- Most FIs have focused on pricing alone to encourage Wealth clients to hold more deposits in savings accounts, but more creative options are available.
- These options include offering a savings-linked checking account paying nominal interest rate and refunding fees for wire transfers and other transactions.
- And Wealth clients should be able to view their entire relationship with an institution in a single place – this is especially important to younger digital natives.
After 18 months of cash runoff in the Wealth deposit space, we turned a corner in the second half of 2023 – since bottoming out last May, the industry has experienced net deposit balance growth of more than 11% (Figure 1). This bounce-back during the last three quarters has been led by CDs (+55%), while savings gains are in line with overall growth and checking has lagged (+3%).
Figure 1: Wealth Deposits Balance Growth By Product, Q/Q
Wealth deposits are up more than 11% overall since the middle
of 2023, with growth in CDs (+55%) leading the way and
checking accounts (+3%) lagging the field.
Despite Wealth deposits currently hovering at pre-COVID levels, many institutions are wondering how to recapture some of that previous runoff and/or deepen new primary deposit relationships with existing Wealth clients to grow their deposits portfolio.
While there’s no one-size-fits-all answer for how to accomplish this, most firms have focused on pricing alone to encourage clients to hold their everyday money in a savings/money market savings account. As a singular focus, this approach falls short. To grow their cash portfolios, banks and wealth-management firms need a value prop that resonates with Wealth clients and encourages advisor engagement.
Gone are the days when you could take a consumer checking or savings product, slap a “wealth” or “private banking” label on it, add a rate tier for $1 million+ balances, and then sit back and wait for funding by high-net-worth clients. Banks and fintechs have focused on delighting the Consumer segment with abundant product options and flashy digital functionality, while Wealth clients are expected to accept products that don’t address their complex needs and often operate separately from the apps at the same institution where their investments are held.
So, what can be done to appeal to savvy Boomers and Gen-Xers that also resonates with Millennials and Gen-Zers who are benefiting (or will soon) from the greatest wealth transfer in history?
Let’s start with the actual product suite. Wealth clients carry higher balances in their checking accounts, but the typical array of incentives tied to debit-card use aren’t really on point for them – they tend to spend using credit cards offering hefty rewards. More relevant for Wealth clients might be a checking account that pays a nominal interest rate and that can be linked to savings and cash management accounts. You could also refund fees (versus simply waiving them) for wire transfers, cashier’s checks and foreign transactions. And if you’re not considering the client’s total AUM when approving overdraft transactions, you’re likely missing an opportunity to show clients you know and appreciate the value of their entire relationship.
Technology budgets are tight and timelines long when it comes to building a new product suite, but you can likely improve your Wealth client experience via relationship-focused adjustments to your digital capabilities.
Clients should, at a minimum, be able to view the entirety of their relationship with you in one place – disjointed apps and platforms are especially unacceptable to younger clients who expect seamless digital experiences. In the same vein, moving money across deposits and investments within the same institution shouldn’t have the same look and feel of an interbank funds transfer, nor should it take as long. Clients also expect that their overall relationship should warrant higher withdrawal and transaction limits in digital channels, and with Reg D and transaction limits on savings accounts having gone by the wayside in 2020, clients appreciate the ability to transact from savings without penalty.
The examples above are not intended to be all-inclusive; rather, they highlight just a few gaps across the industry. As long as rates stay high and Wealth clients have access to other high-yield, cash-like instruments, it’s unlikely that institutions will claw back balances that recently walked out the door. The focus now should be on winning new primary banking relationships with the next generation of Wealth clients – to do that, it will be imperative that Wealth banking leaders take inspiration from the high customer experience expectations set by fintechs and non-bank tech companies alike, and then take action to be more competitive.
