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Unlocking the Unrealized Potential in Banks' Wealth Management Programs

The lines between wealth management and banking are blurring, opening up new opportunities, as well as new competition.

Banks are large players in wealth management, managing greater than 15% of all advised assets in the United States, and there is a vast opportunity to capture even more business as we experience the Great Wealth Transfer over the next 20 years.

However, the lines between wealth management and banking are blurring, opening up new opportunities as well as new competition. While banks are enjoying booming wealth management business, new competition from large RIAs and wirehouses now offering banking services threatens their nearly $7 trillion in assets under management.

With this shift, how are banks competing? By unlocking the unrealized potential of their wealth management programs in three key areas.

Leaning Into the Core Business

Wealth clients generally fall into three categories, depending on total investable income: mass market, affluent and high-net-worth. Traditional models suggest that banks should work to capture the affluent and high-net-worth clients for the best returns. But the most successful banks are flipping this model on its head.

There is a host of different needs across these segments, including those in the mass market segment. More than 80% of households in the U.S. have less than $500k in investible assets and are a bank’s core business. This segment particularly benefits from debt and cash management, leading to investment and wealth growth advice.

These investors also tend to skew younger. By capturing this group early and instilling the value financial advisors bring to helping obtain their financial goals, bank wealth management programs are creating resilient relationships with their customers as well as a long-term revenue stream.   

Changing the Mindset on Advice

Banks have spent years carefully growing their client bases by offering high-quality and diverse services, and are challenged to meet the needs of the next generation of investors who are looking for more support to navigate a complicated financial environment.

The average investor’s life is complex. Investors often have competing financial goals, such as reducing debt and saving for retirement, and although they have access to out-of-the-box digital investment tools, they need someone to help them understand their full financial picture.

This is especially true among younger investors. As reported in a 2023 McKinsey consumer survey, about 30% of retail investors prefer to consolidate banking and wealth relationships. That number rose to 73% among investors between the ages of 25 and 44. Comprehensive financial advice is no longer a “nice to have.” It’s required, and banks have taken notice.

Driving Engagement Through Advisors

While it’s true that banks make most of their revenue on loan and deposit products, they retain clients through wealth management, as wealth offerings help build trusted relationships and engagement between advisors and their clients. Banks have a unique value proposition for consumers because they possess a centralized investment model where clients meet with an advisor across their financial portfolio, which drives down costs and creates loyalty.

In this centralized approach, the advisor is the single point of contact among varied roles and capabilities sourced internally and externally. To be successful in this model, a bank’s service and expertise network must be strong. If they outsource some or all of the middle- and back-office support, tech operations, cybersecurity or compliance, the partnerships are considered wisely to reduce risk and increase productivity. Advisors are the chief choreographers making it all come together for the client.

Digital tools such as robo-advisors, AI and on-demand services entice younger generations and are convenient, but they cannot replace human relationships — the true retention tool. Personal relationships will always be the heart of a bank’s wealth management program.

While many banks are continuing to explore how they can better operate their wealth management programs, some people may be wondering why banks are running these programs in the first place.

I ask, why not?

Now is the right time for banks to leverage their strongest relationships to drive long-term growth and success for wealth management programs and banks as a whole.


Christopher Cassidy is SVP and Head of Institution Business Development at LPL Financial. 

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