The sales rumors have died down, and U.S. Trust president Keith Banks can breathe easier after coming off a very good month. Bank of America Merrill Lynch was named the world’s leading wealth manager with nearly $2 trillion in assets by Scorpio Partnership. Moreover, the bank’s global wealth and investment management division had an impressive second-quarter, fueled by $4.5 billion in revenue, an increase of more than seven percent from the comparable quarter last year.
U.S. Trust, as things turned out, remained a major contributor to BofA’s wealth management empire with $367.7 billion in assets, fending off persistent stories that the unit would be sold off by its beleaguered corporate parent. Sallie Krawcheck, president of Global Wealth and Investment Management for BofA, has emphatically declared U.S. Trust a “core asset” that isn’t going anywhere. For his part, Banks, in an exclusive interview with TheWealth Management Letter, said he is focused on growing U.S. Trust’s assets and increasing its market share – with the help of Bank of America’s balance sheet and banking services.
Banks, who has been president of U.S. Trust since late 2008, also oversees BofA Global Capital Management. He previously served as president of Global Private Client, Institutional and Investment Management for Bank of America and joined BofA following the bank’s merger with Fleet Boston in 2004.
WML: What’s been your most significant accomplishment this year?
KB: I believe we have built the most powerful wealth management organization in the business. I think we have a unique situation and a unique ability to help clients.
WML: How so?
KB: The U.S. Trust organization now has one of the broadest and deepest sets of capabilities out there. As a result, we can help clients across the broadest set of wealth management needs.
WML: What’s the hardest thing you’ve had to do since you took over as president?
KB: The challenge has been the broad-based macro environment. Clients have been deeply impacted by the financial crisis, especially in the emotional sense, for a considerable period of time. People have been in a very conservative mode. The challenge is to engage clients in the type of conversations geared toward strategies that we think they should be doing from an investment management viewpoint. Their mindset has gone from return on investment to return of investment.
The challenge is getting clients to engage in the right dialogue and towards what we believe are the appropriate actions in the context of a long-term investment management strategy.
Having said that, it should be noted that over the last six to nine months clients have been engaging more and are more open-minded to various courses of action.
WML: U.S. Trust’s fit with Bank of America remains an issue. What are some examples of how the two organizations are working well together?
KB: One of our biggest advantages is that we are able to leverage the BofA balance sheet and provide very exciting credit opportunities to our clients. In fact, lending is one of the key pillars of the value-added we provide. We are also able to deliver an extensive array of deposit products.
Our relationship with the broader organization is also beneficial, whether it’s the global commercial bank or the investment bank. Our partners in those businesses refer their client to U.S. Trust when there are wealth management opportunities, and we, in turn refer clients to those businesses when there is a need for commercial banking capabilities or investment banking.
WML: What hurdles remain in integrating U.S. Trust with Bank of America?
KB: At this point there are no hurdles.
WML: No?
KB: The transition is complete. We’ve been given autonomy to serve our clients in a manner consistent with what high-net-worth and ultra-high-net worth clients would expect from a world-class private bank.
WML: John Thiel, the new head of U.S. wealth management and private banking for Bank of America, has a brokerage background. Has that made any difference in how you work together?
KB: John is a partner of mine and we are working together to build a strong partnership between Merrill Lynch advisors and U.S. Trust advisors.
WML: What are some examples?
KB: If there are skills, experience or capabilities that exist in U.S. Trust that would be beneficial to a client of Merrill Lynch, then we would partner with the financial advisor to deliver the U.S. Trust capabilities to the Merrill client. Conversely, if a U.S. Trust client would benefit from the skill set of a Merrill Lynch financial advisor, then we would partner with that individual and deliver and deliver that capability to the U.S. Trust client. This creates a tremendous opportunity for both U.S. Trust and Merrill Lynch to create a very unique value proposition that significantly benefits our mutual client base.
WML: Pricing remains a big issue in wealth management. The major reports that came out earlier this summer from Capgemini and PricewaterhouseCoopers both noted that the industry arguably sets prices too low and is too dependent on the percentage of assets under management model. How do you see this issue, and what are you doing at U.S. Trust?
KB: The effort we make is to price according to the value we provide to clients across their broad-based wealth management needs. Our experience has been that the greater value we provide the more readily we can price in commensurate fashion.
WML: So do you rely mostly on charging a percentage of assets under management or are you using other fee structures?
KB: We don’t comment on that, but I can say we price based upon broad-based relationships with clients.
WML: Have you seen any impact on your business from the recent SEC ruling on single-family offices?
KB: We haven’t seen any significant ramping up. We have a strong multi-family office business within U.S. Trust that gives us the ability to act as a family office for wealthy families who don’t want to create one themselves. And if a family already has one, we work closely with their office to provide services they may need.
WML: What are your major goals for U.S. Trust for the rest of the year?
KB: We want to continue to try and grow our investment management and trust assets and increase our market share across the board.
WML: And who do you see as your primary competition?
KB: Other private banks.
WML: What do you believe is the biggest challenge facing U.S. Trust and the wealth management industry?
KB: One of the more important things on the minds of our clients is inter-generational wealth transfer. It’s critical that we are able to work with clients and help them plan for the future, and it’s important to work with their children and grandchildren to help prepare them for the eventual transfer of that wealth.
WML: What about social media?
KB: We are very focused on social media, especially as it relates to building relationships with the next generation, who we hope will all become clients as well. They are demanding a different way of interacting and having information delivered, and it’s critically important that we are in synch with the preferences of those individuals. We’re seeing that more traditional clients are utilizing social media as well. So it’s something that we are working on more and will become increasingly more important as we go forward.