Future of Investing
Branches are helping Bank of America grow its digital wealth management business
- Merrill Edge has grown its assets quickly by serving a diverse client base, many of whom want human advice
- The digital offering could entice the children of higher-net-worth clients to stay with the same company rather than move to a digital upstart
Wealth management and retail banking are being mashed up into one client experience to draw a greater return on investment from physical branches.
Banks' retail and wealth management businesses have become more closely intertwined over the past few years, and in the age of artificial intelligence, it's now beginning to manifest: Bank of the West, Citizens Bank and various credit unions have been emphasizing the branch as a center for wealth management clients. Now, Bank of America Merrill Lynch is making a major push for branches to help grow its online brokerage and robo-advisory platform, Merrill Edge, whose assets under management grew 18 percent over the last year to $182 billion, the bank reported this week in its first-quarter earnings.
"When you think about revenue streams for banks, including lending and [account] fees, wealth management is one of the largest revenue centers," said April Rudin, chief executive and founder of wealth marketing strategy firm The Rudin Group.
In March, Merrill Edge rolled out plans to add 600 new dedicated "investment centers" within Bank of America branches, growing its U.S. footprint to 2,800 by 2020. It also plans to hire 300 advisers by the end of the year, which would create more opportunities to promote its wealth management offerings and cross-sell to existing customers, drastically lowering the cost of customer acquisition.
"We've heard time and time again the level of confidence clients have with the human touch," said David Poole, head of Merrill Edge advisory, client services and digital capabilities. "They want to know there are people behind the portfolio, not just algorithms."
Digital wealth platforms also create new opportunities to deploy staff members to build in-person relationships with clients, including less experienced employees whose capabilities can be enhanced through use of the digital tools.
"The robos better support people in the branch and can become a much more realistic strategy to hire people with less experience who can use the tools to help them get the right answers," said Aite senior analyst Denise Valentine.
Other large banks have also doubled down on using a physical presence to offer advice to well-heeled investment clients. Citi, for example, built lounges around the world that offer direct access to advisers, along with a suite of exclusive privileges. In the U.S., Citi grew its number of relationship managers and financial advisers by 18 percent last year compared to the previous year, though it didn't specify totals. It also opened a dedicated wealth management center in Miami and began work on one in San Francisco.
Citi has been focusing its business on high-net-worth clients, with Citigold customers (those with balances of at least $200,000) representing 60 percent of the bank’s total loans, deposits and assets under management.
Meanwhile, Chase is similarly opening dedicated spaces for financial advice similar to Apple Genius Bars.
Photo: Citi wealth management branch in Miami, Florida
Poole described Merrill Edge financial solutions advisers as staff members who advise all clients, including those who use the digital self-directed service. A full-time human adviser comes with an additional cost, and there are minimum balance requirements. Clients who invest with a human adviser need an account size with a minimum of $20,000, and the company charges a 0.85 percent annual fee, while robo clients pay 0.45 percent.
"It goes back to Bank of America continuum, from starting-out investors, all the way up to someone with experience who has accumulated wealth -- we cover the whole gamut," said Poole.
While the branch locations solidify client relationships, the digital element is crucial to keep younger customers interested. Merrill Lynch, like other large firms, manages the investments of well-heeled clients who will eventually transfer that wealth to their children. The digital interface is useful for younger clients who may be less inclined to talk to a human adviser. Banks are realizing they need to offer these features to keep millennials interested and avoid a flight of funds to upstarts when generational wealth transfers take place. Younger customers have different expectations than their parents, and many would not hesitate to change their adviser if the customer experience is seen as clunky or sub-par, said Capco managing principal Tobias Henry.
"To keep up with the demographic shift that's happening, and the transfer of wealth to millennials, you need a digital offering to stay relevant," he said. "If you've used Google or Facebook your whole life, you expect your financial services provider to provide a similar type of interaction."
"We've heard time and time again the level of confidence clients have with the human touch," said David Poole, head of Merrill Edge advisory, client services and digital capabilities. "They want to know there are people behind the portfolio, not just algorithms."
Digital wealth platforms also create new opportunities to deploy staff members to build in-person relationships with clients, including less experienced employees whose capabilities can be enhanced through use of the digital tools.
"The robos better support people in the branch and can become a much more realistic strategy to hire people with less experience who can use the tools to help them get the right answers," said Aite senior analyst Denise Valentine.
Other large banks have also doubled down on using a physical presence to offer advice to well-heeled investment clients. Citi, for example, built lounges around the world that offer direct access to advisers, along with a suite of exclusive privileges. In the U.S., Citi grew its number of relationship managers and financial advisers by 18 percent last year compared to the previous year, though it didn't specify totals. It also opened a dedicated wealth management center in Miami and began work on one in San Francisco.
Citi has been focusing its business on high-net-worth clients, with Citigold customers (those with balances of at least $200,000) representing 60 percent of the bank’s total loans, deposits and assets under management.
Meanwhile, Chase is similarly opening dedicated spaces for financial advice similar to Apple Genius Bars.
Photo: Citi wealth management branch in Miami, Florida
Poole described Merrill Edge financial solutions advisers as staff members who advise all clients, including those who use the digital self-directed service. A full-time human adviser comes with an additional cost, and there are minimum balance requirements. Clients who invest with a human adviser need an account size with a minimum of $20,000, and the company charges a 0.85 percent annual fee, while robo clients pay 0.45 percent.
"It goes back to Bank of America continuum, from starting-out investors, all the way up to someone with experience who has accumulated wealth -- we cover the whole gamut," said Poole.
While the branch locations solidify client relationships, the digital element is crucial to keep younger customers interested. Merrill Lynch, like other large firms, manages the investments of well-heeled clients who will eventually transfer that wealth to their children. The digital interface is useful for younger clients who may be less inclined to talk to a human adviser. Banks are realizing they need to offer these features to keep millennials interested and avoid a flight of funds to upstarts when generational wealth transfers take place. Younger customers have different expectations than their parents, and many would not hesitate to change their adviser if the customer experience is seen as clunky or sub-par, said Capco managing principal Tobias Henry.
"To keep up with the demographic shift that's happening, and the transfer of wealth to millennials, you need a digital offering to stay relevant," he said. "If you've used Google or Facebook your whole life, you expect your financial services provider to provide a similar type of interaction."