Wealth Management: Measure Twice, Cut Once

You can learn from my grandfather.

My grandfather (the non-Scotch/Irish one) was a first class finish carpenter.  He worked on the cabinetry in the library of the Biltmore House.  During the depression, he was also a family-farmer who learned how to live on air and about ten acres of scrub pine.  He raised six children, and at least one grandson, retired debt free and had land left over to give to all of his kids.

Part of his success was his “Measure Twice, Cut Once” way of looking at things.  He was a planner —when I was younger, I used to say “plodder” – but he always, ALWAYS, mulled things over from every conceivable direction before he took any action.  Honest to God, I used to tell my mother that I was amazed he got his boots tied before noon. (Ironically, when I was 13, it became my morning chore to get his boots on and tied; reversing the process after supper.)

If there was ever a “Measure Twice, Cut Once” bank program, deploying Wealth Management would be on top of the list.   It’s one of the hardest things a community bank will ever do.  It seems so simple and rational; and the concept has a certain synchronized symmetry about it.  But, like Lee at Gettysburg, Wealth Management almost always turns out to be harder battle than it looks.

Before you start a Wealth Management Program, take a long, sober look at the market.
You may well elect to pass.

wealth3Where most banks stumble is here: the customer’s expectation of a bank’s Wealth Management program is far higher than that which is commonly envisioned by community bankers.  Bankers very frequently underestimate what’s required.   It is precisely this disconnect that bodes ill, and ultimately brings on failure.

So, fair warning: if the bank isn’t willing to meet the customer expectations, the Wealth Program won’t work well, if at all.  There are two reasons Wealth Programs often tank:

The bank underestimates the savvy of potential Wealth customers.  Many, if not most, are a cynical bunch from the get-go; they are quick to detect if the bank is only talking the talk.   Understand, we’re not talking about Joe Customer.  We’re talking about Joseph P. Customer, III.  He ain’t chopped liver.  He knows what wealth is; he knows what wealth management is.  He expects what amounts to Concierge Service.  If you don’t give it to him, best case, he’ll ignore you. Worst case, he’ll make fun of you, publically.

A wealth manager is expected to have a wide ranging, executive ability that cuts across bank department lines.  Wealth customers expect to work with a banker  who can make decisions that interface with the customer’s entire circumstance. Also, they want  a banker who isn’t  going to be cycled out of the department in a year to two, like a typical loan officer or business center manager.  The minute a wealth manager says, “I need to bring along Mr. X, who is in charge of this department…” you have failed.  Now we’re talking a Wealth Clerk.  That’s not the same thing as Wealth Management.

To be successful in wealth management, the bank has to carefully consider three things:

Exactly who is the target market?  Once we know that, we then can know what kind of products and services we need to offer.  There will be a discovery process.  Probably some prelim visits to do some “needs assessment”.  And, this discovery needs to have some fairly high thresholds.  Maybe household assets, including the home, in excess of $2 million, or assets of $1 million, not counting the home, or maybe securities and/or bank CDs in excess of $1 million.

And you need to know where they live, how many kids, parents, what schools, employment, whether they have ever appeared in the newspaper (good or bad).  Pull a lifestyle list.  No kidding, you need to  know all of this,  and more.

Next, we need to know if they are currently banked.  And, here is another place the wheels may come off.  Here’s where a bank has to decide who’s going to call on (and be responsible for the development of) these customers.   If the responsibility for these customers is fractured and split between different departments things can go south pretty quickly.  In fact,  presto, the program is half way to failure. (Well, that was easy.  Maybe you should just go ahead and fail now and get it over with.)

Exactly which services will your bank offer to Wealth Management customers?

Chief among them should be Personal and Business LOANS.  So, our Wealth Manager has to be the right person, someone who is savvy enough to make credit decision.  Remember, these Wealth Customers are not mushrooms.  You can’t treat them as such.  The bank will need the right products to appeal to them.  (And, on that subject, I respectfully suggest you do some soul-searching about the viability of your Cash Management/RDC services in this market segment.)  If they don’t like the service, you may become like King James, who speaking of the Scotts, said, “They are supposed to be loyal to the Crown, but they have become damnably fierce enemies with exceedingly long memories.”

Exactly who will be your Wealth Management bankers? 

These bankers need to be smart, savvy and nimble.  The have to able to court customers and finesse bank executives.  In short, these people need to be some of the sharpest knives in the drawer.  That means three things: (a) they need to be paid well and (b) trained well and (c) provided substantial resources so they can stay in front of customers.  (I’d be in favor of doing IQ testing and not recruiting anybody under 130.)  They should be good at math and psychology.  They need to have a  big ego; and they need to be smart enough to be humble and self-effacing as required.   So, unless you really have the right person, you should not start this wealth program.  Remember, the potential wealth customer is discriminating.  You don’t want to send the “B” team.  You have one chance to get this right.  If you blow it, you’ll be a long time getting it back.

Still, can’t wait to get into Wealth Management? 

I have a summary of what a bank needs to launch.  Email me with WEALTH MANAGEMENT in the subject line and I’ll send it to you.