Magazine article American Banker

NetBank Plans Wealth Management Offering

Magazine article American Banker

NetBank Plans Wealth Management Offering

Article excerpt

NetBank Inc. of Atlanta, which has been riding the mortgage refinancing wave, said Wednesday that -- planning for the inevitable bust -- it will introduce wealth management services in the fall.

The Internet company is one of the few online-only banks to have achieved profitability, but it confirmed in its second-quarter earnings report that its core business, the retail bank, has been operating at a loss.

It cushioned itself last year by buying a mortgage specialist, but it remains to be seen whether wealth management, which historically has been a high-touch, relationship-oriented business, can flourish through remote channels.

NetBank clearly thinks it can. "It's gonna be neat," Douglas K. Freeman, its chairman and chief executive officer, said in a telephone interview.

Though he would not give many details, Mr. Freeman said NetBank will attempt to capture a base of customers who are looking to "get more involved" in their savings and investments, probably the same type of clients who choose self-service Internet banking.

"Our system can project savings and what needs to be put away, whether planning for education for your children, retirement, insurance," he said. "This can all be done accurately and efficiently on the Internet. It will be a great value-added" service.

In another diversification effort, NetBank started offering two new services last quarter. Auto lending, made available in April through its dealer financial services division, had generated $5.4 million of originations by June 30. Small-business banking, made available last month, has collected $4.2 million of deposits.

Others have tried online wealth management -- some with a degree of success., an Internet bank geared toward women, also offers brokerage accounts and lots of advice., which provides services to high-net-worth customers through the Web as well as a few regional offices, was bought last year by the wealth management group of Harris Bank, a Chicago subsidiary of Bank of Montreal.

Isabella Fonseca, an analyst at Celent Communications LLC of Boston who has studied online wealth management, said a lot of financial services companies have not gotten it right.

"Pure online advice tools, which market directly to the end-clients, have failed miserably," she wrote in an article published May 13 in Bank Systems & Technology. "Those firms that are willing to provide the right mixture of online and offline services based on adviser-centric relationships will win the hearts and wallets of this emerging wealthy customer segment and dominate the wealth management space for years to come," she predicted.

Jennifer Demba, a vice president and research analyst at SunTrust Robinson Humphrey's Atlanta office, was also skeptical. …

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