Bank Brokerages Counting on the Relationship Factor
With interest in do-it-yourself trading declining, the value of a broad, advice-based relationship is increasing, a trend executives at bank-owned brokerages who participated in a recent American Banker roundtable said bodes well for their competitive position. Another area of opportunity cited by most participants was account aggregation.
The participants were Donald E. Froude, president and chief executive officer of FleetBoston Financial Corp.'s Quick & Reilly; Kelley A. Doherty, director of e-commerce for Bank of America Corp.'s asset management group; Michael J. Leone, executive vice president of People's Bank of Bridgeport, Conn.; Matt Stewart, managing director and vice president of marketing at Royal Bank of Canada Investments; and Daniel Burke, senior analyst at Gomez Advisors.
Who do you consider to be your competitors -- other banks, other bank-owned brokerages, the online brokerages like E-Trade and Ameritrade, or traditional brokers?
KELLEY A. DOHERTY: We see a series of the traditional competitors that one would expect: the other banks, the bank-owned brokerages, and the major-name brokerages that are both online and offline. But we're also starting to recognize that a series of nontraditional competitors are offering content or other services like aggregation, research, and planning tools.
MICHAEL J. LEONE: We don't see the online-only brokerages as competition to us. Those are the folks who are speaking bargains. We deal in relationships, not transactions. We don't go after the same folks that E-Trade goes after. But Schwab is certainly a competitor of ours, as are all the traditional brokerages and the banks that are getting into the brokerage business.
DONALD E. FROUDE: We take that posture as well. The business is really a relationship business, and the transactional side of it is really a byproduct of the relationship.
I think that the last 12 months have really emphasized that. There has to be a human element to this in order for it to be successful in the long term; you need someone who really understands what this is all about.
The competition, from Quick & Reilly's perspective, is competition for the assets, not for those channels or the method by which those assets are moved around.
LEONE: When you look at the size of the competing market, the traditional brokerages have to be the most significant competitor, because they've got the big market share.
So when you go after competitors, if you're really trying to steal market share you can really only steal it from the people who have market share, and banks don't have much market share yet.
Does it make more sense to try to get customers from your bank-customer base as opposed to going after customers at traditional brokerages, where all the customers are?
LEONE: Our best strategy is to leverage the banking relationships that we have with our customers and try to get them to bring their investment assets to us as well.
That's really what we have going for us and how we intend to compete.
DOHERTY: Absolutely. At Bank of America we have 30 million households. These customers have an established relationship with us. They understand and trust Bank of America with some portion of their financial life.
FROUDE: That's exactly what our strategy is, too -- to gain the lion's share of the customer's investment assets, not just the cash deposits. That's really where the big opportunity is for the bank -- to try to get more and more products and services in and deepen the relationship and intensify the cross-selling. That's not going to happen just from deposit products.
Do you get frustrated when you see companies like E-Trade spending $150 million or $50 million on a Super Bowl ad, or is your business so different from that that it doesn't matter?
LEONE: I can remember, a couple of years ago in a strategy meeting, one of my colleagues saying, "We could have been an E-Trade. …