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Depending on which financial institution you ask, affluent households are described as having investable assets of $25,000 to $500,000. Above $500,000, there are 10.5 million households nationally, according to estimates by The Spectrem Group, a Chicago-based consulting firm. Almost three-quarters of these higher-end households use an advisor in some way. For traditional banks, attracting the cash-rich set as investment advisory customers has been a long-held, but often elusive goal.

That’s understandable, given that banks were shut out from the investment banking business—an historic companion of brokerage—for the 66-year life of the Glass-Steagall Act. Only since 1999, when Congress repealed Glass-Steagall with the Gramm-Leach-Biley Act, have restrictions against affiliations between commercial and investment banks been lifted and have traditional banks been allowed to provide insurance underwriting and other activities.

Because they’re relatively new to the game, banks are furiously playing catch-up, trying to lure their traditional banking clients away from brokerage houses and financial planners. “Full service brokers are the predominant choice among those we surveyed,” says Ann Mahrdt, a director with the Spectrem Group. “Banks show up pretty low on the list, actually.” Most banks see this lack of penetration as an opportunity.

Indeed, Spectrem research finds that banks are pumping up their market share in this niche, albeit from a tiny base. And they’re hardly the only group taking business from traditional brokerage firms. Full service brokers saw their hold on affluent clients drop last year to 24% from 45% in 2002, according to Spectrem. Financial planners slipped to 17% from 21% in that same period. Meanwhile, registered investment advisors doubled their hold to 18%, accountants and investment managers each lifted their shares to 9% from 5%, while private bankers captured 4% of the 2004 market, up from 2% in 2002.

Banks are taking a more holistic approach. Mahrdt says, “Really, what we’re hearing the market say is, ‘We need somebody who can help us with the total picture. Someone who can help us find long-term health care insurance. Someone who looks at a total picture instead of just our investable assets.’”

This desire for total service might be the best opportunity for banks to capture a larger piece of the pie. Increasingly, banks offer full financial services, including brokerage, asset management, insurance, and financial planning. Yet, the challenge remains for banks to get the word out that they can fill the void.

"We do it a number of different ways,” says Rhomes Aur, executive vice president of wealth management for Memphis-based First Tennessee, whose sister banks operate under the flag of First Horizon in Atlanta, Dallas and the Washington area. “We’ve trained all of our folks out in the branches for opportunities to provide wealth management products. They ask customers if they’d be interested in a financial plan or speaking to one of our brokers. Then we track and measure how well our employees cross-sell products.

Aur says First Tennessee sends direct mail, buys print advertising, and conducts seminars and special events for corporate clients. One of its most innovative approaches is offering to create a financial plan at no charge for all clients.

“We offer financial planning complimentary to clients,” she says. “It’s a full-blown financial plan and it’s free. The market price for such plans is $1,500 to $3,000 or $4,000. It gets people thinking about us as more than a checking and savings bank. Not everybody needs one. Our target client has $25,000 in investable assets and $100,000 yearly income. But anybody can get it; we just tend to target that more affluent customer.”

Aur says her company creates about 10,000 financial plans for customers every year. To keep wealth management referral at the front of employees’ minds, First Tennessee offers a referral fee to frontline bank employees if a client signs up for services. If the referring employee is a certified financial services representative, he or she can also share in the commission generated by a relationship with the client.

AmSouth has employed a similar marketing tactic, but has tailored its approach particularly to people examining their retirement options. “We sent out over 250,000 offers in our prospective markets, offering them a free financial plan,” says Tom Twitty, executive vice present of AmSouth’s investment services and wealth management group. “When they met with their financial consultant, we gave them a plan that served as a blueprint for how they could survive on that income throughout retirement. It gave us an opportunity to demonstrate all of the services we have, including a full array of insurance and retirement plans.”

AmSouth also compensates employees who successfully refer clients “based on industry and market factors,” says Joe DiNicolantonio, a regional executive vice president with AmSouth in Chattanooga. “We have a pretty comprehensive profile that takes place when customers sign up for accounts. Our employees take a needs-based approach to determine whether that customer is a fit for wealth management services.”

Smaller banks often have less formal systems. For example, Tennessee Bank and Trust, a new bank in Williamson County, has a very simple referral process. “We don’t compensate for referrals,” says Rick Stauffer, director of Tennessee Bank and Trust Financial Services. “We don’t because we’re a small community bank, privately owned. Our retail bank people will, in interviewing the customer, mention that we have a full-service investment division. That’s part of their job. There’s no additional incentive.

Stauffer says the financial services unit has a tight relationship with the retail and commercial groups, which makes cross-selling come naturally.

He says there is a contrast between Tennessee Bank and Trust and larger regional banks when it comes to the level of expertise offered clients up front. “If you walk into that regional bank, you would first meet a Series 6 (a certification ranking from the National Association of Securities Dealers), who can only work with clients up to about $50,000. Above that, they have to refer to a Series 7.” Stauffer says all financial advisors at Tennessee Bank and Trust must have Series 7 certification, which allows them to sell stocks, municipal bonds, options and mutual funds.

Amsouth’s Twitty says his bank pairs clients with brokers whose experiences are properly matched to their needs. “If it’s a young investor just starting an investment career, we can serve him through our Series 6 that can sell mutual funds—or for annuities consultants also are licensed for insurance,” Twitty says. “But if a client needs a Series 7 representative or a certified financial planner, we have that, too.”

Whether clients prefer working with large national companies or local firms, Spectrem’s Mahrdt says a bare majority of the affluent group surveyed—51%—prefers a large company. So the market appears wide open for any size bank.

Pinnacle Financial Partners in Nashville has positioned itself from its founding to take a significant share of the wealth management market. The firm’s specialty is moderately affluent and affluent individuals. It opened its doors in 2000 with wealth management at the core of its offerings, so it isn’t scrambling like many other banks to bring over its traditional banking clients.

“We concentrate on two things: a high level of personal service and an advisory practice,” says Pinnacle Chairman Rob McCabe. “We approach wealth management as a practice, not a department or a division. The focal point for delivering our wealth management practice is the financial advisor, who coordinates a team of specialists as necessary,” McCabe says. Pinnacle combines experts in each of its areas of focus—private banking, brokerage, asset management, life and health insurance, personal trust and financial planning—to analyze individual clients and provide a road map. “Our principal effort is to provide service and advice based on a client’s needs. To build, protect, and distribute wealth.” McCabe says Pinnacle, which actively seeks professionals and principals in businesses, especially targets individuals with at least $250,000 in investable assets.

Beyond simply trying to win over wealth management clients from other providers, many banks scout for affluent potential customers who don’t believe they’ve reached the right moment to enlist the help of a wealth manger. First Tennessee’s Aur says just having money to invest isn’t always the best gauge for when someone will seek wealth services.

“We don’t just look at assets. We look at people who are looking to retire, buy a house, have a new child or a child ready to go to college,” Aur says. “Life events really drive decisions about whether they should be in the wealth management practice.” It’s the job of banks that have relationships with those clients to know when they’re ready.