Banking on Wealth Management

Looking for help in managing assets of $1 million or more? Minnesota bankers would like to talk with you.

Although banks have always offered trust services, until recently they’d left comprehensive wealth management to lawyers, certified financial planners, and wealth management firms. In the last three to five years, however, more and more banks have developed comprehensive wealth management services, with the goal of managing virtually all of their wealthier customers’ financial affairs.

The banks are prompted in part by a change in the law—the Financial Modernization Act of 1999, also known as the Gramm-Leach-Bliley Act. The new law allows banks to affiliate with securities firms, a partnership type that was previously forbidden. That change lets banks offer investment management and securities trading to clients through third-party vendors, a crucial ability for any company that wants to offer one-stop financial management.

The law shift opens up an attractive new marketplace for banks. Local bankers can create new income streams from new products, and that income consists mainly of fees, and therefore isn’t subject to interest rate risk.

Banks also like the possibility of using wealth management services to create more loyalty and business from their existing clients, as well as with clients who are newly in need of wealth management. “In the next ten years, approximately $8 trillion will be transferred from one generation to the next,” says Roger Scharton, senior vice president and regional manager for family wealth at Wells Fargo Bank in Minneapolis. “One-third of private businesses may be sold in the next ten years. The recipients of that wealth will need help managing the assets they’re receiving”—and banks are there for the assist.