This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Banks Up Profit Bets on the Rich

It's a good time for banks to start serving investors who were shell-shocked by sharp declines in their net worth during the crisis but have finally begun to wade back into the market. Investors pulled $281 billion out of equity mutual funds from the start of 2008 to the end of 2010, but have put $36 billion back in since the start of the year, according to the Investment Company Institute. Those investors have started once again to seek advice on retirement planning and wealth management.

Meanwhile, big changes in the financial industry have given high-net-worth customers the confidence to break away from longtime advisers - a move they might not have made in better times. Schug, of SEI, says industry consolidation and weak performance has "put a lot of assets in play" and created "opportunity for change."

"This is an industry where clients don't like to move and typically don't move if the markets are going up," says Schug. "But now you've got forced change. You see clients that have to make a change because a new firm has acquired their firm or their firm's gone under. Then you have proactive change where the market downturn has led to client unrest and increased demand on a service model. Banks are seeing an opportunity to capture some assets and this is a business that's valuable to them."

But Herb Kaufman, an economist, consultant and professor emeritus at the W. P. Carey School of Business at Arizona State University, is skeptical that wealth management and high-net worth clients can make up for the oodles of revenue lost from financial reform.

Kaufman agrees that wealth management can be a "fairly lucrative" business for banks that hire the right people and build strong relationships with customers - particularly as more baby boomers retire. But he notes that it's an also area that requires a greater investment of capital and time than the businesses banks are now exiting.

Additionally, he notes, while a wealthy client can provide more fee income than the average depositor, there are far fewer of them. Collecting $10 or $30 monthly fees from millions of low-income consumers is far more profitable than collecting $1,000 or $3,000 fees from the top 1% - otherwise banks would have been following their current strategy all along.
4 of 5

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
SYM TRADE IT LAST %CHG
AAPL $118.44 -2.36%
FB $94.14 0.14%
GOOG $631.21 0.90%
TSLA $259.99 -2.31%
YHOO $36.69 0.05%

Markets

Chart of I:DJI
DOW 17,598.20 -91.66 -0.52%
S&P 500 2,098.04 -5.80 -0.28%
NASDAQ 5,115.3820 -12.8990 -0.25%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs