banks have a huge customer base that they haven't tapped into yet" for that market, said Teresa Epperson, a partner at Mercatus LLC, a Boston-based consulting firm. The demographics seem favorable to banks. "With retiring boomers and [their] trillions in assets, banks are becoming more interested in retirement," said Paul McAdam, senior managing director of research for the Chicago-based Bank Administration Institute. "The signs we're seeing from the larger banks in this country is, retirement is emerging as the key focus." Mr. McAdam, like Ms. Epperson, expects that banks will step up their retirement plan marketing to consumers over the next six months. The marketing effort to lure retirement assets to banks is inevitable, according to experts. "It's natural that there would be some attention by banking and financial institutions to capture more than they have in the past," said Charlie Nelson, senior vice president of Great-West Retirement Services Greenwood Village, Colo. A recent study showed that investment firms dominated the retirement business, with 67% of the 401(k) rollover market, while banks had captured a paltry 18%. Insurance companies had landed 7%, and the category "other" 8%. The study was completed in May and released Nov. 5, with 2,997 people answering the online survey. Closing the gap is not only possible but probable. "It seems that retirement assets should have been a hot topic for banks long before now," said Dick Ayotte, chief executive of American Brokerage Consultants Inc. of St. Petersburg, Fla. "There's no reason that banks can't compete and succeed." Because of the amount of assets that baby boomers have accumulated in their retirement accounts, rollovers are enticing to banks. "Banks are smart. They go where the money is," said Ed Morrow, chairman and chief executive of the International Association of Registered Financial Consultants in Middletown, Ohio. "If I were advising banks on this, I would say be diligent, and be patient, because some of the brokerage firms will overreach themselves." Patience is perhaps easier to come by when the opportunity is so great. "We expect this part of our business to grow exponentially because of baby boomers' retiring," said Bob Scott, senior vice president of Centier Bank in Merrillville, Ind., which has $1.8 billion in assets. Right now, in-dividual retirement accounts make up 20% of the business, and 401(k) ac-counts make up another 20%. Centier has a referral program in which branch employees refer clients to retirement consultants. "The branch people are excellent at knowing their customers, and they know which ones are close to retirement, and can refer them to the right person," Mr. Scott said. Banks often have a close relationship with clients, and they provide more-conservative strategies for clients than those they might find at a brokerage firm, said Bill Reid, president of ICBA Financial Services Corp. in Memphis, Tenn. "The rollover business is probably the largest single category of investment business that a community bank is involved in," he said. "People are looking at a full range of financial services from their bank, and that's why this is so important to community banks." For some banks, offering full service means expanding their menu of investments. At Harris Private Bank, for ex-ample, that meant offering new fixed-income and equity products, said Debra Radway, a wealth adviser for the bank, a unit of Harris Bankcorp Inc. in Chicago."We've been working with these clients for years while they've been building their wealth, and now we're here to help them in the next stage of life," she said. While that's true, catering to retirement clients is also good for the bottom line. The strategy of attracting retirement clients has helped banks to offset business lines that are neutral or negative, said Gil Mateer, an adviser with Bryn Mawr (Pa.) Trust Co. For example, this year, Bryn Mawr Trust has increased the number of 401(k) accounts it manages to 43, from 34. "You sort of have to look for new opportunities," Mr. Mateer said. Lisa Shidler can be reached at lshidler@crain.com. |
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Gerardo Tabones |
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Paul McAdam: Banks are more interested in retirement, he says. |
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Charlie Nelson: Banks' interest in retirement is inevitable, he says. |
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