Banks Eat From Hands of the Filthy Rich

However, commercial banks trying to gain market share in this highly competitive area face challenges in several areas, including reputation, integration and investment strategy.

Tough Competition

High-net-worth individuals tend to invest their assets with trusted local consultants or longstanding institutions whose reputations precede them. That makes it difficult for commercial banks with tacky ad campaigns and thousands of branches to gain an edge: The rich want white-glove treatment from respected, high-brow advisors, not an ATM card from the McDonald's of the banking world.

"If you won the PowerBall or came into a lot of money, you'd go to U.S. Trust or go to JPMorgan to have a very stuffy old person help you," van Doorn says.

Building a private-wealth division from scratch would be incredibly difficult and have little chance of success. Instead, over the past decade, banks have opted to acquire well-known firms.

Citi(C Quote) swallowed Smith Barney in 1998. UBS(UBS Quote) engulfed Paine Webber in 2000. Wachovia(WB Quote) scooped up a majority stake in several Prudential units -- including its private-client business -- in 2003. And, most important, Bank of America(BAC Quote) became the U.S. private-wealth juggernaut with its $3.3 billion acquisition of U.S. Trust last year.

BofA's move pushed it ahead of its top competitors, Citi and JPMorgan Chase(JPM Quote), in terms of private-wealth clients and managed assets. But the integration has shown some signs of stress.

Instead of keeping the U.S. Trust brand, BofA opted to change its name to the awkwardly phrased "U.S. Trust, Bank of America Private Wealth Management." Many top-level U.S. Trust executives departed, including CEO Peter Scaturro, who was replaced by his No. 2 officer, Frances Aldrich Sevilla-Sacasa.