Fifth Third To Replicate Local Private Group
GRAND RAPIDS — A very large fortune may repose in assorted securities portfolios, angel investments, businesses, overseas investments, real estate, accounts, collections and homes, not to mention philanthropic trusts and trusts for children and grandchildren.
And one of the problems of possessing so much wealth is that even the most brilliant entrepreneur or capitalist hasn’t the time to keep track of and manage it all . . . not and have a life, too.
The very wealthy must, for instance, deal with the fact that a good many people want nothing more than to separate them from their wealth . . . and standing tirelessly at the head of that line is the all-time heavyweight, the U.S. Internal Revenue Service.
Thus, unless the very, very wealthy want to wind up like Howard Hughes, they hire people to do most of the worrying and the managing for them.
That’s precisely the sort of work occurring in a department called The Private Client Group at Fifth Third Bank (Western Michigan) under the direction of Ed Ryan, senior vice president.
The group is a 1994 creation of Old Kent Bank and reportedly is one of the features that made Old Kent attractive to Fifth Third.
Whether that’s true or not, one of Ryan’s new responsibilities (he was with Old Kent 22 years before the merger) is to soon start showing Fifth Third’s other regions how to set up and operate similar groups.
And he has had some experience in that sort of expansion work, because the group has experienced a 40 percent growth rate over the past two years, leading it to open offices late last year in Chicago and Detroit.
Locally, Ryan told the Business Journal, the Private Group administers an aggregate of $1 billion to $1.5 billion for about 150 area families.
“We actually have four pieces to our product line,” Ryan said, enumerating them as:
- Wealth management
- Business transition services
- Executive life team
- Private banking
Basically, he said, the group is a team of specialists. Comprising it are three high-end trust officers. “In our case, these are attorneys with estate-planning background. Then we have three charter financial analysts, for money management, and four CPAs, and then the private banker.”
He explained that the private banker is one man whose job is taking day-to-day banking services to clients, rather than necessitating that clients come to the bank.
“Let’s say that we have a client who has sold his business,” Ryan said, “and he still has some very complex financial arrangements: investments, numerous accounts, maybe some start-up businesses that he’s helping to finance. And he might have three or four homes: one in Florida, one out west, one here and another one up north. And he may have trusts for his children and even some grandchildren.”
He explained that the private banker facilitates the flow of funds that the client authorizes under the direction of the Private Group and any of the client’s own staff of accountants or lawyers. The private banker also smoothes personal transactions.
“Let’s say the client is out west and happens to need some cash,” Ryan said. “The client can visit any local bank out there and they can call back here to the private banker who can given the assurances they need.
Another realm upon which the group must focus special attention are the now-tremendous uncertainties concerning federal estate tax.
Congress adopted and the president signed a measure to phase out the tax over a 10-year period. Too, the measure features reduced tax rates and rising exclusion amounts over that period.
But the tax repeal failed to pass the U.S. Senate by a 60-vote supermajority. This means the repeal automatically expires — and the estate tax would be restored with full force and at its original rates — unless Congress votes every two or three years to revalidate the repeal legislation. At the end of 10 years, the tax will cease to exist. But then it will go back into full force and effect in the year 2002 unless Congress repeals it for good.
Because of that legislative uncertainty and because so much of financial planning and management revolves around estate taxes — in which the IRS can confiscate up to half a family’s accumulated wealth — the Private Group must build special flexibility into its strategies to transfer wealth from one generation to the next.
Here’s where techniques such as irrevocable trusts come into play. Likewise, very large life insurance policies can, in a sense, “rescue” an estate from confiscatory taxation by paying at least some of the federal taxes it incurs. But if not handled properly in advance, the proceeds of life insurance become part of the estate, thereby hiking those self-same taxes even further.
“We are working with high net worth individuals,” Ryan said.
“These are people with net worth greater than $10 million. And we’re trying to address from a consultative standpoint their complex tax and estate needs to insure that we’re doing the very best we can for them to help preserve their current wealth, enhance their wealth, and — really over the next 10 years — transfer their wealth, depending upon the final outcome of the estate tax bill.
Another key member of The Private Group has overseen development of a proprietary software tool that can bring a 5-year or 10-year graphic timeline to the verbal and written analyses The Private Group presents to its clients.
Ryan explained that the software is one of the tools that helps, for instance, in educating clients about ways in which life insurance works to their heirs’ advantage in transferring wealth between generations.
“Life insurance is a very complex investment vehicle,” he said, “and it’s important to make sure the client understands how its fits their wealth transfer strategies.”
The Private Group also helps develop plans whereby a client can transfer ownership of a corporation to employees or other family members or other employees.
Ryan explained that by next year, he and other members of the West Michigan region will help officers in other regions roll out and set up similar groups. And one major aid to all the groups, he said, is the fact that Fifth Third’s headquarters in Cincinnati has an extensive stock research team. “In wealth management,” he said, “we’re now able to leverage off of them.”
The main hold-up in such rollouts is the wait for September’s transition to common systems among the former Old Kent banks and the new, larger Fifth Third.
The members of The Private Group team are:
Wealth Management Attorneys: Bob Prevette, John Grzybek, Craig VanEss and Jan Winters
Portfolio Managers: Kurt Anderson, Kerby Wallick and Derick Grembi
Business Transition: Bryce Tallant, Ginny Hayataka, Julie Zukowski and Steve Conway
Insurance: Galon Beckemeyer
Private Banking: Larry Pinckney
Financial Modeling Software: Brian Moore