It is sophisticated, financially savvy, ultra-competitive and highly fragmented, and has attracted all the industry’s major players. It has an unusually high concentration of ‘old money’ multi-generational wealth, as well as plenty of newly-minted high-tech millionaires and wealthy professionals working in the city’s thriving private equity, asset management and mutual fund firms.

What’s more, Massachusetts law allows attorneys to act as trustees and manage money, so unlike other markets, big law firms are not only centers of influence, but direct – and formidable – wealth management competitors.

“Boston is a very attractive market,” said Eric Hayes, senior regional manager and senior vice president for Wells Fargo’s private bank division. “It’s the sixth-largest wealth market, has good demographics with venture capital, tech and health care here and a great talent pool with all the colleges and universities.”

“Boston is a very vibrant, competitive market,” agreed Vicary Graham, president of the northeast region for BNY Mellon Wealth Management. “New England has a thriving entrepreneurial community, aided by the range of tech incubators based here, such as MIT and Harvard. This means there’s a continual wave of new wealth being created.”

“We continue to see a great deal of wealth in the market, not just from tech and financial services, but also from generational wealth, which creates money in motion,” said Eric Propper, president and chief operating office of Atlantic Trust Private Wealth Management. “Because it’s such a dynamic market, it attracts the top competitors. Everyone’s there.”

Indeed, every level of the wealth management business is unusually well represented in Boston.
SCS Financial, Athena Capital Advisors, Ballentine Partners and Highmount Capital are among the leading independent boutique firms.

Banks and trust companies with strong local roots and a prominent wealth management business include BNYMellon, Boston Private Bank and Atlantic Trust.

And Northern Trust, Bessemer Trust, Wells Fargo Bank and Wilmington Trust are among the large national brands that have come into the market.

There are also local private trustee offices who work with wealthy clients and, of  course,  over two dozen law firms  with active trust departments, including Choate Hall & Stewart, Mintz Levin and WilmerHale, whose subsidiary, Silver Bridge, has aspirations to be a national wealth management firm.

Events of the last year and a half have been a boon to law firm’s trust business and independents, according to Steve Prostano, president and chief operating officer of Silver Bridge, which was known as Hale & Dorr Capital Management until October 2008.

“We’ve seen less interest in wealthy families in working with larger financial institutions,” Prostano said. “As a result of the scandals and what they’ve seen out there, one of their primary objectives has been to find advice that can be truly objective and someone who is looking out for their needs and can be totally transparent.”

But others in the market don’t believe wealth management is making big gains at law firms.

“I think they have an entrenched client base that is not necessarily growing rapidly,” said Stephen Cucchiaro, president of Winward Investment Management, Inc. a Boston-based asset management firm.
Nonetheless, many of those clients tend to be old Boston families with multi-generational wealth who are hard to access, say competitors.

“Boston is the original trust center of the country, a tradition that goes back to the need of ship captains  to have a fiduciary looking out for their interests when they were at sea,” noted Steven Hoch, partner at Highmount Capital, which has approximately $1.7 billion in assets under management. “There is wealth in Boston, but it is relatively hard to access. The old money in particular is very discreet and private and hard to reach.”

Fortunately for wealth managers, Boston is also a hotbed for entrepreneurs, especially in technology, and most wealth management firms have a mix of clients with inherited wealth and ongoing or recently sold businesses.

Approximately one-third of Ballentine’s clients, for example, have inherited wealth and two-thirds created the wealth themselves, said Roy Ballentine, the firm’s president of the firm, which has about $1.5 billion in assets under management.

“We target business owners who are looking to sell in four to five years,” said Coventry Edwards-Pitt, a Ballentine managing director. “These are people who want help with what their life will be like later, in areas like wealth transfer strategies and philanthropic giving.”

Most clients in the firm’s family office have over $20 million in investable assets, Edwards-Pitt said, and it has opened up a separate firm, Mill Street Investment Management, to handle clients with between $3 million and $20 million.

Attracting new clients, never easy in the first place, is especially challenging in such a knowledgeable, saturated and competitive market that is the home base of financial giants including Fidelity Investments and State Street Global Advisors.

“Because it’s such a highly sophisticated market in a smaller city where everyone knows everyone else, you have to deliver an exceptionally high level of service here,” said Chris Biotti, senior vice president at Neuberger Berman.

Underscoring the level of financial acumen in Boston, Galantine’s Edwards-Pitt notes that 20% of the firm’s client families are headed by investment professionals.

