Union Bank of California’s wealth management business has not been able to increase its assets under management over the past three years.
But you wouldn’t know it from the unit’s overall growth. Revenue and profits from wealth management—which includes private banking, trust, special assets management, private wealth planning and investments —were both up double digits last year and are on track to grow at least that much in 2010, according to Mary Curran, executive vice president of the wealth management group at Union Bank.
At the same time, the business’ $6 billion of assets under administration and $4.6 billion of assets under management are about where they were in 2007, Curran said.
Union Bank is a unit of UnionBanCal Corp., and both are mostly owned by Mitsubishi UFJ Financial Group Inc. Two recent bank acquisitions by the banking company could help fuel continuing growth for the next few years, said Curran. Including anticipated growth in investment management, wealth management could post a 20% compound annual organic growth rate over the coming four to five years, she said.
“We want to be a key contributor to the bank,” said Curran.
The recent results are, in large part, the fruit of an initiative that was set in motion in 2008. That’s when it began testing a team-based approach to serving clients.
The initial two pilot teams have expanded to 14, and plans call for adding three more. Most of the teams combine a private banker, a trust officer, a portfolio manager, a senior wealth adviser, and a broker.
Such teams, which are steadily being adopted by many banks, are an attempt to eliminate turf wars and provide clients the most suitable products and services. Done successfully, they can increase the amount of business each client does with a bank.
Union Bank has hired selectively over the past few years in order to create rounded-out teams, said Curran. “In many areas we had to bring in expertise we didn’t have,” she said. “We had to add the right people where they were needed.”
The bank has worked on building referrals of wealthy clients from private bankers and commercial bankers. And it has built a compensation system in which team members earn compensation even if they do not directly serve a client.
Union Bank’s commitment to improving its wealth management business comes at a time when many banks are grappling with how important wealth management really is to their business, said Kenneth Kehrer, director of research firm Kehrer-LIMRA.
“Wealth management tends to have a small profit margin because of the expense of providing the offering,” he said.
Union Bank’s backing of the business has to do in part with the recurring fee income it provides, and in part with client retention, said Curran.
“If Union Bank of California had no wealth business and no way to address corporate executives, business owners and others in that target market,” she said, “I think you would run the risk of losing control of that relationship.”
Regardless of concerns about profit margin, wealth management is a strategic objective for many banks, said Paul Werlin, president of recruiting firm Human Capital Resources, Inc.
“They understand market segmentation,” he said. “And they want to provide the right solution for everyone from millennials to large family businesses with $5 million to $10 million minimums to invest.”
Much of the growth for the wealth management unit has come in the form of loans and deposits, said Curran. Asset management has been challenging because clients have been keeping their funds in safer, lower-margin products.
“Our clients want to be in more conservative now—bank balance sheet products, conservative brokerage prods or fixed-income products,” said Curran.
Part of Union Bank’s wealth management opportunity to expand its footprint is due to two acquisitions made by the bank in April. First, it bought the failed Tamalpais Bank, based in San Rafael, Calif., acquiring $600 million in total assets. The purchase beefed up Union Bank’s presence in Marin County.
Several days later, it snapped up another failed institution, Frontier Bank, based in the Seattle area. The deal brought Union Bank another $3.2 billion in total assets, as well as 47 branches in western Washington three more in Oregon.
Those acquisitions are not out of the wealth management footprint, but they do fill it in significantly. And that, said Curran, “enhances our original plan.”
Union Bank laid additional groundwork for growth in June, when it hired David Pittman as the managing director of the private bank. Pittman, a veteran of Wells Fargo and Fifth Third Bancorp, will lead the personal trust and investment management business, and he will develop growth strategies for the private bank.
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