Wells Fargo, one of the giants of the US banking industry, is upping its game in the ultra high net worth private client business, with a new streamlined offering for clients with $50 million+ assets.

Wells Fargo, one of the giants of the US banking industry, is upping its game in the ultra high net worth private client business, with a new streamlined offering for clients with $50 million+ assets.

As of next April the New York-listed bank’s Family Wealth and Lowry Hill units will operate as Abbot Downing, a new brand led by James Steiner, who has been appointed as president of the unit.

Steiner, a managing principal at Lowry Hill with a background as a Wall Street analyst, has the task of molding the brand and driving penetration in the top-end wealth management market. Talking to Family Wealth Report, Steiner says the challenge is keeping him busy, “but it’s good busy.”

Two become one

The two businesses Steiner is bringing together have slightly different focuses. Launched in 1986, Lowry Hill provides private asset management and wealth planning services, and manages around $4.7 billion in assets for nearly 300 clients. Wells Fargo Family Wealth is much larger and brings softer services, such as family dynamics and wealth education, into the mix. And up until now, the latter business’s name has aligned its brand closely with that of the bank.

The merging of the businesses comes at a time when the industry is trending towards a “holistic model” of wealth management, and the distinct branding (from the bank) has emerged as the family office market has begun to carve out a stronger place for itself in the wider private client industry. Reports around suggest this is why Wells is rebranding and unifying its presence in the family office space: to strengthen itself in a business area that may be more resilient to volatility than others.

However, it is also a natural part of the merger between Wells and Wachovia, which has been ongoing since the deal completed in 2008. Steiner says it was a “common sense business decision,” which he and David Carroll, head of wealth, brokerage and retirement, began discussing last fall.

With that said, the move will give Wells a wealth management business with $27.5 billion in client assets, and with a focus on soft-side services and holistic planning that marks it out as family office (although this business model is by and large still undefined). According to a list from Bloomberg classifying the top 50 family offices, this would put the unit in fourth place, behind HSBC Private Wealth Solutions, Bessemer Trust and UBS Wealth Management.

And the bank's strategy is to grow its share of the $50 million+ market - the very top end of the wealth management market - which it estimates at being around 10,000 households in the US.

A distinct brand

Well Fargo is hoping to capitalize on the bank’s strength, while giving Abbot Downing a distinct, boutique feel.

“It’s separate in the sense that it’s a very distinct service offering,” says Steiner, adding that the client-to-advisor ratios will be lower than at the private bank, at between 15:1 and 30:1, which will allow the business to be proactive in communicating with clients – something that has become increasingly important since the financial crisis. “But obviously we’ll benefit from the Wells Fargo brand,” he adds.

The Abbot Downing business takes its name from the company which made the stagecoach which has become synonymous with Wells Fargo’s image. “We picked that brand as it’s a metaphor for how we want to serve clients,” said Steiner, referring to the fact that Abbot Downing was known for its passenger experience.

Clearer client segmentation

At a time when falling margins have forced greater focus on individual client profitability in wealth management, the move also gives Wells Fargo a clearer client segmentation model. Those with under $50 million will be served by the private bank, and clients with between $100,000 and $5 million will work with the broker-dealer unit. Across the firm, all the wealth businesses fall under the Wealth, Brokerage and Retirement group.

There will, however, be some legacy clients from Lowry Hill, which had an asset minimum of $10 million, demonstrating just one of the many reasons wealth managers have a hard time implementing strict client minimums.

Client referrals, especially from business customers, are central to Abbot Downing’s strategy to expand in the ultra-wealthy space. Steiner says the opportunity provided by Wells Fargo’s ties with business owners provide a “significant” opportunity. “There are lots of opportunities to present this across the client segments,” he adds. Wealth, Brokerage and Retirement is a relatively small segment, in terms if income, compared to community and wholesale banking.

There won’t be many changes resulting from the merger in terms of offices, as there weren’t many markets where the two firms had an overlapping presence. Offices will merge in Minnesota and Chicago, however. Abbot Downing will have a physical presence in San Francisco, Los Angeles, Scottsdale, Denver, Houston, Minneapolis, Chicago, Philadelphia, Charlotte, Winston-Salem, Raleigh, Naples, Jacksonville, Washington, DC, and Palm Beach.

Building a service model

While there is no strict definition of a family office, Steiner says that for the clients Abbot Downing is targeting, he thinks the key differentiators are as follows:

1) The service model, which must be “extremely high touch”;

2) Developing long-term, multi-generational relationships. He says there are clients going back five generations with the bank, and, for example, in Philadelphia the firm works with 10 families with which it has had relationship for 60 years. “That’s important for these families” who have wealth which will be sustained over generations, says Steiner;

2) A customized asset management offering, with a broad spectrum of capabilities. Abbot Downing will provide access to both third-party managers and its own strategies, from the Lowry Hill business, and Steiner says in-house versus outsourced management will always be evaluated in the context of what is best for the client;

3) Access to a range of fiduciary and trust services, day-to-day services like cash management, and estate planning;

4) Complex lending services;

4) Consulting services such as family dynamics. The firm has psychologists on staff and also provides a family history service, which reflects the importance it puts on “soft services,” says Steiner. Again, these are becoming increasingly recognized as a differentiator at this level of wealth management;

5) Being able to provide services to foundations and endowments, as many very wealthy families will want this as part of an offering, says Steiner.