ABA Banking Journal - June 2008 - (Page 7)

briefing ABA WEALTH MANAGEMENT & TRUST CONFERENCE INSIDE BRIEFING Snapshot: Net interest margins vary sharply by size . . . . . . . . . . . . . . . . . . . . . . . . . . . . p. 8 “Then & Now,” a yearlong review of banking history during ABA Banking Journal’s 100th Anniversary. This month: “When women–and machines–served support roles” . . . . . . . . p. 10 Letters: “There was a bailout” p. 12 ABA Resources . . . . . . . . . . . . . . . . . . . . . . p. 15 Do fee-based services have an edge? Two analysts give views on what creates value in the world of trust and asset management aby boomers may be the best thing Exhibit 1 in years for some bank stock 1600 Projected Value of Managed Account Assets 1999-2010E prices. At ABA’s Wealth Manage$ billions ment and Trust Conference this spring, 1400 analyst Gerard Cassidy made the case 1200 that the market rewards fee-based banks—banks such as Bank of New 1000 York/Mellon that emphasize asset man800 agement, trust, custody, and other fidu600 ciary services—with higher price/earnings multiples than traditional spread 400 lenders. Cassidy, bank analyst and managing 200 director for RBC Capital Markets, 0 explained how fee-based banks have 1999 2000 2001 2002 2003 2004 2005 2006 2007Q3 2008E 2009E 20010E Source: The Money Management Institute, RBC Capital Markets; projections are linear based on approximately 2.5% growth in 4Q 07 and 13% growth per year latched onto the changing demographics particularly well. In a nutshell, as baby boomers move into their 60s in enormous numbers, the wealth Their success, he said, results in large part from superior they have amassed or inherited needs managing (Exhibit 1). client service. This, in turn, is a function of technology and This is not just a gift for banks, however. Cassidy said that well-trained people. Fee-based banks invest more in technoloalready there is intense competition in the wealth management gy than traditional banks, he suggested. field from hedge funds, family offices, and many other players, but he predicted a shakeout would winnow the field going Skip the style box forward. And even though capital markets’ fees have fallen Robert Lee, managing director for Keefe, Bruyette & Woods, recently, he said, fiduciary business will continue to grow believes that a solutions-based business model is superior for the financial advisory/asset management business. In contrast steadily (Exhibit 2, p. 8). After sketching out the favorable scenario for fee-based to the popular “style-box” models [grids used for asset allocabanks, Cassidy and another analyst, Robert Lee, commented tion and risk-return analyses], the solutions approach, said on what approaches and best practices stand out among the Lee, promotes “stickiness” of assets and helps generate more banks that operate in these businesses—Northern Trust and profits from existing customers. A solutions-based model The Bank of New York/Mellon being two that Cassidy men- combines various products and services to meet a client’s objectives. “It takes [the focus] away from performance, per tioned. se,” said Lee, “and looks at the client more holistically. By Bill Streeter, editor-in-chief Over time, Lee predicted, more and more advisory firms B CHARTS BY PHILIP DESIERE Subscribe at www.ababj.com ABA BANKING JOURNAL/JUNE 2008 7 http://www.rbccm.com http://www.kbw.com/index.html http://www.ababj.com

Table of Contents Feed for the Digital Edition of ABA Banking Journal - June 2008

ABA Banking Journal - June 2008 Contents Editor’s Column Do Fee-based Services Have an Edge? Snapshot: Net Interest Margins Vary Sharply with Size 100th Anniversary: Then & Now Letters ABA Resources ABA Chairman’s Position "What? No Annual Surprise Bonus?" Pass the Aspirin Cover Story: Top Community Banks: How They Did... ...And How They Did It Charter Bank First East Side Savings Bank Mackinac Financial Corp. The Peoples Bank Managing the E-mail Monster In Brief Handling PEPs in the Age of "L'affaire Spitzer" Mailbox Banker’s Mart To Advertise/Index of Advertisers The Economy

ABA Banking Journal - June 2008

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