In this blog post, we explore valuable insights from Anne Schutt, Vice President of Business Development at Midwestern Securities, on enhancing retail wealth management in community financial institutions. Anne's extensive career in marketing, business-to-business sales, and financial services has provided her with a unique perspective on the challenges and opportunities in this field. We will look at the importance of strengthening non-interest income through retail wealth management and strategies for community financial institutions to improve their financial services.
The Role of Wealth Management in Community Banks
Retail wealth management is a critical component of a community financial institution’s service offerings. It involves providing clients with personalized financial advice, investment strategies, and comprehensive financial planning. This service helps customers manage their wealth more effectively and achieve their financial goals.
By offering comprehensive financial services, community financial institutions can retain more customers and build stronger relationships. These services include investment management, retirement planning, tax planning, and estate planning. Providing these services under one roof allows community banks to meet all of their customers' financial needs, enhancing customer loyalty and satisfaction.
While large financial institutions often have more resources, community financial institutions have a significant advantage in building personal relationships with their customers. Anne points out that community institutions can leverage their local presence and deep customer knowledge to offer tailored financial solutions. Unlike larger institutions that may treat customers as just another account, community financial institutions can provide a more personalized and trusted service, which is a key differentiator in the competitive financial services market.
Common Challenges Faced in Retail Wealth Management
Community financial institutions face several challenges in offering retail wealth management services. These include limited resources, lack of specialized personnel, and competition from larger financial institutions. Additionally, regulatory complexities and the need for continuous training and technology upgrades can strain the institution’s capabilities.
To overcome these challenges institutions must first partner with third-party investment services vendors who understand their unique challenges and provide a higher-level of support and program management. Institutions must adopt proactive financial advisory services that are advice-driven and customer-centric, not commission-heavy and advisor-centric. This involves anticipating customer needs, providing timely advice, and regularly reviewing and adjusting financial plans. Proactive services help in building trust and long-term relationships with clients and protects the hard-earned reputation of the institution in the community.
Effectively addressing customer needs requires a deep understanding of their financial goals and concerns. Institutions should focus on personalized services, regular communication, and comprehensive financial planning. Leveraging data analytics can also provide insights into customer behavior and preferences, enabling more tailored solutions.
Practical Steps for Improving Retail Wealth Management Services
- Choose Your Third-Party Investment Services Partner Wisely: Just as you provide a unique, value-driven experience for your community versus the mega banks, a smaller broker-dealer/RIA firm that specializes in community financial institutions is often the best choice to truly build a successful program or improve and optimize an existing program.
- Regular Training and Education: Ensure that financial advisors are well-trained and up-to-date with the latest financial products and regulations. Also providing regular training to bank staff at all of your branches on the benefits of referring clients to retail wealth management and practical ways to make the referral is key. Smaller broker-dealer/RIAs that specialize in this space provide resources to support all the training and education needs.
- Enhanced Customer Communication: Establish regular touchpoints with clients to review their financial plans and offer timely advice. This is a great opportunity to better understand your community members and often can result in cross-referrals to other areas of the institution as advisors are having very deep, goal-driven conversations with their clients and uncover needs.
- Comprehensive Financial Planning: Offer holistic financial planning services that cover investments, retirement, tax planning, and estate planning. Ensure your retail wealth management is not just selling commission products. This can be a risk to the institution’s reputation in the community and provide a disservice to the customers you serve.
- Team Integration and Collaboration: Integrating retail wealth management teams with other departments within the institution fosters collaboration and ensures a seamless customer experience. Encouraging cross-departmental communication and shared goals helps in delivering cohesive financial solutions to clients.
- Technology Investment: Investing in technology, such as customer relationship management (CRM) and financial planning software, can streamline operations and enhance service delivery. Continuous training on these tools ensures that staff can effectively utilize technology to improve client interactions and financial planning.
The Significance of Partnering with the Right Broker-Dealer/ Registered Investment Advisory (RIA) Company
Partnering with the right broker-dealer/RIA is crucial for the success of a community institution's retail wealth management program. A broker-dealer/RIA provides essential support, including compliance, training, marketing, and operational assistance. The right partnership can significantly enhance the institution’s capabilities and service offerings.
Key services they should provide include:
- Compliance and Regulatory Support: Ensuring that the bank's financial services adhere to all regulations. Some broker-dealer/RIA companies place this responsibility on an advisor which takes them away from serving clients and puts pressure on them to keep up with an always changing regulatory environment. The home office of the broker-dealer/RIA should have a compliance department that fully oversees the activities of your advisors to protect them and the institution.
- Training and Development: Providing continuous education and certification programs for financial advisors. The broker-dealer/RIA should offer many opportunities for advisors to learn and improve their knowledge and skills. They should also help monitor continuing education and licensing requirements to ensure advisors remain in good standing.
- Marketing Support: Assisting with branding, marketing strategies, and promotional materials to attract and retain clients. Broker-dealers should help highlight your institution program and brand your program to align with your overall institution branding and marketing strategy, they shouldn’t encourage branding a program on it’s own or insist that the program use the broker-dealer/RIA’s branding. This is your program and most community institutions have a century or more of history in their community and as they build their program it should align with your institution.
Additional Areas of Focus for Retail Wealth Management
- Recruiting Financial Advisors In Wealth Management Services: Recruiting the right financial advisors is essential for building a successful wealth management services program. Community institutions should look for candidates with strong sales skills, a customer-centric approach, and a willingness to learn. While prior experience in financial services is beneficial, it is not always necessary. Investing in training and development can transform talented individuals from other fields into successful financial advisors.
- Tracking Key Performance Indicators: To gauge the success of a wealth management program, community financial institutions should track key performance indicators (KPIs) such as assets under management (AUM), revenue generated, client retention rates, and customer satisfaction scores. These metrics provide valuable insights into the program's effectiveness and areas for improvement. For example, a conservative estimate of the average revenue retail wealth management programs generate across the country is $1600 in revenue per $1 million of bank deposits. High performing institutions are regularly generating $3600-$10,000+ in revenue per $1 million of bank deposits. This a good reference to take a high-level look at how your program is performing benchmarked against others to better understand if there is an opportunity for improvement and optimization.
- Maintaining High Performance: Maintaining high performance in wealth management requires a commitment to ongoing improvement. This includes setting clear goals, regularly monitoring progress, and adapting strategies as needed. Encouraging feedback from clients and staff can also provide valuable insights for refining services and processes.
Final Thoughts on Retail Wealth Management Services
Retail wealth management services are a vital component of a community financial institution's service offerings. By providing comprehensive financial services, community financial institutions can build stronger relationships with their customers, enhance loyalty, and stay competitive in the financial industry.
Community banks should evaluate their current retail wealth management programs and consider partnering with experienced broker-dealer/RIAs that specialize in community institutions, like Midwestern Securities, to optimize their services. By implementing the strategies discussed in this blog, institutions can improve their financial advisory services and achieve long-term success.
For more insights and professional guidance on implementing effective wealth management strategies in your community financial institution, visit Midwestern Securities. Our team of experienced professionals are ready to help you achieve your goals and drive growth in your organization. Explore our resources and services to take the next step towards building a stronger, more cohesive team.