Boston Private Bank & Trust Chief Executive Officer Timothy L. Vaill believes establishing intimate relationships with clients is one way to attract its target audience.
In order to attract affluent clients – those with $1 million or more of investable assets – Boston Private Bank & Trust uses the same strategy as many other banks: high levels of customer service. But how that service manifests to clients is vastly different than other banks.
It’s not standing in lines; just about 100 percent of our employees are client-service people who feel a responsibility to deal with client problems. You don’t get shuffled off to some back room to be handled, said Timothy L. Vaill, chief executive officer of the $1 billion-asset firm, which has about 15,000 clients.
In fact, if they wish, clients of the firm’s wealth management division may contact most investment managers at any time of the day or night.
While it isn’t really that unusual for a firm’s wealthiest clients to have that kind of access, what is unusual is that unlike other multi-generational banks, Boston Private is a fairly new kid on the block that is doing an excellent job of attracting the exploding population of newly affluent customers, say analysts.
Needham-based TowerGroup estimates that over 7 million people in the United States have over $1 million in investable assets. The number is growing at a compound annual growth rate of 13 percent, said Dennis J. Ceru, director of retail brokerage and investing at TowerGroup. By 2005, the company is projecting, there will be 13.2 million people with more than $1 million to invest. More importantly, we’re showing the funds available to invest in the U.S. was $28.2 trillion with a growth rate of 14 percent, projecting out to $55 trillion in 2005, he said.
That’s why this is such a hot marketplace. Not only is there a lot of people with money, but there’s a lot of money out there, said Ceru.
Boston Private, which opened its doors in 1987, occupies the grandly designed space of Ten Post Office Square. Upon entering, the visitor is greeted with cathedral ceilings, marble, brass chandeliers, artwork and Ming vases that are placed along recesses in the upstairs walls.
Boston Private has locations in Boston, Wellesley Hills, Kendall Square and the Back Bay. They all look the same and have the same feeling of graciousness, comfort and welcome. The clients comment on this all the time, that they feel they’re coming into someone’s home. They see the privacy that’s available. They see that the employees are treated well and graciously, and that makes them feel good, he said.
The fact that Vaill describes the Boston office in terms of a home when in fact it seems more like a grand manor hints at the fact that the sweet spot of targeted audience is those with $5 million to $25 million in investable assets.
So how does a bank attract such an audience? Service, service, service, said Ceru. It is all about that personal touch; it’s about creating that whether it is actual or perceived …You have to cut through that ridiculous scenario where you dial up a call center and you enter an account number, you go through seven series of prompts only to have someone ask you what’s your account number. The private banking mentality doesn’t permit that, he said.
Keeping the clients happy so that they are likely to stay with the bank through their financial life cycle – the time in their mid-20s when they start accumulating wealth until retirement age – is the prime focus of the bank. Much of Vaill’s resources are poured into investing in his employees who get to know clients very well. One of the perks of being a client at Boston Private is that the bank will occasionally invite select groups to the symphony, special lectures or other events in which it thinks a client may be interested. According to Vaill, it has nothing to do with net worth and everything to do with relationship management. If an employee knows a certain client would love to attend an antiques show, the invitation will be extended.
What people are paying for here is the relationship, the touch, said Vaill. That extends to making calls even for reassurance or to share news. If the Red Sox win the World Series, for example, Vaill said they might call clients to share the news.
The whole company here is dedicated to wealth management. We’re not diverted by making loans to South America or picking up a credit card receivables portfolio that’s gone awry. My attention as a CEO all day, every day, is to focus on our clients for wealth management services, said Vaill.
‘Ready Access’
Recently the bank was able to attract a wealthy real estate developer in the Boston area who moved all his funds to the bank. Out of appreciation, Vaill said he hosted a catered dinner in the bank’s offices for the man, his family, children and even his mother.
I don’t know if a lot of that is done around town, but we have several rooms we can do that. It’s a high-touch entertainment factor, he said.
The special treatment extends to inviting certain clients in on a venture capital or private equity fund if Boston Private thinks it may appeal to them.
While Vaill said his clients are appreciative of the bank’s efforts and aren’t all that demanding, Ceru said the newly affluent – those who made their money in the last 25 to 30 years, as opposed to inheriting it from the last century – have grown accustomed to personalized service.
Many of the newly affluent made their money in technology, so they’re used to it; they like it, they enjoyed it, they see the benefits of it. So they, more than almost any other segment of the population, will understand the importance of ready access to information, to money, to products and services, and they will be more demanding of that. They have defined this broadening of the personal touch down from what was previously only available to the very, very rich to the affluent levels, said Ceru.
But while establishing intimate relationships with clients is one way to draw its target audience, Ceru said it’s very easy to suffer a quick loss of clients as well.
Boston Private has enjoyed 35 straight quarters of increased earnings, said Vaill. Growth has been in excess of 20 percent annually for the last six years. Although Boston Private has plans to open three to five more offices, it will never be a 30-branch network, he said.
It’s difficult to grow substantially and still maintain the high-touch relationship with clients, said Ceru. All institutions that cater to the wealthy face this issue, he noted. Add to that the cost of the relationship bankers. And there’s also a risk to the institution because the banker has a relationship with the client. If they are lured or wooed away by another institution, you run the risk of losing the client as well, Ceru said.
Several employees know each client very well, ensuring that the client will never have to deal with someone he doesn’t know at Boston Private, said Vaill.
But while Boston Private caters to the wealthy, Vaill said he hasn’t heard of any incredibly unusual or out-of-bounds requests. In the normal course of business, bankers regularly meet with clients at their homes, offices and even cars so that the customer will not be inconvenienced. The bank provides investment management, financial planning and private banking, using both sides of a bank’s balance sheet to allow customers to either borrow money when they need to or manage it short-term just as a deposit vehicle.
The recent sluggish economy and what Ceru described as the dot-bombs of last year haven’t had a detrimental effect on the private banking world, either. Vaill said he has seen some movement out of the markets into more liquid funds, but it simply gets transferred to another part of the Boston Private company. The most dramatic shift he saw was on Sept. 12, when a customer came in and requested to convert his money into gold bullion. But by and large, people who were once confident in their own investment skills are seeking a trusted advisor, said Vaill. Which is exactly what Boston Private purports to be.
After Sept. 11, people were nervous, he said. They are again, looking to solidify their relationships. One of the things we did after that was contact all of our clients [to say], ‘We’re here; we don’t have any particular recommendations today, except stay put and we’re watching it very closely if you want to come and talk.’
Being there for clients, even if they just want to talk about world events, is something that Boston Private is banking on to maintain a long, wealthy relationship with its clients.
