Investors opening arms to nouveau riche clients

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Private banking groups are playing their own version of "Who Wants To Be a Millionaire."

In the unprecedented economic boom, private bank and trust organizations are raking in assets from new millionaires -- the old-fashioned way -- with personal contacts and advertising.

Competition for the assets of the new millionaires has become fierce. From banks such as Wells Fargo Bank and Bank of America to Wall Street operations such as Merrill Lynch & Co. and J.P. Morgan, financial companies have added services and marketing muscle to attract the new millionaires.

SCHWAB JUMPS IN

Even discount broker Charles Schwab & Co. threw its hat into the ring with the acquisition last year of U.S. Trust Corp., which manages $86 billion in assets, 80% of which belong to wealthy individuals.

"The larger the target, the more people want to reach it," says Robert Duboff, director of national marketing for the North American operations of Ernst & Young, New York.

According to estimates from market researcher Spectrem Group, the number of U.S. households with more than $1 million in assets (beyond the value of their home) has doubled to 7.1 million from 3.45 million in 1994.

There's a lot of money at stake. According to a survey by Merrill Lynch and consultant Cap Gemini, millionaires around the world hold a total of $22.5 trillion in assets and the figure is bound to grow by 12% annually, to $44.9 trillion by 2004. In the U.S., they have $8.1 trillion in assets, expected to grow to $14.3 trillion by 2004.

MANAGING MONEY

Not only do those households have more money, they need more help managing it.

Spectrem's research found 60% of high-net-worth individuals feel there is too much financial information to sort through and 44% said they don't have the time to manage their own money. The Cap Gemini study suggested the investors want personalized products and attention from their financial managers.

The nature of the wealthy investor has changed, as well, note observers. Even after the stock market deflated many dot-com portfolios, the average millionaire is now more likely to be a young entrepreneur than a middle-aged heir.

One recent campaign from Phoenix Home Life Mutual Insurance Co. tweaked that old money/new money divide. The media plan also took a different tack. Aside from financial magazines, it included lifestyle books read by the well-to-do. And the media plan included co-sponsoring events with the magazines such as gallery receptions and jazz and classical music concerts.

Under the headline "Money. It's not what it used to be," print ads from Emmerling Post, New York, feature a study in contrasts. One two-page spread features a queen in Elizabethan regalia juxtaposed with a young woman in black leather and a tiara. "Some people still inherit wealth, the rest of us have no choice but to earn it," copy says. Another ad features a gray-haired gentleman and a young man with the line "New money is different than old money. For one thing, it's younger."

New millionaires are skeptical customers, says Charles Wendel, president of Financial Institutions Consulting.

"They're more cynical about trusting a bank or a brokerage firm without asking a lot of questions."

That means the best way to reach them is through referrals, with intense marketing efforts aimed at intermediaries such as accountants and lawyers, says Mr. Wendel. By advertising to the intermediaries, the private banks can leverage their relationships with the millionaires -- and their money.

Media fragmentation has made it possible to advertise to wealthy investors and intermediaries more efficiently, says Mr. Duboff. Thanks to the creation of specialized cable channels such as CNBC, MSNBC and Golf Network, financial magazines and Web sites, it is possible for financial companies to reach the wealthy where they live, he explains.

EFFICIENT ADVERTISING

"They've found out that it's not undignified to do it and it's more cost effective than ever before," he says.

Marketing strategies for the wealthy are still very traditional, full of social events and entertainment outings, says Bruce Brittain, president of Brittain Associates, a market researcher that focuses on financial services.

"A lot of this money management business, and why people stay with who they stay, is that they've developed a relationship with that person," he says. "Those junkets solidify those personal relationships . . . The message that they send is, `I'm not just a number to these guys.' "

For example, he notes one of the most successful of private banking operations is Northern Trust, which has a strategy of having "a real, flesh and blood presence" within a 20-minute drive of areas with high concentrations of high-net-worth individuals.

Northern Trust is not alone. In February, J.P. Morgan took Wall Street to Main Street when it announced it would open 18 private client centers in high-rent areas such as Palo Alto, Calif., Boca Raton, Fla. and Seattle. The centers, which were promoted with direct mailings, are staffed by financial advisers to guide their wealthy clients' investments and tax issues.

SEPARATE CHANNEL

Some companies have added online services for clients who want access to their accounts, but only as another channel to reach the client, not a substitute, Mr. Brittain cautions.

Merrill Lynch met with success with what it calls a "choice platform" for its U.S. Private Client Group, which offers consumers several product selections and online and offline channels. The company credits that platform, introduced in the second half of 1999, with speeding up its asset growtha record $36 billion in net new client assets in the fourth quarter alone.

When it launched an online brokerage in December, the company focused on reassuring its traditional brokerage customers with ads from J. Walter Thompson Co., New York. In the ads, clients nervously quizzed a financial adviser about the new online services. The nonplussed adviser smilingly explained everything -- the office, the coffee, even the company's bull logo -- would not go away.

"The traditional providers who have been slow to get into the Internet have seen asset losses. Not offering services such as access to account information can be a black eye . . . but replacing a traditional model with an Internet model is foolhardy," he says. "It's not a person who'll show up in your house or meet you at the club."

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