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PRIVATE BANKING:
PROVIDING CUSTOMIZED SERVICES
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By Brian R.
Hook
Banks across the St. Louis region are working to provide a more
customized and personal service for high-net-worth clients through
private-banking operations.
“I think we are somewhat in the forefront of this private-banking
trend,” says Ray Stranghoener, president of Commerce Trust Co.,
based in Clayton. Commerce Trust is the umbrella group for all of
Commerce Bancshares Inc.’s high-net-worth services, which includes
private banking, investment management, and trust-related services.
At the $13.7 billion bank, with retail branches spanning Kansas,
Missouri, and Illinois, private banking is part of the wealth-management
services provided by Commerce Trust. Stranghoener says high-net-worth
clients at Commerce typically have a team that includes a private
banker, a portfolio manager and a trust officer.
“If you are a private-banking customer at Commerce, you get to deal
with the same person every time. Our private-banking clients don’t
have to go from office to office in the bank. Their private banker
will cover all those steps for them,” Stranghoener says.
Since Commerce Trust revamped its approach in 2000, assets have
doubled. Private banking within Commerce Trust is closing in on
$600 million in loans and about $650 million of deposits, Stranghoener
estimates. He says the St. Louis region represents roughly half
of that amount. Commerce Trust also has about $20 billion in total
client assets under management, with St. Louis representing about
50 percent of the total.
Commerce Trust has developed another team to support private bankers
called the Financial Advisory Services group. The team includes
financial experts in a variety of areas, including financial planners,
estate planners, and tax experts. “We’ve got people who can do business
evaluations, if the client owns a company. We’ve got real estate
people who can help them with their real estate investments,” Stranghoener
says.
The specialized team assisting private bankers also includes a registered
social worker. The social worker is available to help if a client
has a family member who needs nursing care, for example. “We even
have hired and supervised domestic help for elderly people. That’s
sort of an extra dimension of personal service,” Stranghoener says.
Commerce is planning to double its private-banking staff, all currently
based in Clayton, over the next five years. Commerce is also planning
to place private-banking staff in three new locations. A new private
bank is under construction in Frontenac. Commerce also plans to
place private-banking staff in Town and Country.
Plus, Commerce plans to offer private banking in Southern Illinois
after acquiring West Pointe Bancorp Inc. in Belleville for $80.9
million in April. “We already made the decision that we are going
to add private banking to the staffing over there,” Stranghoener
says. The acquisition of West Pointe added $477 million in assets.
Not everyone qualifies as a private-banking client at Commerce Trust.
Individual clients usually have at least $1 million in net worth,
other than residential real estate. Clients also tend to have investable
assets of at least $500,000 or more, and an annual income of at
least $150,000. “That’s sort of the minimum threshold where they
have more complicated needs and can really take full advantage of
our services,” Stranghoener says.
Private banking helps contribute to the growth of Commerce Trust’s
overall asset-management business, Stranghoener says. “We tend to
start our new relationship in the private banking area. Once we
get the relationship established it grows into investment management
and eventually into trust services. So, it’s a great starting point.”
St. Louis-based First Banks Inc. restructured its private banking
operation last September. Joe Hoffmeyer, senior vice president and
managing director of First Bank Wealth Management Group, says the
bank put together a team. The wealth- management group combines
traditional investment management, trust services, and private banking.
Private banking services at the $8.7 billion bank, with locations
in Missouri, Illinois, California and Texas, includes innovative
loan products, such as home equity, and personal loans. “Basically
it is taking the basic banking products and adding another layer
to reward the private-banking clients for their business,” Hoffmeyer
says.
“What should set institutions apart is how it’s delivered. We hope
it is a more personalized approach to delivering those services.
Instead of calling up the bank, you have a phone number, or perhaps
even a cell phone number, for your private banker.”
Banks across St. Louis are starting to focus more on private banking
within the last five years, says Troy Ward, an equity analyst who
covers banks for St. Louis-based A.G. Edwards & Sons Inc. “St. Louis,
compared to a lot of markets, is already pretty heavily consolidated,”
Ward says. “That opens opportunities for some smaller banks, because
smaller banks can provide that hands on service a little bit better.”
Private banking often differentiates itself from traditional banking
by not trying to be everything to everybody, Ward says. “They are
after a niche business. They are after the high-net-worth individual
and they tailor their products to meet their needs.”
Kevin Eichner, president and chief executive of Enterprise Financial
Service Corp., in Clayton, describes Enterprise as a family-office
bank. Eichner says billionaires often have their own office with
attorneys, accountants and investment advisors. “What we’ve done
is taken that idea and provided it for business owners,” Eichner
says.
The $1.5 billion bank, with locations in St. Louis and Kansas City,
will walk clients through a process of assessing all of their financial
needs, Eichner says. Planning includes estate, tax, and benefit
plans, along with succession and investment plans.
“We’re very focused on privately-held businesses and their owners,”
Eichner says. “If you had $10 million and you wanted somebody to
help you manage that money, there are thousands of people who would
love to help. But if $8 million of your $10 million net worth is
locked up in your company, there are not many people who know how
to work with you and can help you turn that into a much more substantive
sum over time.”
With $220 billion in assets and 2,500 branches nationwide, U.S.
Bank has approximately 4,500 private banking clients in its three
St. Louis and one St. Charles branches. These clients account for
$8 million in assets locally.
Regional manager Ed Higgins says that the key advantage of private
banking is that it is a “relationship kind of banking as opposed
to transactional. When the average consumer walks into a branch,
maybe you know the teller from the last time, but you’ll go in any
line.”
In a private banking situation, not only is the client assigned
a private banker, but also a portfolio manager, tax accountant and
trust officer. “This same team,” Higgins says, “works on your accounts
and your families’ accounts. In some cases, this could be for several
generations.”
To qualify, he says, they look for half a million in investable
assets and $150,000 in income. “That could vary,” he says. “A newly-minted
doctor has more debt than he has assets and we’re willing to invest
in the future of young professionals.” |
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