A growing number of community bankers are convinced that wealth management and private banking are the answers to replacing diminishing revenue streams.
During the latest wave of quarterly conference calls, the leaders of
Most of these banking companies have increased their assets under management in recent quarter, adding to the optimism.
Webster has doubled its team of private bankers to about 50,
Veterans in wealth management have taken notice, realizing that small banks have few other options to replace revenues were reduced or eliminated by recent regulations and artificially suppressed interest rates.
Community banks "don't have the net interest income they are used to having," says
Tampa Banking launched Florida Investment Advisory in 1996; it now has
Divers warns that hauling in a lot of assets under management does not always lead to a lot of new income. "It costs so much to do it well. It does not leave much money on the table for the bank," he says. "You can hire some good lenders and make a lot more money" with loans.
Still, many of the larger community banks are stretching their scope into wealth management, either through acquiring firms or consolidating operations into larger wealth management divisions.
In fact, higher costs and more regulatory red tape convinced
Giles is operating under a partnership with
"Instead of having to create new regulatory compliance technology, it is built for me and there are new economies of scale in sharing" resources with LPL, Giles says.
Despite such challenges, a number of community banks seem to be making progress, even when it comes to boosting income from wealth operations.
Companies are also looking at ways to streamline operations to improve communication or reduce expenses.
First Midwest in
"We are working to broaden our revenue streams through the expansion of our fee-based business lines,"
Scudder said the combined group, along with improved Treasury management activities helped First Midwest's fee-based income increase 4% from a year earlier.
Some of the potential growth in wealth management could come from clients who are upset with bigger banking companies, though it remains to been seen how much of a boost those customers could provide.
Some "firms are growing assets because they're finding disgruntled clients," says
"Sustainability and growth over time depends on the underlying health of the economy," Ralston said. "The well-heeled traditional wealth management client is very concerned right now about the direction they perceive the economy is headed."
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