With a growing number of baby boomers heading toward retirement and looking to protect, grow and transfer their assets, many banks are now stepping in to build long-term relationships with clients by guiding their wealth-management strategies.
“When we work with clients on investment management, we talk about their estate planning needs and get them introduced to an attorney, if they don’t already have one,” explained Andy Waters, president and CEO of Community Trust and Investment Company.
“Hopefully, we’ll be named in some capacity in that client’s estate plan. The purpose then is to manage the money over multiple generations.”
Waters oversees Community Trust’s investment company, which is based in Lexington. He began his career with CTIC in 2004 and became its president and CEO in 2011. Many of CTIC’s clients are wealthy, but wealth management isn’t limited to customers with multimillion-dollar portfolios, Waters said.
“We have many folks who start with a couple of hundred thousand dollars,” said Waters. “They’ll check us out and ‘kick the tires,’ and then slowly add more to their account. For folks who don’t have half a million or more of investable assets, we can service them from our brokerage office.”
Waters says a common profile at this level is a person in their mid-40s to mid-50s who owns a business, has worked hard and accumulated some wealth and wants to manage and preserve it to meet current needs or to supplement their retirement. Being a community bank, CTIC helps many small to midsized business owners.
“That’s our bread and butter,” said Waters.
Fifth Third Bank’s investment management group oversees $26 billion in assets. That covers an approximate geographic area from Michigan to Florida, Pittsburgh to St. Louis, according to Dan Poposki, senior portfolio manager at Fifth Third Bank in Lexington. In Kentucky, Fifth Third manages just over $1 billion, primarily in the Lexington and Louisville markets.
Poposki said banks and investment firms are moving away from the transaction and commission-driven business and more toward managing all of a client’s wealth. Fifth Third wants to be more holistic and comprehensive with its wealth clients, he said.
“The days of the individual investor asking ‘What’s the hot stock?’ are gone,” said Poposki. “The first big hit was when the tech bubble burst in the late 1990s, and then the financial crisis of 2008 occurred. That’s when people really got hurt. Looking at everything is a better way to manage wealth,” he said.
Fifth Third wants to know a client and their family dynamic before a customized wealth management team is assembled. The team may include a portfolio manager, wealth manager, private banker, trust officer and an insurance specialist to handle risk management.
“There’s a lot of gray matter involved,” said Poposki. “It’s not just putting numbers into a software program and getting a bunch of numbers out and saying, ‘Here it is.’” Fifth Third uses its private bank (kind of a bank within a bank) to take care of clients with investable assets of $1 million or more.
“We bring our best resources to bear for those clients who have more financial complexity than someone in their 20s or 30s,” said Poposki.
Poposki said federal regulations are making it more expensive for wealth management companies to do business.
“To a point, I think [regulations] are necessary, but you can’t compensate for all the different problems out there, like Bernie Madoff [infamous financier convicted of major fraud] that pop up,” said Poposki. “Some of the ‘guardrails’ are necessary. But you don’t want it to be like bumper bowling, where no one rolls a gutter ball. We need to let free market capitalism play out.”