Firms bulk up on wealth managers

Last Friday’s dismal jobs report had some bright spots, including the fact that the financial-activities sector of the economy showed a gain for the first time since July 2007. And if anecdotal evidence in the wealth management industry is to be believed, the trend may continue.

BNY Mellon Wealth Management Friday said that it has hired Lisa Simington to oversee its wealth management business in the Southeast. Ms. Simington, who previously served as a director of wealth management for Wachovia Corp.’s Georgia operations, is expected to hire as many as nine wealth managers for BNY Mellon, the company said.

Meanwhile, JHS Capital Advisors, which was formed last month by John Sykes, the former chairman of struggling independent broker-dealer GunnAllen Financial Inc., recently announced plans to hire 500 financial advisers over the next five years. Other wealth managers that are in the process of hiring advisers include Evercore Asset Management, French Wolf & Farr Inc. and Jefferies & Co. Inc.

“Wealth management is still a very good business, even after a very difficult up-and-down decade and a particularly difficult 18 months,” said Jeffrey Maurer, chief executive of Evercore Wealth Management LLC, which has $1.4 billion in assets.

Indeed, demand for wealth managers has skyrocketed in recent years as the number of millionaires has grown. Investible assets held by high-net-worth individuals in North America are expected to reach $12.7 trillion in 2013, from $9.1 trillion at the end of 2008, according to the annual World Wealth Report, issued last June by Capgemini U.S. LLC and Merrill Lynch & Co. Inc.’s global wealth management group.

Consequently, more brokers, advisers and financial planners are calling themselves “wealth managers” to garner high-end business.

WEALTHY BOOMERS

“There’s no secret to the growth of the industry,” said Larry Hughes, president of BNY Mellon, which has $151 billion in assets.

“It’s followed the demographic trends,” he said. “As the baby boomers have accumulated money, that’s created more wealth.”

Increased demand by baby boomers for advisers who are knowledgeable about complex tax- and estate-planning issues is also fueling the demand for wealth managers.

From a firm’s perspective, the wealth management business is attractive because assets tend to be “stickier,” and the fees derived from those assets are more reliable.

“Our hiring plan for 2010 is a substantial one relative to the prior two decades,” Mr. Hughes said. “It’s a very meaningful expansion.”

BNY Mellon plans to add about 25 wealth management sales representatives this year and in the “double digits” for private bankers, Mr. Hughes said. The firm will also open an office in Texas, he said.

The demand for wealth managers is likely to be particularly robust this year as wealthy investors step off the sidelines and re-enter the market, FBR Capital Markets’ Steve Stelmach wrote in a research report released last week.

“Our view regarding private-client revenue is that the worst is over and that the coming year will show gradual improvement in trading activity and asset management fees,” he wrote. “Potential revenue upside could come from an improvement on a revenue-per-financial adviser basis as retail investors re-enter the market.”

Mike Wolf, co-founder of French Wolf & Farr, which has about $230 million in assets, agrees.

“One reason wealth management is a growth play right now is that there are just a lot of assets that are in transition, whether they’re moving from a wirehouse to a trust company to an independent adviser,” he said. “There are a lot of assets moving around and a lot of advisers who are thinking about changing jobs.”

Mr. Wolf and his partners want to increase assets to $1 billion over the next five to 10 years, from $230 million today, he said. They recently moved to larger offices in Atlanta, and Mr. Wolf said he is talking with several advisers and groups of advisers about having them join the firm.

During the past nine months, Jefferies has bolstered its number of wealth managers to 25, from 17, said A. Markman Peters, head of the firm’s wealth management group.

The firm recently brought five wealth managers to its London office and is increasing its wealth management ranks in Atlanta, Boston, Dallas, Los Angeles, New York and San Francisco. Soon Jefferies will also have a wealth management presence in Chicago, Mr. Peters said.

“It’s a priority for us to have wealth management capabilities of good scale in all of those markets,” he said.

Although Mr. Peters declined to comment about how many wealth managers Jefferies ultimately intends to hire, there is a “robust pipeline to continue to hire at a rapid pace,” he said.

The firm is focused on “top-tier” advisers — those with a minimum of $500 million in assets, Mr. Peters said. To keep that kind of money coming in, the firm is following its investment-banking business like “the infantry follows the tank,” he said.

In other words, it is pitching its wealth management services to clients of its investment-banking group — and the more advisers on the payroll, the better.

“My dance card is full of people that want to talk to us,” Mr. Peters said.

E-mail Hilary Johnson at [email protected].

Related Topics: Wealth Management