Wealth management services, long a bedrock of revenue for banks, are no longer catering solely to the ultra-rich.
Increasingly in Middle Tennessee, banks are offering personalized services to a larger slice of their customer base.
Experts say its the latest way to maintain profit margins as new federal regulations transform the way financial institutions do business.
At First Tennessee Bank, 400 employees work in the wealth management division, which grosses about $70 million annually, said Dave Miller, executive vice president of retail banking.
Miller said the divisions work helps fill the profit gap created by the recent tightening of rules on overdraft fees and the approaching limits on debit card swipe fees.
People have seen gyrations in their investment portfolios and want advice on how to invest in the future, Miller said. The services are being sought by the affluent, the mass affluent and now, even the regular Joe.
The mass affluent the phrase typically denotes individuals with $100,000 to $1 million in liquid assets have been targeted by other banks, including Bank of America, which in February launched an online brokerage service called Merrill Edge geared toward helping this group invest.
In June, Regions Financial announced that it would combine its wealth management unit with its trust and private banking divisions, widening the scope of its personalized wealth management services to less-affluent customers.
In a statement, the bank said the units creation was intended to increase non-interest revenue.
Regions expects the new financial overhaul rules to cost the bank $170 million in yearly revenue, according to a Regions spokesman.
From a bankers perspective, wealth management helps fill the hole created by the new regulations and what weve been through the last couple years, First Tennessees Miller noted.Targeting the aging population
Though wealth management has beencritical to regional banks for decades, demographic changes have forced many financial institutions to meet a growing demand, said Greg McBride, a senior financial analyst at Bankrate.com.
Not least, the baby boomers are entering retirement, he said.
The number of Americans over the age of 65 is expected to increase to 71 million by 2030, according to the Centers for Disease Control and Preventions latest statistics. There are currently about 40 million people over 65.
As the baby boomers move into retirement, financial institutions see an opportunity, and so what used to be marketed toward high-net-worth individuals is now an outreach geared toward the mass affluent, McBride said. As they leave the workforce, theyre realizing that they need help managing their money.
This is not to suggest that the highly wealthy are being deserted, noted Anjan Thakor, professor of finance at Washington Universitys Olin School of Business in St. Louis.
But what has changed, Thakor said, is the understanding of a high-net-worth individual once thought to be someone with $5 million or more in liquid assets. It now has come to mean a person with $1 million in net value, he said.
And this prosperous subset has been amassing ever more riches.
The 3.4 million people in North America who have a net worth of $1 million or more grew their wealth by 9.1 percent last year, to $11.6 trillion, according to Merrill Lynchs World Wealth Report released last month.
Banks have always coddled the super-rich, Thakor said. And the services grow with the population.Banks target wealth niches
At Nashville-based CapStar Bank, the wealth management team has uncovered a lucrative niche: helping professional athletes handle their money.
The banks Robin Henderson manages investments and other financial decisions for some 40 athletes around the country.
The bank, which opened in 2008, announced last month that Hendersons division would expand into the Atlanta marketplace.
As his division extends its regional reach, Henderson thinks more Nashville banks will ramp up niche wealth management services like how SunTrust, Bank of America and other regional banks have catered to Music Row to make up for lost profits.
The growth potential, he said, is extraordinary in services targeting athletes, musicians and other deep-pocketed professionals.
All bankers are now searching for ways to add value, Henderson said. Its all net-revenue driven.