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| Bankers' Agenda |
Profitable Parleys
Constance Gustke
12/01/2003
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Looking at banking relationships holistically can highlight opportunities for
savings. According to the research by Spectrem Group, a Chicago-based consulting firm, $5 million-plus clients have an average of 17 investment accounts. These represent ripe opportunities for consolidation. Brad Turner, a senior managing director at McDonald Financial Group in Cleveland, worked with one client and an estate planner to condense 25 accounts into three. "He’s now saving tens of thousands of dollars in fees," Turner says. He also advises clients to negotiate more sharply by approaching a bank as a multigenerational family, a tactic that lowers fees collectively because there are more assets on hand.
| "You get more bargaining power the more assets you invest." |
Consolidating accounts builds bargaining clout by increasing the assets under management. In fact, for clients with a net worth of more than $15 million, private bankers usually abandon straightforward fee schedules and negotiate fees as a matter of course—something clients might not realize if they leave negotiations to third parties. In fact, many of these clients hire experts to handle the details. For example, Cooper has her accountants negotiate fees. "They’ll ask hard questions such as, ‘Is there a pre-payment penalty [on loans]?’," she says. "Sometimes there are hidden fees that you don’t understand until they hit you." Others use a lawyer or family CFO, a professional adviser who knows how to price products and services.
There are, of course, limits. Mark Feldman, CEO of Inlign Wealth Management in Phoenix, negotiates fees for his wealthy clients. "It’s important to know where [clients] can and can’t maneuver. You can’t go lower then 20 basis points [a basis point is one-hundredth of a percentage point] for one service," he says, because banks are unable to price services below their cost of capital. According to the PricewaterhouseCoopers survey, the average size of a fee discount ranges from 10 percent to 20 percent.
Cooper and others readily admit that fees should never be the predominant consideration in evaluating a private bank. Relationships in which private bankers are responsive and caring are worth keeping. "When you find someone who is watching out for you, it’s very important," she says. Pricewaterhouse
Coopers’ survey shows that most organizations score poorly on understanding clients’ needs and objectives.
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