Big threat for big wealth managers? Their local bank

Big threat for big wealth managers? Their local bank
Community and regional banks nabbing clients from wirehouses and larger financial institutions; 'easy to buy assets'
FEB 23, 2012
Wirehouses and big banks beware: Smaller banks are picking off your wealth management clients. Regional and local banks are accomplishing this feat with a nifty pincer move. They’re getting bigger as a result of strategic purchases, but they’re keeping their small touch to lure wealth management clients who are unhappy with the customer service they’ve gotten. “Clients see they are now one of 500 clients somebody is taking care of, rather than the one in 100 they used to be,” said Francis J. Leto, executive vice president and head of the wealth management division of The Bryn Mawr Trust Co., which is a unit of Bryn Mawr Bank Corp. “It has been a big driver in our organic growth.” While regional banks say they're winning their fair share of defections, acquisitions are also clearly a factor in growth. The Charles Schwab Corp. noted in a recent report that regional banks stepped up acquisitions last year. Of the 57 deals tracked by Schwab in 2011, 10% of the deals involved regional banks, up from 4% in 2010. Bryn Mawr, for one, has been an active buyer. In 2008, the bank acquired financial planning firm Lau Associates for $15 million. This summer, it purchased wealth manager Hershey Trust Co. for about $19 million. And on Friday, Bryn Mawr announced yet another deal, this time acquiring $1 billion in assets under management from Davidson Trust Co., a unit of Boston Private Financial Holdings Inc. According to a regulatory filing, Bryn Mawr paid $10 million for the assets. These purchases have bulked up Bryn Mawr's wealth management business. In 2009, the Pennsylvania-based bank's wealth management division had $1.9 billion in assets under management. With the Davidson Trust purchase, that figure is now closer to $6 billion. Expect more of the same. “Look at the economy and what is going on in banks generally,” Mr. Leto said. “It is difficult to make money with the compression in margins and other pressures.” Acquisitions are a natural fit for Bryn Mawr, which has been in the investment management business for over a century, he said. “It is very easy to buy assets today, because many [banks] are looking to modify their books of business,” he said. “We don’t believe in buying assets unless there is a reason.”

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