Welcome to Financial Advisor IQ

Wirehouses Ramp Up Their Private-Bank Advantage

By Chris Latham February 21, 2014

Wirehouse brokers and their independent brethren never tire of sniping at one another about who serves clients better. But in at least one respect the wirehouse advisors have an edge: access to private banking services for ultra-high-net-worth clients, who often like having a one-stop-shop to call their financial home. With one internal phone call, FAs at firms like UBS, Merrill Lynch and Wells Fargo can help clients raise cash to buy a new yacht, transfer cash internationally at the most advantageous exchange rate or set up a multigenerational trust.

The downside is pressure to cross-sell services. Financial advisors at the big firms aren’t compensated the same way the bankers are, but both are encouraged to send new business their colleagues’ way. No one who spoke to FA-IQ for this story would discuss compensation, bonuses or incentives to cross-sell. However, some advisors complain about living with the sense that they’re supposed to sell jumbo mortgages as well as manage wealth.

To the big firms’ executives, it’s a strategic no-brainer. As they see it, being able to offer trust, private banking and financial advice under one roof is a competitive advantage it would be stupid to squander. “The bank sees the ability to advise clients on both sides of the balance sheet as a great opportunity that starts with the advisors and bankers talking to clients first about their needs,” says Laurie Krupa, head of Bank of America’s Global Wealth & Investment Management (GWIM) Banking, which serves both U.S. Trust and Merrill Lynch.

And wirehouse advisors admit that the assets they manage get stickier when clients form other financial relationships within the bank.

National broker-dealers like Raymond James and LPL Financial offer clients limited banking services, through affiliate firms or in-house departments. Small independent advisory firms can tap custodians like Pershing, which last year started offering RIAs private banking resources from BNY Mellon.

But advisors in these channels must work a lot harder than their wirehouse colleagues to offer such services, says practice management consultant Michael Silver, co-founder of Focus Partners in Paramus, N.J., whose clients include advisors in every channel. “Independents must have a go-to team of strategic partners to leverage for every scenario,” he says. “The vetting process and relationship building can be extremely difficult.”

Silver says the wirehouses do see internal conflict between their bankers and their advisors — for example, over who owns the client and which unit the firm supports with the most resources. Yet he thinks the wirehouses are overcoming those hurdles as they make cross-selling a priority.

At UBS, private bankers and trust officers stand ready to support advisors when a client needs them, says advisor Ted Smith, who manages $800 million in Baltimore. Smith says he hasn’t felt friction with those colleagues, perhaps because at UBS advisors continue to own the client relationship and are usually the ones to pick up the phone and call in a specialist, rather than fielding calls from bankers.

To ensure clients don’t feel they’re being sold unnecessary services, Smith has long conversations with them early in the relationship to get a comprehensive view of their financial picture. “Many clients know about the lending services, but sometimes they don’t think about the trust side until it’s brought to their attention,” Smith says. He declined to say whether he receives incentive compensation if his clients use these services.

More Coordination

At Bank of America, both Merrill Lynch and U.S. Trust advisors can tap GWIM Banking product expertise in lending, mortgages, credit and other solutions, Krupa says. Merrill advisors have access to GWIM Banking’s 700 bankers, introducing them to their clients and, when appropriate, allow the bankers to contact clients directly. Internally, advisors and bankers hold monthly meetings, with the advisor providing updates on clients’ changing situations and goals and with the banker suggesting strategies.

Kim Rogers

As for Wells Fargo, the firm has been steadily expanding a program to increase coordination between advisors and private bankers since the fall of 2011, says Kim Rogers, who oversees Wells Fargo Advisors’ high-net-worth partnerships.

Before the program began, she says, departments were so heavily siloed that some wealthy clients never heard from their advisors about in-house private banking resources — so they opened accounts elsewhere. Now, the advisor acts as relationship manager, building a team of private banking and trust specialists that stays with clients as their needs evolve.

Rogers says the program is succeeding. “We’re seeing more assets come into the firm,” she says. “That’s one of the main selling points of this partnership, the ability to consolidate the relationship in one place.”