In
the eternal debate on what is the best business model for ultra high
net worth clients, managers at Wells Fargo’s recently rebranded Abbot
Downing unit in the US are emphatic that being part of something much
bigger works for its customers.

Abbot Downing
serves UHNW individuals and families with at least $50 million in
investable assets, and is an integration of Wells Fargo Family Wealth
and Lowry Hill.

At present, the vast majority of its clients are existing Wells Fargo
clients rather than outsiders. Such a high percentage of in-house Wells
Fargo clients - the firm does not give an exact figure - does not faze
Abbott Downing managers at all - in fact theyare proud of the market share
this brings.

“A large majority of Abbot Downing’s new business comes from existing
Wells Fargo clients. Wells Fargo has a lovely advantage of serving one
in three households in the US,” Mary Mewha, regional managing director
at the firm, told this publication at a recent interview at the firm’s
offices in San Francisco’s financial district.

“It is a natural that when large fortunes are being created and there is a liquidity event, we are at the table,” Mewha said.

However, when asked if the number of non-Wells Fargo clients should increase, Mewha replied: “I like to think so.”

Part of something big

Mewha and colleagues appear pleased to be part of a much larger
business group, and although no bank has entirely escaped the turmoil of
recent years, they argue that Wells Fargo has emerged in better shape
than some rivals (it bulked up with the merger with Wachovia during the
height of the credit crisis). For the bank as a whole, Wells Fargo
recently reported net income of $4.9 billion, a gain of 27 per cent
(annualised) from the previous quarter; revenue was $21.2 billion,
slightly down from $21.3 billion in the previous three months. At the
wealth management division that includes Abbot Downing, revenue was $3.0
billion, up 2 per cent from the previous quarter.

The firm has certainly been busy since the re-brand, although the
newness of the name should not obscure the fact that Wells Fargo has
been in the wealth management game for over 150 years. As an example of
developments, Wells Fargo in September named former Fortigent chief
investment officer Nathan Sonnenberg as director of investments in
Washington, DC. As reported recently, the
firm has named Paul Cummings, formerly managing director and head of
Channel Management for the Managed Solutions Group at Merrill Lynch, as
regional managing director for the Northeast Region.

So far so good

After any re-brand and change, inevitably there can be concerns about
how smoothly the process goes. Wells Fargo’s wealth team has seen some
departures. For example, about two years ago, the boutique wealth firm,
Ascent Private Capital Management of US Bank, was started by Michael
Cole, who was former head of Wells Fargo Family Wealth Group and Wealth
Planning Center. One of his colleagues, Mark McLaughlin, is an ex-Wells
Fargo senior wealth management professional.

Inevitably, any changes bring some strains, but Mewha was upbeat on the performance of the unit so far.

“The best indicator [of success] is that the business hasn’t slowed
down at all. We are 40 per cent ahead in sales terms of our target this
year, and that’s just for our San Francisco office. Anecdotally, the
evidence is that we are continuing to do really well. The new brand has
been very well received. We have gotten enquiries from clients and
centers of influence.”

Part of any challenge in making such an operation work is ensuring
clients feel they are getting specialised treatment and not just numbers
on a board – a risk that can occur in a big organization. Mewha points
to the low number of clients per relationship manager as proof of the
“boutique” feel that Abbot Downing gives its clients. Nationally, the
firm’s client/RM ratio is 15 clients per manager.

This “boutique” status is also important in making clients, such as
those undergoing a major liquidity event, entrust financial and related
affairs to advisors having previously been hands-on managers of
operating businesses, she said.  

Adjustments

“One issue faced by wealthy clients is that when running a business,
many of their needs were taken care of, such as financial
administration; once a business is sold, a client suddenly finds that he
or she needs to do this themselves – this is where Abbot Downing can
step in and take care of such wealth management `infrastructure’,” Mewha
said.

“This may include bill payment, keeping track of their (typically)
complex structures, multiple legal entities, multiple homes or real
estate, other investments, etc, as well as special reports, and so on,”
she said.

“Most of the individuals looking for such services have excelled in
their businesses but these are areas they know little about and it can
be a bit scary,” she continued.

And just as critical to the process is taking time in ensuring that the bank is right for the client, and vice versa.

“The four largest relationships we brought in this year were ones
where we were initially in contact with the family two years ago – it
can take that long,” Mewha said.

Hard and soft

Despite its historical pedigree, Abbot Downing managers say they are
determined to show it is a cutting-edge wealth management house,
embracing technology in various forms to stay out front of competition.
For a firm whose parent is rooted in California, home of the Silicon
Valley region of the US, this makes sense.

Wells Fargo points out, for example, that it has a YouTube channel; a
Twitter channel and has given iPads and other mobile devices to various
advisors in the field.

As if to illustrate how far Abbot Downing goes in embracing what is
called the “soft-side” of wealth management, the business employs three
psychologists and one professor as part of the team. Patricia Armstrong,
managing director, family dynamics at the firm, is not keen on the term
“soft side”, arguing that some of the non-financial aspects of wealth
can be the most difficult to tackle.

Armstrong, a psychologist by background, has been at Wells Fargo in
various roles, for 22 years, working in talent management and leadership
development areas, among others. She has worked in the wealth
management side of the business for the past decade.

“I work as part of a team that consults with clients regarding the
impact of wealth and preparation of heirs. We have backgrounds in the
behavioral sciences including psychology and philosophy,” she told this
publication.

Abbott Downing offers an educational programme for clients, such as a
multi-client forum, giving clients the opportunity to gather together.
“Families sometimes feel like they are in a bit of a bubble and
appreciate the chance to have a meaningful dialogue with each other as
well as experts in various topics,” Armstrong continued.

The most recent such event was in September, in Chicago, she said.

A term that has come up before in these pages is the subject area
called “family dynamics” – a topic of increasing importance. The firm
can enable conversations to start about difficult topics, such as
succession, she said. “What we know from clients is that they are as
interested in addressing the impact of wealth as the technical aspects
of wealth,” she said.

“The most frequent thing the client has is the hope that their good
fortune does not become an ill-fortune for their children,” she said.

“Some of the families we work with manage their wealth as a family
enterprise - not as individuals with a short time-frame but as
enterprises managing significant wealth together and for a variety of
purposes.”