During one of my first days on the job 15 years ago at a large New Orleans bank, I learned a valuable lesson about images and stereotypes – a lesson I’ve never forgotten.
While waiting for a meeting with the CEO outside of his office, I noticed a man in worn denim overalls and work boots who entered via the mezzanine elevator. As he smiled and tipped his cap at me, I couldn’t help but think to myself that the man must be lost and asking for directions in the oddest of places.
Upon seeing him, the CEO’s secretary jumped from her seat, gave the visitor a warm welcome and introduced me to him. After exchanging pleasantries, the secretary quickly escorted the man into the CEO’s office, closed the door and returned to her desk.
When I commented that the man’s name sounded familiar, she told me it should. Indeed, I learned that the self-made businessman was one of the wealthiest men in Louisiana.
That experience underscores a point that many bankers forget, namely that the least likely candidates sometimes possess the greatest wealth.
While courting doctors, lawyers, and other high-profile executives, it is often easy to neglect people who don’t fit external stereotypes of affluence at first glance. Depending on whose research you believe, studies generally state that the millionaire population is growing at three times the rate of the general population, thanks to two-income households, inheritances, successful entrepreneurial efforts, a long bull market and other factors.
In their recent bestseller, “The Millionaire Next Door”, authors Thomas Stanley and William Danko identify a burgeoning class of millionaires that is nothing if not ordinary. Often cost-conscious and modest in their means of lifestyle, this new breed of millionaire can be difficult to identify. Subsequently, banks that are rigid in their definitions of “upscale” or “emerging affluent” prospects may lose out in the process. Indeed, the neighbors next door with the 10-year-old minivan may pack a mean net worth.
Banks may be challenged on several fronts in capturing this audience.
Experts say industry consolidation is one factor that has put banks under pressure. For example, when banks merge, breakdowns can occur in customer service in trust departments. Nationally, there are several instances where merged banks have taken their trust business out of the local area and have consolidated it into a major – and often distant – city. Pricey merger deals can also lead to significant headcount reductions which impede service quality.
Quality trust personnel or asset managers whose jobs aren’t in peril may chafe at merged-bank management philosophies and leave for greener pastures.
Beyond internal obstacles, there’s also the variety of nonbank competitors to contend with.
Nowadays, everyone from brokers, insurance companies, and mutual fund companies to CPAs and lawyers in some markets are chasing a piece of the high-net-worth action. Undeniably, competition has arrived and it has no intention of leaving. Some banks are fighting back by reorganizing internally or by purchasing asset management and/or brokerage firms. Others are opting for strategic alliances.
But perhaps most telling are the comments of one self-made millionaire who left his bank in the Northeast for a competing asset management firm.
In a recent magazine interview, the millionaire posed a chilling question: “How can a $70,000 vice president in a bank trust department really relate to me, with $6 million, when he’s having a hard time making his monthly mortgage payments?”
While finding “The Millionaire Next Door” is a tough challenge for any financial provider, it’s obvious from the above remarks that keeping him or her may prove to be even more difficult for some banks.
Tupelo-based journalist Karen Kahler Holliday writes a monthly banking column for the Mississippi Business Journal. She is senior contributing editor for U.S. Banker magazine.