How Fifth Third's RIA is mining private banks to build $10B in AUM

Eric Housman sees Fifth Third Wealth Advisors as occupying a distinct space in the fee-only advisory world — but one it's not likely to have all to itself for long.

Many banks looking to establish an advisory arm simply go out and buy an existing RIA. Fifth Third, the 17th-largest U.S. bank as measured by deposits, instead decided to build one from the ground up.

When Housman was approached in 2020 with the idea of starting what would become Fifth Third Wealth Advisors, he was a managing director at the mid-Atlantic division of Fifth Third's private bank. Housman, now president of the RIA subsidiary, said in a recent interview that he jumped at the opportunity.

"In 2021, we built this thing from a complete blank piece of paper," Housman said. "Fidelity is our custodian. We don't use any of the bank's technology. We're a separate LLC, wholly owned by Fifth Third Bank. We are just like ABC RIA down the street, so to speak. We're a small business. We're always saying we're not only delivering the sausage, we're making the sausage here."

READ MORE: 
Fifth Third plans $10 billion RIA with new advisors
Advisor moves: Morgan Stanley pulls from Merrill, Fifth Third from TIAA
Cetera CEO on embracing the 'RIA-ization' of the industry
The 52 best RIAs to work for
RIA Leaders 2024: Download FP's list of the 150 largest fee-only RIAs

But being similar to a small business doesn't mean Fifth Third Wealth Advisors has small ambitions. Housman thinks the day will come when the RIA, which has an account minimum of $2 million, will reach $10 billion in AUM.

That would put it among the biggest players in the industry. An industry snapshot from the Investment Adviser Association and the regulatory consultant COMPLY found in June that nearly 70% of advisors manage less than $1 billion in assets and 88% less than $5 billion.

Fifth Third Wealth Advisors hit a milestone on the way to that goal in March, when it reached $1 billion in AUM, and it is on course to surpass $2 billion by the end of the year. Housman has set his sights on passing $5 billion in 2025.

Unlike many wealth managers that bring assets over by recruiting advisory teams from wirehouses and independent broker-dealers, Housman and his colleagues are looking mainly to private banks. In November, for instance, Fifth Third Wealth Advisors announced it had recruited a trio of wealth managers formerly overseeing $1.8 billion at the Charlotte, North Carolina-based bank Truist.

Fifth Third Wealth Advisors now has 10 teams in seven states, including Florida, Georgia, Illinois, New York and North Carolina.

Housman sat down with Financial Planning to discuss his ambitions for the RIA, why he prefers to recruit private bankers and why he thinks other banks might soon imitate what he and his team have done.

This article has been lightly edited for clarity and brevity.

Financial Planning: Why would a large bank like Fifth Third want a self-standing RIA?

Eric Housman: If you look at our industry over the last 10 years plus, you've seen clients and assets and talent start to leave, or leave traditional private banks and go to independent RIAs. So at Fifth Third, we decided, "You know what? What if we could build our own RIA?" Something that's outside the bank structure but, at the same time, supported by the bank.

Could we go in and attract some of this talent, clients and assets that are already leaving, and get them over here?

FP: Why prioritize recruiting from private banks rather than wirehouses, IBDs or other RIAs?

EH: There are a lot of talented people inside of traditional private banks today who are looking to make a move. And the way I describe them is they're in the second half to last third of their career. They've already moved private banks maybe once or twice, so they're not interested in doing that again. And they've maybe thought about going to work for an independent RIA.

But I think our special niche is the access back into the bank, so that they can still offer the same sorts of services that they used to — the balance sheets, the trust powers, the planning capabilities. And we wanted folks that had some level of corporate perspective and what it was like, even though we don't "work for the bank." But we are owned, so there is that crossover with the bank.

So we're kind of in that sweet spot in the middle. And the positive for them is that we've removed all the time distractors inside of any large financial institution that keep you away from clients. There is no other bank in the country that is doing this.

FP: One of the big drawbacks to recruiting private bankers is that their assets are often harder to move over than, say, assets from a wirehouse. What are you doing to ease these transitions?

EH: There is always going to be a level of that. That's why, No. 1, we only do teams. We don't do any individuals. So the more people that we get that surround client relationships, the more of those that are probably going to move over time.

No. 2, we only target teams with a billion dollars in assets under management or greater, because we want their pool to be big enough, knowing that not all of it is going to follow.

No. 3, we only recruit teams that also have members that are very tenured and have been with these clients over an extended period of time. So you might think that makes your pool very small. But we're learning pretty early on, that's exactly what works.

It's a very simple model. People know that if they come here, they need to have a following. It makes for a very easy marriage.

FP: How do you go about recruiting?

EH: We're very blessed here. We have a dedicated sourcer/recruiter here inside the bank who only works for us. He is on the phone all day long. And he has been doing this for at least 20 years. He has a very deep Rolodex of relationships with people from coast to coast. Usually the first step in what he's truly trying to do is set up a call or a meeting with me, so I can explain the model.

The one thing that we're not doing — we're not a broker-dealer, we're not an FA shop. So we're not doing upfront checks on trailing 12s or things like that. But we do have a very lucrative comp package as you move your clients over.

It's fashioned after an RIA, not a bank compensation model.

FP: Do your advisors receive incentives for encouraging clients to buy Fifth Third banking products?

EH: Absolutely not. As a matter of fact, probably one of the interesting things is that, while we have access to the balance sheet and all those things I mentioned earlier, they don't have to use any of those things. Our investment platform is open architecture. We don't have any proprietary products whatsoever.

So this is definitely a client-first model, with no additional incentives at all.

FP: Are many of your clients referred to you from the bank?

EH: What makes us uniquely additive to the bank is we don't get any internal referrals, so everything we do is sourced from the outside. So in theory, probably 95% at least, of what we do never would have come to Fifth Third, had we not had these teams out in the field.

And we still have the traditional private bank, and they are set up in the regions and have relationships. Our role was never to infringe on or eat into any of those. Ours was always to go out and find it on the outside and have these folks move their formal relationships over. Which is, again, one of the reasons why our compensation model is more like an RIA and less like a bank.

FP: Do you think some other banks may soon follow your lead here?

EH: I don't think the traditional private bank is ever going away. But I think this sort of model — eventually somebody will copy us. Today, we may be the only bank that's figured this out.

But I just think the business is moving in this direction. The RIA business is just booming and growing like crazy over the last 10 years. So I think we found a really unique niche for now that we're going to exploit for as long as we possibly can.