Spread the wealth: now that margins are slim and fees are meager wealth management has taken on a new appeal as a source of noninterest income. This approach comes with a new business model that focuses on financial planning for a wider variety of retail customers--not just the very affluent.

AuthorStewart, Deb
PositionCover story

IS NOW A GOOD TIME FOR COMMUNITY BANKS to enter the wealth management business--or to focus more intensely on their existing business line?

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Yes, is the quick answer from Carolyn Paul, president of Investment Management and Trust for ANB Bank (assets: $1.7 billion), Colorado Springs, Colo. "Margins are thin, and fees are hard to come by; this is a great way to add noninterest income." And she knows, having built a very successful wealth management business for a mid-sized bank, she is now starting again--building out a robust wealth management business at ANB Bank.

"When you're starting out or rebuilding, you need to ensure that you have a firm foundation. You need to be confident about your products, pricing, value proposition and compliance infrastructure before you start inviting customers into your house. Next, you need to find the right people. People who fit with your team and culture, who have the skills and have the ability to build relationships," Paul explains.

"Above all, to succeed in this business, you need to always keep the customer's best interest at heart. If you're doing the right thing, you'll be rewarded," Paul continues.

"Keep the customer's best interest at heart"--this phrase is repeated by wealth management leaders from across the industry. How it manifests itself in their business strategy varies, but several common themes emerge:

* Using financial planning as a key to understanding customer needs in greater depth and building deep, long-lasting relationships.

* Understanding that your existing client base is key to growing your business for the future--in a variety of ways.

* Recognizing whom you're competing with and crafting the appropriate competitive response.

Focus on the customer

In 2008, Canandaigua National Bank & Trust Co., (assets: $1.7 billion), Canandaigua, N.Y., made a fundamental shift in its wealth management business model. The bank moved from providing fee-only comprehensive financial plans for a few clients to one in which financial planners are integrated into all retail and wealth-management investment account relationships, with costs covered by investment account fees. This shifted the client experience from an investment-only focus to one centered on the client's overall financial well-being.

"When we made this shift, we created two immediate needs--the need for trained financial planners and the need for an efficient way to manage clients' portfolios in light of their overall financial picture" says Jim Terwilliger, who is a Certified Financial Planner and senior vice president, financial planning manager at Wealth Strategies Group.

"We require our financial planners to have earned the Certified Financial Planner certification. And, we have staffed the majority of these positions internally. This ensures a cultural fit, an understanding of our company and provides a career path for our branch associates. In terms of improving our efficiency in portfolio management, we have moved to a passive...

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