Creating Strategic Value through Financial Technology

CHAPTER 7The Wealth Management Niche

INTRODUCTION

Wealth management services have traditionally been offered by a variety of financial institutions, including banks, RIAs (registered investment advisors), and insurers. Historically, wealth managers have focused primarily on clients with a high net worth and ample capital available to invest. The services provided by a wealth manager can vary from assisting with analyzing and advising on potential investments and portfolio allocations to strategic advisory services such as advice on tax‐efficient wealth transfer strategies and retirement planning.

Banking and wealth management have intersected with a number of banks offering trust and wealth management services to customers through their trust and wealth management divisions. In the twelve months ended June 30, 2016, community banks (banks with assets between $100 million and $5 billion) collectively had $1.5 billion in fiduciary‐related revenues compared to $8.3 billion in fiduciary income for the Big Banks (banks with assets greater than $5 billion).

Despite the wealth management offering of a number of community banks, this is an area where community banks have historically underperformed the Big Banks.¹ Income from fiduciary activities comprised approximately 14 percent of non‐interest income for the Big Banks compared to only 8 percent of non‐interest income for community banks. Approximately 75 percent of the community banks reported no fiduciary‐related income compared to ...