M&A and Advisor Recruitment Are Top-of-Mind for Private Banks

September 20, 2022 — Boston

Banks employ inorganic growth strategies amid heightened competition in wealth space

Private bank and bank trust executives are actively implementing inorganic growth strategies, namely mergers and acquisitions (M&A) and advisor recruitment, to achieve scale in an increasingly competitive wealth management environment. Firms that can offer a wide range of services (i.e., planning, trust, banking) and a strong advisor platform will be able to compete more efficiently to serve their clients’ needs, according to The Cerulli Report—U.S. Private Banks & Trust Companies 2022.

Cerulli’s research finds more than two-thirds (68%) of private bank and bank trust executives are considering M&A opportunities to grow and adapt their businesses. Among these firms, 62% are considering acquiring and integrating a smaller firm from their channel, while 38% are considering merging with a peer of equivalent size.

M&A activity is being driven by the desire to achieve greater economies of scale, according to 75% of bank executives. “Adding more scale not only allows firms to reduce redundancies and improve margins, but also increases the capability of a firm to deepen existing relationships with clients,” says Chayce Horton, research analyst. “As technology and service demands grow among consumers, more scaled and integrated firms will be able to provide seamless, comprehensive, and cost-competitive financial services experiences for their clients.”

Bank trust executives are also working to expand advisor headcount—53% indicate they are actively recruiting advisors and teams from other firms. Historically, the bank channel has not been a significant beneficiary of advisor migration. More than two-thirds (68%) of advisors in the bank and trust company channel have only ever worked within that channel—only 17% previously worked at a wirehouse while just 7% have experience as a hybrid or independent registered investment advisor (RIA).

However, as banks look to create scaled and integrated organizations, one of the major goals is to be viewed as a competitive platform for advisors in motion. “Firms that have adequate operational scale with a wide breadth of services and a strong advisor platform can hope to be attractive landing spots for advisors who are dissatisfied with restrictions of very large institutions but do not want to bear the burdens of a fully independent operating model,” says Horton. “Reaching a ‘Goldilocks’ zone where effective integration is attainable, but scale is not cumbersome, is a balance that most firms in the bank and trust space can strike,” he concludes.

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