Adding to the challenge of client acquisition is the fact that liquidity events, a lifeblood of the business, have been drying up.

“While business has been picking up at the mid-market level and through referrals, we haven’t seen as much wealth creation,” said Hayes. “Less people are selling their business or going public.”

Prostano sees business opportunities coming from people who want to move out of cash, but liquidity events, he said, “are not part of our growth expectations.”

Or as Mr. Hoch put it, “there’s not a lot of new wealth being created for new business, so we have to steal it from each other.”

Which, of course, underscores the difficulty of increasing market share in Boston, as well as the opportunities available, as evidenced by the national firms who keep setting up shop.

“No one is dominant in Boston,” according to Propper of Atlantic Trust.

“It’s a market where anyone can become a leader,” agreed Silver Bridge’s Prostano. “It’s up for grabs.”
Despite the fierce competition for clients that characterizes the Boston market, the allure of “The Hub” for wealth management firms remains undiminished, as firms of all sizes continue to move in and build up.

One of the biggest, in fact, is set to complete its massive move into the city this summer.

After completing its operational integration with Wachovia, Wells Fargo Bank will be moving all its wealth management businesses into a gleaming new offices on Berkeley St. in Boston’s Back Bay neighborhood by the summer.

That includes The Private Bank, which targets clients with between $3 million and $50 million in investable assets and the Family Wealth unit, which works with clients with over $50 million.

What’s more, Wells Fargo will be “looking to add talent” throughout the year, according to Eric Hayes, senior regional manager and senior vice president for the private bank division.

Wells Fargo will hardly be alone.

Local stalwart BNY Mellon Wealth Management remains bullish on New England, and plans to add more sales personnel, bankers and portfolio managers, according to Vicary Graham, president of the northeast region for the bank.

“We are also looking for potential acquisitions both nationally and regionally that fit our culture and values as a wealth manager,” Graham said.

Silver Bridge, a subsidiary of the WilmerHale law firm, recently added an office in Delaware and wants to be a national firm.

The firm is offering more multi-family office services, and plans to hire opportunistically in Boston this year, said president and chief operating officer Steve Prostano.

A number of market observers believe there will be some consolidation in the Boston market this year.

Boston Private has been mentioned as a potential takeover target, but no offers have been confirmed.

“We are seeing a lot of activity in the commercial MFO space,” said Mark Wickersham, a senior associate for Family Office Metrics based in Boston. “Single family offices with multiple generations can’t handle the complexity and the economics anymore and are looking to partner with multi-family offices.”

Highmount Capital, which has $1.7 billion in assets and would like to get to $3 billion, is talking to smaller firms in the market about merging or being acquired, said Steven Hoch, a partner in the firm.

“The burden and expense of compliance will drive consolidation,” Hoch said. “With so much busy work and heavy costs that is difficult to pass on. Smaller firms with under $500,000 in assets under management won’t be able to survive on their own.”

Highmount will also be hiring investment talent in Boston, he said, and continue to build up the firm’s European presence via its Amsterdam office.

There is also a school of thought in Boston that more new entrants, such as GenSpring Family Offices, may be poised to come into the market.

“There are a lot of legitimate $100 million families in the area,” said Stephen Cucchiaro, president of Winward Investment Management, Inc. a Boston-based asset management firm.

What’s more, Cucchiaro believes there will be “a lot of money in motion” in the market as well, coming from dissatisfied brokerage firm clients and new sources of wealth generated by venture capital and private equity firms and entrepreneurs selling their businesses.

And wealth managers in Boston report seeing more interest in their services, albeit with more caution and scrutiny, from potential clients.

“Centers of influence and third-party consultants have grown in importance in Boston,” said Coventry Edwards-Pitt, managing director for Ballentine Partners. “We’ve found it’s helpful because  it helps people understand what we offer in an industry that is so jargon-laden and where everybody says the same thing. Now they’re asking probing questions, which is good because when we see them we can move beyond a marketing spiel and get into a real conversation about how we can help them.”

Prospective clients are “looking more closely under the hood before selecting a firm,” said BNY Mellon’s Graham.

But she is encouraged by growth in “high tech, clean tech and bio tech” in the regions and an abundance of private equity helping entrepreneurs get to market.

“We are seeing more movement,” said Highmount’s Hoch. “People are out there looking. There’s a lot of dating going on, but not a lot of closing the deal ending in marriage.”