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As wealthy boomers retire, investment firms staff up

  • http://media.charlotteobserver.com/smedia/2014/01/31/17/08/icgmy.Em.138.jpeg|214
    T. Ortega Gaines - ogaines@charlotteobserver.com
    Joe and Sarah Pennacchia, facing camera, meet with PNC wealth-management team members Sean Williams, left, and Sarah Balanda.
  • http://media.charlotteobserver.com/smedia/2014/01/31/17/08/vcpBn.Em.138.jpeg|209
    T. Ortega Gaines - ogaines@charlotteobserver.com
    PNC Financial Services has built a wealth-management team from scratch since buying RBC Bank in 2012. From left, members Sean Williams, Tom Clymer, Alan Smith, Andrew Brooks, Jim Benedict and Jack Cassady brainstorm in a directors meeting.

More bankers are knocking on the doors of Charlotte’s wealthy these days – in some cases quite literally.

As the baby boom generation hits retirement age, banks and investment firms are staffing up to land the job of managing where they’ll put their money.

Nearly a half-dozen firms have been hiring new financial advisers in the Charlotte area, hoping to capitalize on the demographic shift and a significant increase in the number of millionaires in the area. Two strong years in the stock market have made the business even sweeter.

• PNC Financial Services has built a wealth-management team from scratch since buying RBC Bank in 2012. Wealth director Jennifer Green said the team doubled its sales goal last year.

• Baird has brought in a dozen financial advisers and amassed $1.7 billion in client assets in its first four years in the Charlotte market. The firm recently opened a second office near Lake Norman and hopes to double in size locally.

• Edward Jones has hired nearly a dozen new advisers in the Charlotte region in the past year, a roughly 20 percent increase.

• Merrill Lynch has bumped up its number of advisers locally and begun a pilot program to place a dozen of them in Bank of America branches across Charlotte.

• U.S. Trust, also owned by Bank of America, has boosted its team serving the ultra-wealthy by 20 percent in its market spanning North Carolina and Tennessee. Total balances were up 26 percent in the year, and the market set records three years in a row for bringing in new clients, region executive Matthew Ellis said.

All that growth has translated into substantial profit.

Bank of America’s overall wealth-management business earned $3 billion in 2013, the most in the company’s history. The division now accounts for one-fifth of the Charlotte bank’s revenue. Edward Jones also posted record net income last year.

Nationally, banks’ wealth-management businesses have recovered far quicker than areas such as lending. Assets under management in the U.S. have surpassed levels reached before the financial crisis, according to data from consulting group Booz & Co.

“If I were deciding where to invest, it’s a no-brainer,” said Arjun Saxena, a Booz & Co. partner.

For one, the business doesn’t require the capital that a car loan or mortgage business would. Wealth-management divisions don’t typically make many loans, so less money has to be held back in reserve, said Bruce Holley, a senior partner at the Boston Consulting Group.

The stock market rally over the past two years has also significantly padded clients’ investment accounts. The Standard & Poor’s 500 index, a widely accepted measure of the overall stock market, closed 2013 up 30 percent, its best performance in a decade and a half.

Wealth managers typically charge a percentage of their clients’ portfolios, so when markets rise, both win.

Battle for new clients

Fueling the growth in new clients is a population quickly advancing to retirement age. Financial advisers say clients tend to reach out once they hit their 50s and want to make sure they’ll be able to live the way they want to after retiring.

Most firms specialize in clients with between $250,000 to more than $1 million in investable assets. Some, such as Edward Jones, do not have a minimum dollar figure.

“As the baby boomers age, they are moving out of that wealth-accumulation mode and thinking very long and hard about the best, most appropriate way for them to make sure the wealth they have created is passed on and is working the way they want it to,” Ellis of U.S. Trust said. He said the country will see the greatest transfer of wealth in its history over the next decade.

At the same time, more of those households are hitting “high net worth” status – the prime demographic wealth managers are after. A Nielsen Co. study in May predicted that the number of millionaire households in Charlotte would grow by 18 percent in the next five years.

At the same time, as home to thousands of financial industry employees, Charlotte households tend to be financially literate and actively interested in managing their money. That has made Charlotte a competitive market for firms looking to expand.

Edward Jones is known for having new advisers go door-to-door in their neighborhoods to shake hands and introduce themselves. “It’s one of the ways that you gain trust,” regional leader Tim Portelance said.

The 11 new advisers have been knocking on doors almost daily from Charlotte to Mooresville, Cornelius and Albemarle.

Many new clients come from word of mouth and advisers simply being seen in the community. Green of PNC said her advisers are encouraged to follow their passions into volunteer roles. She, for example, serves on the board of the Bechtler Museum of Modern Art and the Charlotte-Mecklenburg Library Foundation.

PNC has also started organizing community forums. Recent plans included an event featuring a local doctor talking about Alzheimer’s disease and the financial challenges it can present.

Others come from rounds of cold calls to small-business owners and checking up on lists of people who might be approaching a life change.

“It’s a numbers game. You have to contact a lot of people. You have to get in front of a lot of people,” Baird office manager Landrum Henderson said.

“It’s not an easy business to build, but it’s a wonderful business once you do get it built.”

That leaves customers with a more difficult choice of who to take their business to when they decide to seek out a wealth manager. Ken Bakar of CEG Worldwide, a company that helps match investors with advisers, suggests that people treat an introductory meeting with an adviser like a job interview.

Bakar said he recommends asking detailed questions about how the adviser operates and why he or she got into the business to begin with. He said that oftentimes, people end up choosing an adviser based on the experience of a friend or family member and become unhappy.

“You have to determine if it’s the right fit,” he said.

Dunn: 704-358-5235; Twitter: @andrew_dunn
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