The battle for the high-net-worth and ultra high-net-worth client is heating up. In recent weeks, wealth managers of all stripes have announced plans to strengthen their services for their most affluent clients.
BNY Mellon Wealth Management, a firm with a long record of serving wealthy families, recently announced the opening of its first office in Washington, D.C. as part of a strategic push to be in the top 10 U.S. wealth markets where ultra high-net-worth individuals are concentrated. Its entry into Washington not only accomplished that goal, said Larry Hughes, CEO of BNY Mellon Wealth Management, but it also got BNY Mellon into 16 of the top 25 markets.
Moreover, the firm plans to add substantial resources to the ultra high-net-worth business going forward. In addition to bringing in additional investment experts and advisors, the wealth manager will expand the sales force by 15% in 2012, said Hughes.
It also is shoring up its management ranks in this area with the recent promotion of a longtime BNY Mellon veteran to a new position leading the firm's team of advisors to ultra high-net-worth families and family offices.
Even though the wealth manager plans to grow organically for the most part, it's not against the odd acquisition or two if the fit is right. Six months ago, it bought the investment management business of Chicago-based Talon Asset Management and a year ago made its first foray into the Canadian market with the acquisition of i3 Wealth Advisors, a wealth management boutique in Toronto.
Hughes reported that the wealth management group is having a strong year with new business up 15% to 20% from last year led by the ultra high-net-worth sector. He was especially proud of client satisfaction and referrals. He noted the firm's 97% client retention rate and the fact that 93% of clients polled in a recent survey said they would be willing to refer someone with needs similar to their own.
Greg Cherry, a senior analyst at Aite Group, an independent research firm, said that firms are actively pursuing the high-net-worth markets because they represent an opportunity to capture a higher "share of wallet," referring to the amount of a client's wealth that is managed by a single advisor.Ultra high-net-worth clients, he noted, tend to use fewer advisors than do less affluent clients. "Competitive forces are intensifying and will continue over the next few years as firms go after this market," said Cherry.
On the West Coast, San Francisco-based Bank of the West, a subsidiary of BNP Paribas, is making similar efforts to romance affluent and high-net-worth clients. The regional bank recently began opening new office centers in the bank's key markets for the exclusive use of wealth management advisors and client relationship managers. The idea behind the distinct office spaces is to give wealthy clients greater privacy, said John Bahnken, head of Bank of the West Wealth Management and senior executive vice president.
So far, Bank of the West has opened three office centers with two more slated by the end of the year and three more in 2012, including a flagship office center in San Francisco.
The bank is promoting the offices as "wealth management client centers." They are part of a new service approach the bank adopted earlier in the year to deliver broader wealth management services to high-net-worth clients. "Affluent and high-net-worth clients want an integrated banking and investment relationship," said Bahnken. The bank's new service approach gravitates around relationship managers called private client advisors or PCAs who, as clients' central contacts, bring in wealth management experts, such as trust officers and private mortgage bankers, as needed. The bank's approach had previously been fragmented.
Since Bank of the West introduced the new service model in April, it has appointed some 30 PCAs in key markets, including California, Colorado, Nebraska, New Mexico and North Dakota. The bank aims to have 50 by the end of the year. It also is shoring up the number of personal trust administrators, investment portfolio managers, mortgage bankers and other wealth management experts.
New boutique shops are getting in on the act too. In November, Gordian Wealth Advisors, a new wealth management firm focused on high-net-worth and ultra high-net-worth individuals and families, opened for business in San Francisco. The boutique firm serving primarily clients in Silicon Valley was founded by two investment and wealth management veterans. Within a week of hanging out its shingle, the firm hired Sanctuary Wealth Services to provide back-office and business services.
Gordian joins other entrants to the ultra high-net-worth market, including Wells Fargo, which plans to launch a new boutique catering to the ultra-rich in April 2012. The boutique, to be called Abbot Downing, combines Wells Fargo Family Wealth and Lowry Hill, two well-established Wells Fargo businesses. Another example is Bank of Montreal, which last year launched a new division focused on the wealth management needs of the super wealthy.
The flurry of activity doesn't surprise Aite Group's Cherry. "They're seeing opportunity in the space."