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Following the Money
Northern Trust believes that the ranks of those well-heeled Floridians are swelling, and it smells business: It estimates that the number of households with $1 million or more in investible personal assets (homes, cars and boats not included) jumped by 13% from 1994 to 1995 to a total of 73,000. The bank sees another crop of potential millionaires growing among the more than 300,000 Florida households that now have six-figure incomes.
Other financial institutions have turned up similar findings, pushing them into a fierce competition to court the favor of rich Floridians. Multistate banks like NationsBank, nationwide stock brokerage firms like Smith Barney, and even local community banks have stepped up their efforts to compete with Northern Trust and other financial institutions that specialize in serving Florida's well-to-do. Catering to the affluent pays well. A bank or brokerage firm which manages a million-dollar account can count on a hefty annual fee, often $20,000 or more. The wealthy "are not necessarily sitting behind [computer] screens monitoring their investments," says Adolfo Henriques, president of NationsBank of Florida's Miami region. "They are looking for professionals to do it for them."
Targeting wealthy prospects
Marketing to the affluent takes a kid glove approach. Like other financial professionals who target the high-end market, Henriques says personal attention is vital. "One-on-one contact," he says, "is the only thing that works." When they identify a rich prospect, bankers and brokers don't introduce themselves through a cold call or a general letter of solicitation, such as a credit card offer. Instead, they may send a personalized invitation to attend a seminar on investing. Some invite prospective clients to luncheons featuring a nationally known author or entertainment personality who will talk about a subject other than personal banking. Actor Charlton Heston, for example, has become one of Northern Trust's most popular speakers at bank-sponsored gatherings of well-to-do prospects. The client, after the initial contact, picks the time and place to talk business. Smith Barney's office in West Palm Beach offers classes on topics such as estate planning to accountants and lawyers, providing these professionals with continuing education credits. The idea, of course, is to convince them to become Smith Barney clients.
While bankers and stockbrokers are using the light touch on potential high-end customers, behind the scenes they're aggressively pushing into each other's traditional businesses to expand their menu of services.
Many stockbrokers now sell trust services and make small-business loans - two core businesses of the banking industry. Dan Herz, a former banker who advises small businesses on how to deal with banks, says some brokerage firms appear more willing than banks to offer a loan as an inducement to handle other financial matters for entrepreneurs.
Herz, president of DFH Business Consultants in Cooper City, says Merrill Lynch has become one of the most proactive lenders to Florida entrepreneurs and professionals. Raymond James offers mortgages and other loans through Raymond James Bank, a savings bank it established in 1994 after buying three Florida offices of a failed Alabama-based thrift. Lawrence Silver, senior vice president for marketing, explains that many Raymond James clients want FDIC insurance protecting their cash reserves.
Meanwhile, Raymond James continues to build its three-year-old trust banking operation. It bought a Tacoma, Wash., trust company in 1993, renamed it the Raymond James Trust Co. and shifted operations to St. Petersburg. Silver says the strategy behind the acquisition was to discourage Raymond James clients from setting up trusts with competitive financial institutions that might forge additional financial relationships with the clients.
Nontraditional businesses
Three years ago, Smith Barney set up a trust operation in Florida, with offices in Sarasota and West Palm Beach, to keep client money in-house. "If a client passed away," says Greg Torretta, branch manager and first vice president at Smith Barney's West Palm Beach office, "there were too many occasions when the heirs would move the assets to a trust company."
Banks also have diversified into nontraditional businesses - such as the sale of mutual funds and insurance policies - thanks largely to legislation and court decisions deregulating the sale of various financial services. Barnett won a case before the U.S. Supreme Court in March 1996 that permitted banks' move into insurance sales. (See accompanying story.) In another insurance-related decision last year, the U.S. Supreme Court upheld the right of banks to sell annuities at their offices with their own personnel. Until that decision, Florida's major banks had been selling annuities through third-party vendors and were relatively minor players in a market dominated by insurance companies and brokerage firms.
Now, banks appear to have formidable strength as a marketing channel for annuities. Since it began using its own sales force in Florida in August 1995, First Union has sold annuities with a total value of $130 million. Barnett Banks began a new sales program this June, and Rick Jones, Barnett's chief asset management executive, says the banking company's annuity sales will be "10 times what we did last year" with an outside vendor.
Bankers also have joined stockbrokers in profiting from the popularity of mutual funds. Barnett's Jones reports that the total assets of his company's Emerald Funds grew from $3.5 billion to $4.1 billion during the first half of this year. First Union Corp. sold an additional $300 million of its Evergreen Funds in Florida during that period, according to G. Kennedy (Ken) Thompson, president of First Union National Bank of Florida.
Personal touch
Even some of Florida's smaller banks are joining the giants in serving investment-minded clients. First Guaranty Bank and Trust Co., whose Jacksonville headquarters is near several hospitals and medical centers, has a client base laden with the business and personal accounts of doctors and dentists. The $173 million-asset bank keeps its medical clientele happy with a courier service that picks up their deposits, saving them a trip to the branch office. First Guaranty also has a trust subsidiary and a year-old brokerage subsidiary that offers mutual funds and securities.
"We offer all of the products, combined with the type of personal service the larger banks generally cannot provide," says First Guaranty Chairman Julian E. Fant, Jr. "We still find that many people like to deal with institutions that have long been part of the community."
And indeed, despite the challenge from stockbrokers, Florida banks still control a growing volume of trust assets. Data from the Federal Deposit Insurance Corp. show that trust assets at Florida banks and savings institutions grew from $61.7 billion at the end of 1990 to $91.5 billion at the end of 1995.
What's ahead in the high-end battle among Florida's bankers and stockbrokers? Richard X. Bove, Raymond James' banking analyst, expects the state's major banks to become even more aggressive on the wealth management front. He cites SunTrust and First Union as aggressive marketers of those services. He also is looking for stepped up competition from AmSouth Bancorp. and SouthTrust Corp., two Alabama-based banks that have become major players in virtually all areas of the state except South Florida.
Those that offer products with the best bells and whistles will gain ground. But ultimately, the human touch is perhaps the most important factor in marketing sophisticated financial services. Says Fant, the chairman of Jacksonville's First Guaranty Bank and Trust: "People like to deal with someone who knows them, and they like to feel special."
Business Beat - Week of May 3rd
