Bank executives are kicking their wealth management businesses into high gear.

In a study of 140 senior executives released Wednesday, Fidelity Institutional found that more than half (55%) expect to boost revenue from their wealth management practices 25% or more in the next five years. Nearly one-third (31%)— those having made the most progress in developing their wealth management businesses and identified in the report as “pacesetters”—anticipate that wealth management will contribute 35% to total bank revenue in five years’ time.

“We see this as a great opportunity in the marketplace,” Mike Norton, head of the banking segment for Fidelity Institutional, said in a telephone interview. “We think this study reinforces that wealth management—particularly the fee-based aspects of wealth management—will become one of the growth engines for the banks over the next five years.”


The pacesetters stood out significantly from the other banks in the study, with their wealth businesses contributing 28%, on average, to the institution’s overall revenue at the time the survey in late 2013. The other banks didn’t foresee achieving that high contribution rate even in in five years’ time. They were shooting for a comparatively meager 20% contribution to overall revenue.

What traits did the hard-charging pacesetters have in common that helped set them apart? One of the most notable characteristics was that they were leveraging their RIA firms, with a large majority (83%) using them as part of the delivery model, according to the report.


“We’re definitely seeing an uptick in interest in the banks that we work with around what we call an RIA approach,” Norton said.

Norton noted that several Fidelity bank clients had purchased RIAs over the past few years and that a number of them were looking at RIAs as a strategy going forward. “We have a number of clients that we’re working with that are looking at potentially purchasing RIAs to expand their geographic footprint,” Norton said. Others were interested in targeting new market segments, such as women or Gen X/Gen Y clients. The overall reason for banks buying RIAs was to “round out their wealth management expertise,” Norton noted.

The pacesetter banks in the study used different RIAs models. Some acquired RIA firms, while others grew them organically or worked with external firms. Most of the pacesetters who bought an RIA firm (88%) did so to gain access to clients and markets the RIA firm served, according to the report.

In addition to using RIAs, the pacesetter banks had senior management support for their wealth businesses and had taken more steps than other banks to integrate their wealth management practices. For example, only 16% of the pacesetters felt they competed somewhat with other parts of their bank for client assets and internal resources. At other banks, 35% did.


The pacesetters also had a more holistic view of wealth management, offering more comprehensive wealth management services than other banks. For example, two-thirds (66%) provided wealth advisory services, whereas only 34% of the other banks did. They also tended to focus less on commoditized products, such as insurance and annuities.

In addition, the banks with the fastest-growing and most advanced investment services programs made greater progress in outsourcing noncore back-office operations and increasing advisor productivity. Only one-quarter saw a need to add technology resources to increase advisor productivity, compared to almost half for other banks.


Nonetheless, banks—whether pacesetters or not—face a number of challenges, chief among them the streamlining of platforms. The fact that banks “have grown up over the years on multiple platforms across the wealth management offering” makes “keeping up with all the different platforms one of the key challenges they’ll need to overcome in the marketplace,” Norton said.

Recruiting and retaining advisors will also be a challenge, Norton said, explaining that banks have historically lagged the wirehouses and independent firms in hiring advisors and boosting their productivity.

“They need to ramp up from a recruiting and retention perspective,” Norton noted.

Despite the challenges, Norton is unremittingly positive about the prospects for banks and their wealth management businesses. “We see this as a great opportunity,” he said.

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