Many banks are looking to fee-based businesses like wealth management to help them develop new revenue streams, according to Fidelity Institutional’s Bank Wealth Management Study.
In a survey of 140 senior bank executives, Fidelity found that more than half of them expect their wealth management practices to grow 25 percent or more in the next five years. Wealth managers are registered investment advisors that help individuals plan for retirement.
A handful of banks already have built up their wealth management businesses. Fidelity refers to them as Pacesetters because wealth management is estimated to make up 35 percent of their revenue in the next five years.
The survey uncovered the five key traits of Pacesetters and the top challenges they face for continued success.
The five key traits included leadership commitment and a continued focus on wealth management; integration, not competition, with other bank lines of business; comprehensive wealth management service offerings; leveraging the RIA approach; and outsourcing non-core back office operations.
The five challenges these businesses must overcome included investor perceptions; internal development and training; streamlining platforms; recruiting and retaining advisors with wealth management expertise; and keeping up with technology.
“While some may assume that Pacesetters were the largest banks or clustered in certain regions, our study found that what really set these firms apart was how they run their wealth management practices,” said Mike Norton, head of the banking segment for Fidelity Institutional. “Pacesetters recognize that wealth management not only offers significant revenue-generating potential for banks, it also presents an important client engagement and retention opportunity.”
Fidelity Institutional is a division of Fidelity Investments that provides clearing, custody and investment management products to registered investment advisors, banks, trusts, broker-dealers and family offices.