Boston Private Bank opened its ninth office in Beverly on May 21. Chief Executive Officer Mark Thompson said the bank, which targets wealthy clients, is poised for further expansion.
What’s a special banking service, and what is everyday?
The answer to those questions is at the heart of what private banking is all about, says Brian Gregory, who runs Boston Private Bank’s newest location in North Beverly.
“We do every day what the other banks do special, that they have to make an extra effort to do,” explained Gregory, a 25-year Boston Safe Deposit & Trust and Mellon Bank industry veteran hired this year to run the $2.2 billion-asset Boston Private Bank’s ninth office in as many years.
The Beverly branch, which opened May 21, is Boston Private’s first on the North Shore. Those who stop by call it “almost a bank within a bank,” Gregory said. “We can provide all [financial management] services necessary here, under one roof, for a client who walks in the front door.”
Jim Jones, president of First Wellesley Consulting Group, a Wellesley-based firm that advises banks in Massachusetts and nationally on strategy, said the private banking model is similar to that of a five-star hotel.
“They know your preferences and provide them without even being asked,” he said.
It’s definitely a niche market, Jones added, similar to other targeted strategies such as Internet banking. The idea is that the focused services will resonate with a specific, narrow market, attract loyal customers and be profitable.
Twenty-year-old Boston Private, one of 13 entities owned by Boston Private Financial Holdings that employ similar strategies in different regions of the country, is one of just a handful of Massachusetts banks that specifically target wealthier clients.
A number of banks have departments aimed at them – among them national giant Bank of America, which located its wealth-management headquarters in Boston just a couple of years ago, according to Massachusetts Bankers Association Senior Vice President David Floreen.
There’s plenty of wealth to manage in Boston, he noted, adding that as the birthplace of a number of large mutual funds and home to State Street Bank, the city is one of the largest centers for financial investment activity in the world.
There’s also plenty of talent to choose from in a city of professionals experienced in handling wealth, he added.
Floreen said Boston Private is one of just four Massachusetts banks among several started in the mid- to late-1980s that survived the startup and flourished. All four, he said, had unique business models. Boston-based Wainwright Bank, which also had its roots in that time period, started with a wealth-management model but has since changed its mission to community development lending.
Wainwright President and Chief Executive Officer Jan Miller said a new board member who was involved in AIDS fundraising work, the poor economy of early 1990s and the bank’s acquisition of branch locations in some areas where a focus on wealth-management wouldn’t have been practical were behind the change.
Boston Private opened its headquarters in Boston’s Post Office Square in 1987. The branch expansions commenced in 1998.
Boston Private Bank’s model combines commercial banking with wealth management, investment management and trusts, Floreen said.
Bank executives say the commercially chartered institution targets clients who are involved in privately held businesses and have between $3.5 million and $10 million to invest.
The minimum deposit to access Boston Private’s premium investment-management services is $1 million, although basic deposit and checking accounts, and loan services, are open to all.
Chief Executive Officer Mark Thompson said clients are “wealth creators” such as lawyers and venture capitalists, and said the bank wants to help them during all stages of their financial lives.
“We can lend money to businesses and individuals who are [starting businesses],” he said. “That creates opportunities for our investment-management and trust group.”
The bank also offers commercial banking services and residential loans.
Seeking Advantage
What Boston Private can offer that a larger institution with a wealth-management division can’t is faster access to senior decision-makers, Thompson said. According to Jones, what Boston Private offers that a financial or investment manager doesn’t – in a field where the lines admittedly are blurred – is access to retail and commercial banking services in the same place where clients get personal financial advice.
Floreen said banks have an additional advantage over some financial advisors because they must meet rigorous regulatory standards that ensure depositors’ money is safe.
Still, the sheer number of advice-givers who want to serve the wealthy is daunting. The Spectrem Group, a Chicago consulting firm specializing in information about wealth and retirement, found that people with more than $3 million to invest have a wide array of options from which to choose. Just 1 percent to 2 percent of those surveyed for the firm’s 2006 Affluent Market Insight Report named a “private banker” as their primary financial advisor; most put a full-service broker (42 percent) or investment manager (13 percent) in that role.
But Thompson said he sees opportunity in those numbers.
“It [wealth-management] is very competitive,” he acknowledged. “This means we have to be that much more competitive.”
Recent studies show Boston Private is positioned to succeed, he said.
For example, one survey from VIP Forum, a Washington, D.C.-based membership organization of wealth-management executives, showed that 62 percent of households with $10 million or more to invest own privately held businesses. Such households form Boston Private’s current client base.
Significantly, another report from the Boston Foundation showed that between 2001 and 2055, $1.25 trillion will change hands between the generations in Boston-area households, Thompson said.
“There will be a place for private banks that have the expertise to meet that need,” he predicted.
The key challenge to a private bank seeking to trump other financial-management options for wealthy clients is to have staff members who are well known locally and have extensive experience in the business, Jones said, because such employees are more likely to know where to find potential new clients.
Gregory, who heads the new Beverly office, fits that model. He worked for 25 years as a banker and investment advisor for Boston Safe Deposit & Trust, and later at Mellon Bank, until Boston Private hired him this year.
“My clients used to revel in the fact that I was the only one in financial services they knew that had the same phone number for 25 years,” he joked.
He said he’s in the business because he loves it and he cares about his clients, and joined Boston Private because the job allows him to leverage his bank and investment “skill sets” in one place.
Thompson, a Wainwright Bank founding officer who joined Boston Private in 1994, said the bank seeks out people like Gregory – “well-seasoned professionals that know all the industries.”
He said the North Shore office meets the one of the bank’s original goals, which was to have locations north, south and west of its downtown Boston headquarters.
It’s now looking at other ways to expand.
“We are considering how technology can further help us,” he said, and the bank also is going to set its sights on opening more new locations, and perhaps acquiring other banks.
