Times are changing in the banking industry. Gone are the days of financial institutions solely relying on domestic deposit programs to drive growth and stay relevant in the competitive market. Today’s banks and credit unions must dig deeper and offer even more robust programs that include traditional deposit accounts, wealth management services and investment programs to tap into new opportunities and, most importantly, meet the needs of the next generation of financial clients.
The recently released report, “U.S. Private Banks & Trust Companies 2024,” found that domestic deposits at U.S. banks significantly outpaced the growth of wealth management assets in the last decade. The discrepancy between deposits and wealth management is evidenced by the increase in banking clients who opt to only use traditional banking services. In 2017, 30% of bank clients solely used traditional banking services. Whereas in 2024, 56% of bank clients only used banking services.
The numbers prove financial institutions have been effective at promoting traditional bank offerings. However, banks and credit unions have not achieved the same levels of success in other lines of business — specifically wealth management services and investment programs — and this means financial institutions are leaving profits on the table and missing out on growing wallet share and deepening client relationships.
Now is the time to capitalize on depository clients and create comprehensive financial services that offer them the one-stop-shop experience they crave. Here are four reasons why financial institutions should prioritize and build out banking and wealth management initiatives to serve a wider range of client needs while growing business:
1. Market Demands Are Shifting
The latest data shows that 7 in 10 investors prefer consolidating banking and wealth management relationships — especially for investors who are 25-44 years old. In the past, investors took a more siloed approach to financial planning and management, but today, investors are looking for integrated solutions and financial institutions that offer more than just traditional banking. Much of this shift can be attributed to the growing population of young, affluent investors and changing demographics in the U.S.
2. Diversified Revenue Streams Drive Resilience
A surefire way to build resilience in any uncertain market is to diversify product offerings and tap into more opportunities to engage with existing clients. By expanding banking services to seamlessly include wealth management and investment advice, banks and credit unions can create more resilient balance sheets with new and different revenue streams, such as non-interest income. An investment program is a great way to further diversify and stabilize recurring revenue growth.
3. Unpredictable Times Call for Proactive Strategies
Banking institutions are being called on to show stability in an unstable world. It is important for banks to show their value by offering a range of services and financial tools to help clients weather the storm today and in the future. A recent study found that 73% of banking consumers expect their financial institution to anticipate their needs — but only 37% said theirs do. As an industry, we can do better and use our market expertise to anticipate changes and support clients under any circumstances.
4. Clients Want Seamless Financial Experiences
If you can’t give your banking clients what they want, you’re at risk that they will fire you and hire your competitor. With more clients seeking to consolidate their finances — banking, wealth management and investments — financial institutions need to break down the walls between departments and deliver fluid banking and finance solutions. This includes further data integration opportunities for clients to see their full financial picture within robust online banking, trust and client portals offering planning tools, document vault capabilities, account aggregation services and connecting them in a digital experience thus meeting the client where they are at.
With around 4,470 banks conducting business in the US last year, it can be impossible for financial institutions and credit unions to compete and differentiate. That’s why the best deliver a more integrated and strategic approach to helping clients manage and service their wealth. It’s not brain surgery — but rather a well-thought-out master plan that guides institutions in times of uncertainty and opportunity. Don’t wait until it’s too late to develop wealth management and investment initiatives. Your clients will thank you sooner rather than later.
Securities and insurance products offered through Cetera Investment Services LLC (doing insurance business in CA as CFG STC Insurance Agency LLC), member FINRA/SIPC. Investment advisory services offered through Cetera Investment Advisers LLC. Neither firm is affiliated with the financial institution where investments are offered.
Investments: • Are not FDIC/NCUSIF insured • May lose value • Are not financial institution guaranteed • Are not a deposit • Are not insured by any federal government agency.