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Got $100,000? Have a Cookie: Banks Try Luring the Top 10%

Wine and cheese in the vault. After-hours appointments to suit busy schedules. And loads of marble and mahogany with not a teller in sight.

Directly across the street from a workaday Chase bank here is another Chase branch, one that’s out of reach for some customers even in this affluent Westchester town.

Glimmering appearances aside, it’s not the very rich that Chase is after, though. The real target is what bankers call the “mass affluent,” a much larger group that JPMorgan Chase and giant rivals like Citigroup, Bank of Americaand Wells Fargo all covet as they earn less from ordinary savers.

Whether it’s standalone buildings or separate lounges or even chocolate cookies, banks are more aggressively targeting people with assets in the hundreds of thousands of dollars, not just millions. The aim is to sell higher-margin products like mutual funds, stocks and retirement advice to depositors who have traditionally looked to their local bank only for checking and savings accounts.

This shift raises delicate issues at a time when existing savers are fed up with fees, and income inequality has become a hot-button issue. Despite the controversy, the appeal of the mass affluent segment is clear — they can generate nearly twice the revenue of ordinary customers.

Bank executives say they are committed to serving all their clients, but experts on the industry say new government restrictions that slashed once-lucrative fees for services like debit cards and overdraft protection will accelerate the trend of catering to the mass affluent.

“The traditional banking model is being fractured,” said Mark T. Williams, a former Federal Reserve bank examiner who now teaches courses on banking at Boston University. “Some lower-margin customers will have to go elsewhere to find the same level of service.”

Last year, JPMorgan opened 246 Chase Private Client locations, mostly in existing branches. This year, the bank will add 750 sites. And while the Larchmont branch is its first standalone center, roughly 20 more are planned.

The amenities are not the point, said Barry Sommers, chief of Chase Wealth Management, who attended the wine and cheese opening party in Larchmont in November. “It’s not just about nice carpets or cool mints,” Mr. Sommers said. “Customers want good products and good service in a private setting.”

Last year, Bank of America put 600 Financial Solutions advisers in branches, and plans to add 400 this year. Citigroup has dedicated Citigold lounges in flagship branches in Union Square in Manhattan and the Foggy Bottom neighborhood in Washington, and it plans to add Citigold advisers in roughly 50 branches this year, bringing the total to about 200.

Besides being more lucrative, accounts serving affluent clients also face less of a pinch under new government regulations than do those of ordinary savers.

According to a presentation to analysts by JPMorgan Chase late last month, the rules mean only a 5 percent reduction in revenue for the bank from households with $500,000 in assets or more compared with a 35 percent decline in what the bank earns from customers with balances of $5,000 or less.

Rather than the familiar split between the 99 percent and the 1 percent, in this case it is more like the much larger top 10 percent that’s being segmented away from everyone else, said Charles Wendel, a former McKinsey consultant who now heads his own firm, Financial Institutions Consulting, in New York.

“Big banks are going after millions of customers as opposed to a few hundred thousand,” he said.

“They’ve got to make money somewhere,” Mr. Wendel added. “If you walk into JPMorgan with $50,000, they’re not going to say get out, but you’re not going to get the level of service or product breadth that you might like. Banks cannot be all things to all people.”

Banks have long sought out the well-heeled, but in the past the posh treatment was more restricted to the wealthy, typically people with assets over $5 million. Just who qualifies as mass affluent varies by bank, with JPMorgan Chase’s minimum for Private Client accounts generally at $500,000, although executives say customers with less can also qualify. Citigold offers access to customers beginning at $50,000.

A study by Forrester Research estimates that 40 million people in America have assets of $100,000 to $1 million, not including the value of their home. One-third of all retail investment assets are held by the mass affluent, Forrester says, compared with 63 percent in the hands of people with more than $1 million, and just 4 percent belonging to those with less than $100,000.

Although bank officials say investment advisers typically don’t receive incentives to place clients with proprietary bank funds or other products that carry higher fees, Bill Doyle, an analyst with Forrester Research, said customers should always make sure they are getting the best possible deal. “House brands get pushed on these customers,” he said. “That’s where it pays for banks.”

Smaller banks are also focusing on more affluent customers. First Republic, which is based in San Francisco, does not set minimum balances, but instead is concentrating on the segment by building branches in the most upscale areas, like a new site on Sand Hill Road in Menlo Park, Calif., close to a bevy of venture capital firms. First Republic plans to open about eight branches this year, up from two last year, bringing its network to 70 locations.

First Republic’s offices, which feature freshly baked chocolate cookies and magnifying glasses to help customers read the fine print, have no tellers — only what executives call relationship managers in settings that resemble a living room more than a traditional bank, complete with overstuffed chairs. For some clients, the branches are beside the point.

“We’ll come to you,” said the bank’s president, Katherine August-deWilde. “If you want us to meet you in your home on a Sunday, we’ll do that.”

The payoff is striking — in a study of one West Coast institution by Pinnacle Financial Strategies, a consulting firm in Houston, the typical mass market household earned $630 for the bank compared with $1,193 for a household in the affluent segment.

JPMorgan Chase, which historically had not focused on this niche, is making an especially aggressive push and gaining market share, according to industry experts.

In the presentation to investors last month, executives highlighted the growth potential of the Chase Private Client group, noting that it added 22,000 customers last year who increased their deposits and investments with the bank by an average of $70,000 each. New clients, who had not invested with Chase previously, brought an average of $330,000.

Chase officials say the company is not focusing on mass affluent customers at the expense of the rest of their client base, noting that the bank plans to soon introduce a product aimed at low- to middle-income customers who need traditional services.

“We are working hard to improve service for all of our customers, and to create better products based on what they need,” said Kristin Lemkau, a spokeswoman for the bank.

Executives at other banks maintain that they, too, aren’t leaving any customers out in the cold.

“We don’t exclude anyone,” said Dean Athanasia, head of preferred and small business banking at Bank of America. “If you do more business with us, we reward you.”

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