Follow the Money 

‘Stable, Steady and Scalable:’ FIs Explore Wealth Management  

Citizens Goes on a Hiring Spree 

From regional giant Citizens Financial launching a new private bank last year to local banks poaching wealth-management talent from other institutions, the competition to provide more affluent customers with an array of investment and advisory services is heating up. iStock image 

Area banking institutions think they’ve found a potentially lucrative revenue stream: private banking and wealth-management services.  

From regional giant Citizens Financial launching a new private bank last year to local banks poaching wealth-management talent from other institutions, the competition to provide more affluent customers with an array of investment and advisory services is heating up, as banks seek new revenue streams to boost their margins and profitability.  

The trend is happening across the country. And banks both big and small are launching initiatives or expanding existing ventures to provide new services to their more affluent clients.  

In recent years, large Wall Street banks have been busy beefing up their wealth and investment services, such as Morgan Stanley, which last decade bought Boston’s Eaton Vance as part of its strategy to capture a bigger piece of the asset and wealth management pie.  

In earnings calls, officials at Eastern Bank have touted the wealth management business they’ll be building when Eastern buys Cambridge Trust later this year. In New Hampshire, Cambridge Trust’s wealth business is built in part on Cambridge Trust’s own talents and part on what it acquired when it bought Optima Bank & Trust in 2019. 

But by far, the largest and most prominent regional move to expand services to more wealthy customers came via Providence-based Citizens Financial, which last year launched a new private bank.  

In an analyst call last month, Citizens chairman and chief executive Bruce Winfield Van Saun said the new private bank already had $2.4 billion in deposits as of the end of March.  

“The Private Bank is off to a good start,” Van Saun said. “We expect momentum to accelerate further over the course of the year. We’re also focused on building out private wealth management through further investment in Clarfeld [Citizens Private Wealth] plus several imminent team lift-outs.”  

Citizens has already hired hundreds of employees, many of them poached from rival private banks and wealth-management firms, to staff its new private-banking operation, the company has said.  

So far, Citizens Private Bank has offices in Boston, New York City, the San Francisco Bay Area and Palm Beach, Florida, but Citizens’ existing wealth management services already have a noteworthy footprint in New Hampshire. 

Outsource to Reduce Expenses 

Private banking and wealth management often overlap in the services they provide, but they can have slight differences. Wealth management generally entails providing advice and investment services to clients, while private banking provides full financial management services to their affluent clients.  

For Citizens, the bank’s overall wealth operations, which include Citizens Wealth Management and Citizens Private Wealth, reported a total of $24 billion in assets under management as of the end of the first quarter, for a 15 percent year-over-year increase from Q1 2023, the bank reports.  

No matter where the line is drawn between the two, experts say it’s clear that banks increasingly see their well-to-do customers as potential sources of new revenue.  

“It can be lucrative for banks,” Wally Okby, a strategic advisor at Datos Insights in Boston, said of wealth-management services. “At the very least, banks see [services to the affluent] as stable, steady and scalable revenue streams.”  

He noted that wealth management assets across the county stood at $38.5 trillion in 2022, with assets growing at an annualized rate of 8.4 percent over the past 10 years.  

In other words: it’s a big and growing field that many banks, now facing an array of profitability challenges, find hard to resist.  

Though wealth-management startup costs can be expensive, Okby said that smaller banks are in a pretty good position to compete with larger financial institutions due to their ability to provide more in-person advisory services.  

“The old retail banks are morphing into a different type of organization,” he said. “The barriers to get into [wealth management] have basically faded away over time. Any and all banks can set up [a wealth-management unit]. They can even outsource pretty much everything [related to it].”  

‘Go Where the Money Is’ 

Paul McAdam, senior director of banking and payments intelligence at J.D. Power, said there are basically two types of clients that institutions can choose to go after when building wealth-management businesses.  

There are “affluent” clients, with assets of $250,000 and up. And then there’s “mass affluent” clients, with assets of about $100,000 to $250,000.   

Those are general categories – wealth-management definitions can vary from bank to bank. Citizens Financial’s new private bank, for instance, is targeting clients with assets of $200,000 and up, according to published reports.  

But keeping to McAdam’s two categories of clients, about 41 percent of “mass affluent” customers have all their assets parked at a single bank, while only 17 percent of “affluent” clients keep all their assets at a single bank, he said.  

Retirees make up about 25 percent of all wealth-management clients, he said.  

“Banks are definitely going after the more affluent crowd,” McAdam emphasized. “It’s truly the same old story: Go where the money is.”