INTERVIEW: A Catch Up With BNY Mellon’s Family Office Group

Eliane Chavagnon

4 April 2014

BNY Mellon Wealth Management is in throes of a two-year recruiting campaign that will see the addition of around 100 new positions in the US and abroad, reflecting what the firm described as its “profound commitment” to the wealth management industry.

Today, BNY Mellon Wealth Management has around $185 billion in assets, of which around $80 billion is represented by the family office business

And the family office business is doing particularly well, having logged a 31 per cent pick-up in new business year-over-year in 2013, with pre-tax income 52 per cent ahead of the previous year. Additionally, BNY Mellon Wealth Management won the private bank offering for family offices at the inaugural Family Wealth Report Awards last month in New York, while also scooping up the award for best US private bank .

Within wealth management, BNY Mellon’s Family Office Group is represented by single family offices, multi-family offices and virtual family offices.

All together, the New York-listed firm serves around 450 family offices across those three segments, with SFOs making up the majority and virtual family offices representing the smallest component. There are around 125 employees within the Family Office Group, which has three main locations: Boston, MA, New York and Pittsburgh, PA. But the firm is also pushing to have a stronger presence west of the Mississippi.

Erich Smith, who is responsible for BNY Mellon’s Family Office and Charitable Solutions Group - of which the largest component is the Family Office Group – recently spoke to Family Wealth Report about the some of the opportunities he’s seeing in the sector in 2014.

“The greatest opportunity we have is to get more of our clients’ assets under management,” Smith told this publication in New York last month.

He explained that the foundation of the Family Office Group’s services is around master custodial capabilities and represented by four sleeves: banking, investment management, wealth transfer and asset servicing.

“The difference between what we do for the family office client versus what we do in our direct client business is that family offices tend to be more ‘á la carte’ purchasers of services as opposed to comprehensive,” Smith said.

“Going forward, the opportunity I think we see as an organization is to better package all of those capabilities and bring those to the family office client, and be a more holistic provider of those services. We think that approach will be more cost-effective for clients. Whenever you purchase your services and solutions in an ‘á la carte’ fashion, it tends to be more expensive.”

Indeed, during session two of the Family Wealth Report Summit last month, Kathy Engle of RBC Wealth Management mentioned that high net worth individuals expect to feel like they are dealing with one firm – regardless of how many products or services they may have with an organization .

Smith added that the firm is working to create an infrastructure to support the formalization of this - from the chief investment officer to portfolio officers.

“It has become increasingly clear to us that clients want one primary contact that is not responsible for the day-to-day activities, but someone they can have on a regular basis do two things for them 1) bring new ideas to the table and 2) be a sounding board for that office,” he said.

“We are proactive about going out and talking with our existing clients and asking more about the things that keep them up and night and what they’re thinking about.”

Family office trends

Speaking about family office trends more broadly, Smith said BNY Mellon is seeing more wealth being created through technology – specifically on the West Coast.

“Those are the individuals that don’t want to deal with us in the traditional manner – they want a more digital experience,” he said.

“That is why we’re in the process of opening a new office in Palo Alto, CA – it’s going to have a much different look and feel than what our traditional office would be here in the East. We’re very cognizant of technology and the role it plays in our business – we’re spending a lot of time thinking about, not where is technology today, but where it is going to be five years from now.”

Another opportunity the firm is picking up on relates to multi-jurisdictional families – those whose wealth was created outside the country but who have a business interest in the US. During a time of increased globalization of wealth and geographic dispersion of high net worth individuals themselves, this is a big theme in wealth management at present.

In line with all the above, Smith said the Family Office Group is looking to bring in senior investment talent, familiar with a range of investments but specifically in alternative investments.

“We also see an opportunity to do more in the fiduciary area,” he said. “We’re looking for people who have experience in serving the fiduciary needs of high net worth individuals. On the sales and new business front, we’re looking for individuals who have had experience in prospecting and interacting within the space, and who have a very solid network within the family office segment.”

When the hiring campaign started in early 2013, Lawrence Hughes, chief executive of BNY Mellon Wealth Management, told Family Wealth Report that he expects the hiring drive will continue through 2014, as the firm is deeply set on focusing on the quality of the people and the cultural fit.