After two years of struggles with its wealth management business, Cardinal Bank announced this month that it is scrapping its trust business and consolidating the other parts of its wealth management services.
The idea, the bank says, is to move away from institutional clients and focus instead on providing specific services to individuals and business owners.
“We were dabbling, and you can’t really dabble in anything — it just doesn’t work,” said Bernard Clineburg, chairman and chief executive of the Tysons Corner-based bank. “We’re pretty much ’fessing up and saying, ‘Hey look, we know [wealth management] is going to be a big part of our business going forward. How are we going to make it streamlined and simplified?’”
Analysts say the decision reflects a broader change in the industry as wealth management firms — many of which have expanded rapidly in the Washington area in recent years — hone in on particular industries and areas of expertise as a way to stand out from the pack.
“It’s like a lot of other areas of banking — if everybody tries to hop on the bandwagon at the same time, not everyone is going to make money at it,” said Bert Ely, an Alexandria-based banking expert. “It’s something that takes some degree of specialization — you’ve got to get to a critical mass in order for it to be to attractive to customers.”
Convergent Wealth Advisors, for example, has begun recruiting managers with very specific skills, said Douglas Wolford, president of the Potomac-based firm.
One recent hire focuses exclusively on long-term exit strategies for entrepreneurs, while others deal with specific aspects of government contracting and defense.
“It seems like the wealth management industry is becoming ever more specialized,” Wolford said. “We’re looking to add [employees] in specific fields because that’s really where much of the demand is springing up.”
At Cardinal Bank, Chief Risk Officer Chris Bergstrom said he hopes increased specialization will help the company’s wealth management division turn a profit. Last year, the division posted $19,000 in losses. The year before, it lost $29,000.
“It just wasn’t something that was going to work for us in the long-run,” he said. “Our real focus is making money in [the wealth management] group, and we think this change will help us do that.”