Perspective

Understanding TPM: The third-party marketing model for bank-owned wealth management

For some banks, TPM may improve the business impacts of wealth management; however, any benefits may come with unexpected drawbacks.

Key Takeaways

Banks are under significant pressure: Record low interest rates, digital disruption, and perceived commoditization pose significant challenges for banks, even before the expected impact of the global COVID-19 pandemic.
Third-party marketing promises relief: Third-party broker-dealers are offering to pay banks to take over their wealth management practices, to streamline those practices with scale and expertise, and to split the revenue with the bank.
The reality of TPM may fall critically short: In practice, the benefits of TPM may fall short of the promise. Additionally, an in-house wealth management practice may prove to be a critical asset for banks, as client expectations continue to evolve.
The bottom line: The TPM model has appeal for smaller banks that struggle to scale their wealth management practices, but banks should perform due diligence to understand the impact this shift could have, especially in contrast to alternative paths to scale.

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