What WaFd Bank Is Building With Its New Wealth Business
Last month, Seattle-based Washington Federal Bank launched its own registered investment advisor, WaFd Wealth, and recruited John Chavez, a 30-year Merrill Lynch veteran, to run the new wealth unit.
Chavez has big plans to grow the division. He said the bank got into the wealth management business to diversify its revenue stream. The endgame is to have wealth management, trust services and boutique banking all under one roof so that the bank can do virtually anything for clients. To help achieve that, Chavez is working with Pike Street Labs, a fintech subsidiary of WaFd Bank, to build a financial planning-based technology platform for the mass affluent market.
“Fast forward three years from now, we’ll have a technology solution for the massive affluent segment that could possibly dwarf the AUM of the core wealth management business,” he said.
The technology will not be a robo advisor, he said, but more of a questionnaire-based financial planning tool that can build scenarios for clients with artificial intelligence-generated outcomes. Humans will then review the financial plans.
“If we empower the human capital on the bank side to pursue CFP designations two years from now, we could have a couple thousand financial planners across the bank’s footprint that we train to plan the way we expect them to plan,” he said. “They can take planning outcomes that are automated, review them, talk with clients in local markets about their specific situations, and have more of an automated investment solution that is run by our CIO team and rebalanced in a more dynamic way.”
Chavez is also looking to hire CPAs and attorneys to build a trust company that the bank plans to launch in the next three to four months. The trust company will operate as a subsidiary of WaFd Wealth.
A number of WaFd Wealth clients need support with special needs trusts, and Chavez said recent federal estate tax law changes could breathe new life into irrevocable life insurance trusts, a useful tool in special needs planning.
“These are people that are members of your family, and if they have a family member with special needs, they want you as an advisor to be connected to supporting them when they’re gone,” Chavez said. “If that account and that team is at a different firm, it’s really difficult to stay connected, not only from a compliance perspective, but from a practical perspective.”
Chavez has known WaFd CEO Brent Beardall for many years; they’ve been neighbors and golf buddies. In early 2023, Beardall survived a deadly plane crash in Provo, Utah, and was pretty banged up. After he recovered, he and Chavez started talking about launching the wealth management business.
It was around this time that Silicon Valley Bank and First Republic collapsed, and Chavez pointed to the opportunity for WaFd to fill a void left by the big banks that didn’t have the appetite to customize lending products for their clients. A lot of high-net-worth clients have financing needs that are “outside the box.”
“They may not have income profiles that fit in neat little boxes that big banks have to check to get to a ‘yes’ in an underwriting environment.”
At the same time, Chavez was looking to either retire, as he approached 55, or leave the wirehouse for another venture. He decided the timing was right to seed WaFd’s wealth management division, and said the project has re-energized him. He declined to say how much AUM he and his partner brought over, except that it was not a small amount.
“I’m interested in building a scalable practice with relationship managers, specialists who are doing heavy lifting for all of our clients,” he said. “And while our clients may not need all of the breadth and depth of services that we can provide, we want to make sure that they’re available to them as their lives change. Because what they may not need today, they might need next year.”
Chavez said the majority of WaFd Wealth’s growth will come from “natural hunting.” The pro forma financial statements don’t have bank referrals in them. But the bank presidents have already started to refer prospective clients with wealth management needs.