A matter of trust
Jim Sandager, a fee-only investment adviser based in West Des Moines, says he’s had more people with a net worth of at least $10 million step through his firm’s door in the past two years than in its previous seven-year history.
“That tells me that people that have these more complex situations are looking for independent, objective wealth coaches that can serve as their advocate and their fiduciary in advising them,” said Sandager, a principal with Syverson, Strege, Sandager & Co.
As reported recently in The Wall Street Journal, some of the country’s largest financial institutions, including Citigroup Inc., Morgan Stanley and Merrill Lynch & Co. Inc. are creating separate tiers of service to differentiate their super-wealthy clients, who may have $100 million or more in investable assets, from those who may have a more modest $10 million portfolio. Others are catering to the growing ranks of the “mass affluent” who may have from $100,000 up to $1 million to invest.
In the extremely competitive world of private banking services, also known as wealth management, Central Iowa banks and financial advisers are taking similar strategies — on a smaller scale – to attract and retain their clients.
From the perspective of several Greater Des Moines wealth advisers, more people than ever are seeking wealth management services as tax laws and investment choices become increasingly complex. At the same time, there seems to be a larger pool of affluent people with investable assets, and their needs vary greatly according to their individual situations, say the experts.
At the Syverson firm, “we’ve developed different levels of services for different levels of complexity,” Sandager said. The highest level of service is reserved for those with $15 million and above of investable assets, he said, with other tiers from $15 million to $8 million; $8 million to $3 million, and $3 million and below.
“In many cases that complexity is related to, ‘What impact do I want to have for my family and my community?’” he said. “Everyone is unique and requires a custom approach, even within the same range. Because of the complexity of the higher levels, there are more moving parts, and therefore there will be more services that will better address the problems that can be created from these moving parts and to give solutions that are custom to their situation.”
Jim Urbanek, senior vice president and regional manager of Wells Fargo Private Client Services for Central Iowa, said clients’ need for advice has become more intense than ever.
In response, Wells Fargo has significantly expanded its array of financial management software tools and training for its financial advisers in the past three to four years, he said.
“We really don’t have any hard-and-fast rules (on asset levels),” Urbanek said. “We tend to migrate the service as their needs increase. That means we’re adding to the team. It may mean that someone who has been working with a client for years will have others added to the team, such as a trust or estates expert, or a more sophisticated banker.
That’s one of my jobs, to make sure we’ve got the right level of sophistication and the right level of attention. … Often, we’ll hand-pick teams because I know the family’s interests. If I know a family is interested in charitable giving, I’m going to put my best expert on charitable giving on the team.”
Additionally, many banks are increasingly moving to a “more open architecture” as financial advisers, Urbanek said, to include referring clients to outside consultants.
“We’re not just managing people’s portfolios with our own team, which we still do a lot of, but we’re also referring our clients to money managers,” he said. “That has essentially allowed us to get on the same side of the table as the client, so there’s not this built-in conflict. When you start to put together a team of managers as a consultant, you really start getting on the same side of the table.”
Because of its size, Wells Fargo can provide access to financial managers that an individual may not otherwise be able to afford, Urbanek said.
“Financially, it’s good for us, because we’re being paid an advisory fee, part of which goes to the investment managers,” he said. “This is a very competitive business; there are a lot of players, and you have to bring a lot of value to the client or you’re not going to be successful.”
The number of investment accounts opened each month at Wells Fargo Bank offices indicates a high interest in building for the future and in families investing for their children’s education, Urbanek said.
“Probably the biggest phenomenon that we’ve seen over the past 10 years is that we’ve seen the number of higher-wealth individuals continue to grow,” he said. “We’re serving both ends of the market, but we’ve seen the high end grow faster. We’ve continued to recruit financial consultants to staff our banking stores. And we’re licensing more of our bankers so they can talk investments, because more Baby Boomers are saying, ‘How am I going to retire?’”
Regardless of their level of assets, Central Iowans are generally more comfortable talking with financial consultants than they were five or 10 years ago, said Joe Heffernan, president of wealth management for First American Bank in Clive.
“The financial services sector has become much more complex, and people have less time than before, so they’re much more willing to come in and talk about their legacy, or making sure they do have the best retirement plan,” he said. “I’ve seen that as a big change in the whole industry.”
First American offers four broad areas of service within wealth management: private client services for trust and estate planning; institutional services such as retirement and deferred compensation plans; investment sales; and discretionary investment management, the latter geared toward those with $200,000 or more to invest.
“What makes the community bank structure better is we do not silo these four areas,” Heffernan said. “We are much better able to get the four areas to work together. So if one of our customers determines group health insurance might be good for their company, we can act much more quickly than a commercial institution.”
The bank’s financial consulting services are not limited to high-income customers; it will work with all sizes of clients, Heffernan said. “We’re more interested in working with customers from cradle to grave,” he said.
Typically, First American customers will be steered toward more comprehensive services as their needs become more complex. Additionally, they can choose their preferred method of payment, either on a fee basis or a transaction basis.
From Sandager’s perspective, acting as a wealth coach can mean referring clients to any number of professionals, from banks and trust companies to certified public accountants and attorneys.
“We have a deep bench on that,” he said. “We don’t get any money from those deep benches; they’re just firms that we’ve worked with in the past. We’re not looking to replace other team members; we’re looking to add to the team by serving in the wealth coach role. That includes integrating and coordinating between the teams to benefit the client.”