A version of this article first appeared in the April BAI Executive Report: Growing quality deposits and customer acquisition. In the report, you’ll find content tackling deposit behavior trends, tech-enabled deposit growth strategies, liquidity and funding flexibility, plus more.
Deposit acquisition and retention are two sides of the same coin. Nowhere is that more evident than as Baby Boomers hand some $80 trillion to the younger generations, a shift so consequential it’s earned its own moniker, the “Great Wealth Transfer” or GWT.
Holdings will change hands, but if banks and credit unions act smartly, it doesn’t necessarily mean dollars will flow out of financial institutions.
Still, the institutions that “are already taking strategic action around the wealth transfer” are best positioned to benefit, says Preetha Pulusani, CEO of DeepTarget, a digital marketing firm.
Inaction can have consequences.
Recent “EY research shows that up to 30% of inheritors do not continue with their existing financial institution… representing a significant risk for banks and credit unions,” adds Urs Palmieri, EY’s wealth and asset management consulting leader.
Connecting with Boomers’ adult children, offering investment products, providing estate planning guidance and having an inviting digital presence for inheritors are among the steps institutions are taking to retain and grow deposits through the wealth transfer phenomenon, banking industry observers stress.
Ongoing effort
By most accounts, we’re still in the earliest years of the transfer. The GWT is expected to play out over two decades. With such a slow shift, institutions must be strategic in how they prioritize GWT among the many pressing deposit acquisition concerns.
In reality, attention to GWT goes hand-in-hand with providing continuous solid customer service, say bank and credit union wealth advisors. “We look at it as a process, not an event,” says Erik Berge, senior vice president and senior wealth strategist, at Citizens Private Bank, a division of the $217.5 billion Citizens Bank.
Often, clients have inheritance-related questions, says Berge, an attorney, who, along with other Citizens advisors, will review estate planning documents. If clients’ adult children can be brought in on those conversations, it ups the odds of future loyalty. “Every family is different; some generations don’t want to share [inheritance details] with the kids. But if we can start those relationships early on, we will,” Berge shares.
Indeed, Boomer clients are often less concerned with strictly personal financial matters and instead worry about the impact of an inheritance on heirs, says Felix Meneses, SVP, trusts and estate manager for $50 billion Cadence Bank.
Cadence developed a “Wealth Empowerment Program” offering three levels of online instructions (with stages defined by age, starting at 15 and going to age 40) that teach financial basics and set values-related goals, such as charitable giving. Not all clients are interested in the program, but it’s a valuable offering for many, says Meneses.
In addition to connecting through estate issues, there are other opportunities to bring in the next generation to the bank, says Michael Wilson, head of First-Citizens Wealth at $224 billion First-Citizens Bank & Trust. For one, he’s seen “a shift toward [Boomers] wanting to give while they’re living,” with attendant opportunities to involve the next generation through establishing custodial accounts or gifting down payments for homes.
Main Street opportunity?
Wealth divisions, and their high-net-worth clients, have inherent opportunities to discuss inheritance concerns. Frequently, institutions offer non-bank investments to clients of their wealth division, which often require a certain threshold in investable assets. However, select investment offerings can be made available to a wider client base, says Christopher Cassidy, SVP at LPL Financial, which provides middle- and back-office support to the wealth divisions of partnering institutions.
Many banks and credit unions “employ a client or member segmentation strategy,” and then tailoring marketing and service to each. So, the mass affluent would hold up to $2 million, the mid-tier segment up to $10 million and high-net-worth above that, he explains.
Still, many banks and credit unions, especially smaller operations, lack wealth divisions and the attendant investment offerings in equities, bonds and funds. According to the 2024 CSBS annual survey, the share of community banks offering wealth management services rose to 36%, up from 33% in 2022. And, the Kehrer Group reports that 1,089 out of 4,645 credit unions offered investment services in 2023 compared to 1,036 out of 5,281 five years earlier.
It’s not as if community banks don’t have high-net-worth clients, stresses Lynn David, CEO of Community Bank Consulting Services. “I tell clients, ‘Give me a list of your 250 largest non-business depositors’ and then I ask ‘Do you know who James Smith is? You should because he has $650,000 on deposit with you.’”
When high-deposit customers pass away, their heirs more times than not will ask for a check to close out the account, taking the funds elsewhere, says David. To avoid this action before a conversation can ever take place, he strongly advocates community institutions to partner with a third-party investment provider and build earlier relationships with heirs.
Investment services are also key for retaining current Boomer customers since many have sizable work-linked 401(k) accounts that they will want to convert to an IRA, and will go elsewhere if the option isn’t available, says Mike Sha, CEO at SigFig, which partners with traditional financial institutions to offer digital investment services and online advice.
Some institutions offer non-bank investments only to clients of their wealth division, with entry defined by a set threshold of investable assets. But investment offerings can also be more widely available if that’s the route an institution chooses, says LPL’s Cassidy.
Key touchpoints matter
At the very least, institutions without investment offerings should educate tellers, contact center agents and other staff to recognize opportunities to strengthen connections with depositors, says Community Bank Consulting’s David. “When someone says they have a new grandbaby, that’s the time to refer them to a representative about custodial accounts, for instance.”
And, institutions can offer workshops on inheritance planning using local experts, suggests DeepTarget’s Pulusani. Offering virtual meetings at which older clients can discuss matters with their adult children on financial plans for health emergencies is another way institutions can build bridges to younger generations, adds David Benskin, CEO at WealthAccess.
Digitally integrating banking and wealth
At the $5 billion Enterprise Bank, wealth advisors take a “holistic” approach in helping clients reach their financial goals, explains Stephen Irish, COO of the bank and senior managing director for Enterprise Wealth Management. That means advisors in the wealth area also consider clients’ mortgage loans, credit cards, checking and other banking deposits, for a global view of all elements impacting the clients’ goals.
Enterprise offers an online portal that displays wealth clients’ banking relationships (even those with other financial institutions), as well as their investment accounts, Irish explains.
Wilson of First Citizens concurs that “seeing all information on a single piece of glass allows [wealth clients] to better work with their advisor.”
Moreover, studies, like a 2024 report from McKinsey, show that digital integration is a key banking and wealth management feature that the inheriting younger adults place tremendous value in — and that will help secure loyalty.
Marilyn Kennedy Melia is a contributor to BAI.
