Banks are big players in wealth management, management more than 15% of all advised assets in the United States and there is a great opportunity to capture even more business as we experience the Great Wealth Transfer over the next 20 years.

However, the lines between wealth management and banking are blurring, opening up new opportunities as well as new competition. While banks are enjoying a boom in the wealth management business, new competition from large RIAs and electronic bureaus that now offer banking services threatens their nearly $7 trillion in assets under management.

With this change, how are banks competing? By unlocking the unrealized potential of their wealth management programs in three key areas.

Relying on the core business.

Wealth clients generally fall into three categories, depending on total investable income: mass market, affluent, and high net worth. Traditional models suggest that banks should work to capture affluent and high-net-worth customers for the best returns. But the most successful banks are turning this model on its head.

There are many different needs in these segments, including those in the mass market segment. More than 80% of US households have less than $500,000 in investable assets and are the core business of a bank. This segment particularly benefits from debt and cash management, leading to investment advice and wealth growth.

These investors also tend to skew younger. By capturing this group early and incorporating the value that financial advisors bring to help them achieve their financial goals, banks' wealth management programs are creating resilient relationships with their clients as well as a long-term revenue stream.

Change of mind for advice.

Banks have spent years carefully growing their customer bases by offering high-quality and diversified services, and are challenged to meet the needs of the next generation of investors who require more support to navigate a complicated financial environment. .

The life of an average investor is complex. Investors often have competing financial goals, such as reducing debt and saving for retirement, and while they have access to digital investment tools out of the box, they need someone to help them understand their full financial picture .

This is especially true for new investors. As reported in a McKinsey 2023 Consumer Survey, about 30% of retail investors prefer to consolidate banking and wealth relationships. That number rose to 73% among investors between the ages of 25 and 44. Comprehensive financial advice is no longer a “nice to have”. It is necessary and the banks have noticed.

Encouraging engagement through advisors.

While it is true that banks make most of their income from loan and deposit products, they retain clients through wealth management, as wealth offerings help build trusting relationships and engagement between advisors and their clients. . Banks have a unique value proposition for consumers because they possess a centralized investment model where clients meet with one advisor across their entire financial portfolio, which lowers costs and builds loyalty.

In this centralized approach, the advisor is the single point of contact between the various roles and capabilities of internal and external resources. To succeed in this model, a bank's network of service and expertise must be strong. Whether they provide some or all of the middle and back office support, technology operations, cybersecurity or compliance, partnerships are wisely considered to reduce risk and increase productivity. Advisors are the master choreographers who make it all come together for the client.

Digital tools like robo-advisors, AI and on-demand services appeal to younger generations and are convenient, but they can't replace human relationships—the real lifeblood. Personal relationships will always be the heart of a bank's wealth management program.

As many banks continue to explore how they can better operate their wealth management programs, some people may wonder why banks are running these programs in the first place.

I ask, why not?

Now is the time for banks to use their strongest relationships to drive growth and long-term success for wealth management programs and banks as a whole.

Christopher Cassidy is SVP and Head of Institutional Business Development at LPL Financial.