INTERVIEW: Wells Fargo's Abbot Downing Builds Momentum After Re-Brand

Tom Burroughes

29 October 2012

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 . For the bank as a whole, Wells Fargo recently reported net income of $4.9 billion, a gain of 27 per cent 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 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 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.”