BANKING ON WEALTH
NM’s financial institutions ramp up services for those with high net worth
New Mexico banks of all sizes are beefing up their wealth management divisions and private banking groups as a way to generate additional income.
The past decade has seen a number of financial institutions move into wealth management and other lines of business that provide revenue not reliant on interest rates — anything that brings in fee income.
Banks make money by selling money in the form of loans, profiting from the interest they earn on those products being more than the interest they pay on deposit accounts, such as checking and savings. With lingering low interest rates squeezing those profit margins, wealth management units give banks an opportunity to add new customers or deepen relationships with business owners and others who may have loans with an institution. “It’s an increasing emphasis for us,” said John Gulas, president and CEO of Los Alamos National Bank, a nationally chartered bank that’s looking to grow new lines of business for its New Mexico customers in the six communities it serves, especially anything that generates fee income from clients, such as stock trades and other investments, he said. LANB, with $1.4 billion in assets, has six branches in Los Alamos, Santa Fe, White Rock and Albuquerque.
In Santa Fe, where the bank is No. 2 in market share after Wells Fargo, wealth management is a strong skill set given the town’s high-net-worth individuals, including multimillionaires, with second homes in the area, he said. LANB currently has $500 million “under care” on its wealth management side, Gulas said. Helping grow clients’ assets is a stable of experts working across a full spectrum of wealth planning consulting, investment management, philanthropy, private banking and trust services. One particular emphasis is a program targeting women investors called Know Your Worth, Empower Your Wealth.
“This is a luncheon hosted by our female advisers specifically for women to inform them of how to plan for retirement and to answer their questions about investing,” said Gulas. “These luncheons will be held in all of our markets on a quarterly basis.”
Women are not a niche market for LANB or other banks — they control the majority of personal wealth (51.3 percent) in the country. These assets are estimated at $14 trillion and are expected to increase to $22 trillion by 2020, according to the Deloitte Center for Financial Services.
Gulas, who projects that fee-based business will eventually comprise onethird of the bank’s annual income, is also eyeing opportunity in Albuquerque, where LANB is building a new branch. “Albuquerque is the state’s economic engine with more business growth, the airport, UNM,” he said. Staffers will build relationships with clients
to boost wealth assets under administration.
They’ll find lots of other players already carving out their own pieces of the wealth management pie.
Bank of the West in
April launched a “wealth management center” in Downtown Albuquerque to serve “high-net-worth individuals, affluent families and business owners in one of the bank’s expanding wealth markets,” according to the bank. U.S. Bank opened a private client group office in New Mexico in 2013 to provide comprehensive wealth management services to well-heeled individuals, and for-profit and nonprofit organizations. The group, which now has $50 million in assets under management, offers customized financial planning, investment management, trust administration services, and specialized lending and deposit services.
“When you look at the industry, there are many clients who still have yet to address the details of financial planning, estate planning, retirement planning or even wills,” said Paul DiPaola, regional president of U.S. Bank in New Mexico. “Business owners need to re-examine their investments, business succession planning, and think about buying and selling existing businesses.”
Wealth management in the United States is a huge business today, and it’s getting bigger. The Deloitte Center expects U.S. household assets to increase from $87 trillion today to over $140 trillion by 2030, of which nearly $64 trillion will be in investable financial assets. This means that, in 2030, between $150 billion and $240 billion in wealth management fees could be up for grabs.
“Before the crisis hit, I think business owners were very easily making decisions on their own and trusting their gut instincts, and would have multiple providers in all they do,” Gulas said. “But now they value things like relationship and trust and consistency, and we felt that, being in town for so long and building so many relationships on the loan side, they were comfortable coming to us for those things.
“It’s always going to be in the interest of a bank to diversify its revenue stream, but we continue to focus on how can we get deeper with our clients and provide more solutions to them,” he says. “They’re looking to us for that because we have the products and services, and this expertise — all under one roof.”
Bank of America’s Merrill Lynch wealth management offices in New Mexico also work with the institution’s business-owner clients, said Phill Porpora, division executive for the region, where he leads 77 advisers managing $6.1 billion in assets. With the combination of Bank of America’s banking services and Merrill Lynch’s research and technology, Porpora said advisers offer a comprehensive range of products and services to clients, “ranging from $250,000 to $10 million plus in assets.” His team offers financial strategies, risk management, asset allocation portfolios, estate and tax planning, business transition guidance and various types of financing. One of the most challenging parts of the jobs right now is not only keeping clients on track to achieve their financial goals, but also to “soften the noise” resulting from economic trends and forces that roil the markets, such as Brexit and the upcoming presidential election, Porpora said.
“We also have many more
clients embracing thematic investing,” said Porpora, referring to strategies that direct money to socially responsible companies.
While banks are moving aggressively to expand their wealth management business, Albuquerque is home to a wide range of financial advisory firms, wealth managers and financial planners who offer services and specializations to clients of all income levels.
“The key is to find a professional that can help you own now based upon your current needs,” said Peter Lehrman, a certified financial adviser and president of Sandia Wealth Management. With over 100 clients in the Albuquerque area, Lehrman said he helps each one with an investment policy statement, which is really just a road map for making sure he’s helping them achieve goals.
Focused, not fragmented, investing seems to be Lehrman’s strong suit.
“Recently, we had a new client transfer in her retirement accounts — almost 100 positions in stocks, mutual funds and exchange-traded funds,” Lehrman said. “The monthly activity in the accounts took up a dozen pages. She did not understand what was going on and how it applied to her goals.
She was terrified. Our goal is to make the process more approachable.”
Clearly not daunted by the process is Frank Gerstle an Albuquerque client of Lehrman’s for over 20 years. A retired mechanical engineer who worked at Sandia National Labs, Gerstle and his wife, Polli, are reaping the benefits of many years of living within their means and planning early.
“We’re not high flyers,” laughed Gerstle, who admits to driving the same car for the past 20 years. He said Lehrman’s expertise has helped the couple realize a comfortable retirement income and investments that helped put their two sons through college. “He’s a good listener,” Gerstle said.
Gerstle’s advice to others: You can save yourself a lot of stress in later life by delaying that urge for instant gratification. Don’t spend more than you earn. And compound interest is a faithful servant.