Nov. 3–When Jim King’s family sold the business seven years ago for more than $100 million, he had a lot of big financial decisions to make.
For help investing his money and minimizing his tax bill, King turned to a bank’s wealth management division. A team of advisers helped him buy municipal bonds and endow scholarships at his alma mater, N.C. State University. The bank also assisted the firm’s other shareholders — his children and siblings.
“We had a lot of planning to do when we sold the family business,” said King, 64, who was president of Sunox Inc., a Charlotte manufacturer and distributor of industrial gases, before he sold it to a Dutch company. “This made it a whole lot easier.”
With more money comes more complex financial needs. That’s why banks, brokerages and investment firms have wealth management or private banking arms that offer the kind of services the less well-off could only dream about.
How about a specialist to help you buy a helicopter? Or a personal concierge service to nab World Series tickets? Or the chance to make the same private investments as a bank’s top executives?
To qualify for this white-glove treatment, you’ll need anywhere from $100,000 to $3 million. That’s in investable assets, meaning you can’t count your house, car, stereo or baseball-card collection.
Who has this kind of money? As of the middle of this year, the United States had 3.8 million millionaires in terms of investable assets, a 14 percent increase from last year, according to an annual survey of wealthy households by research firm NFO Financial Services.
Financial services firms say catering to the rich is a growing business, especially as baby boomers hit their peak earning years or retire.
In 2002, financial services firms compiled revenues of $123 million from wealthy clients, down from $144 million in 2002 because of the stock market slide, according to Boston Consulting Group.
Just last week, Charlotte-based Bank of America Corp. said it was buying FleetBoston Financial Corp., largely to tap wealthy Northeast markets. And earlier this year, Wachovia Corp., Charlotte’s other big bank, said its brokerage joint venture with Prudential Financial Inc. would help it attract more affluent clients.
These wealthy customers range from corporate CEOs to “millionaire next door” investors who quietly save their money year after year, experts said.
“There are plumbers. There are people at professional services firms on track for partner,” said Bruce Holley, head of Boston Consulting Group’s North American Wealth and Asset Management practice. “They wear very many faces.”
Walk into a wealth management office, and you’ll quickly see the difference from your typical bank branch or brokerage office. At Wachovia’s uptown Charlotte wealth management office, clients can recline in leather chairs at marble tables in conference rooms named after some of the major stock market indices.
In U.S. Trust’s wood-paneled suite, also in uptown, advisers meet their customers in a 19th floor conference room with a panoramic view of the city, often over a catered lunch.
“We want to convey a feeling of warmth and hospitality,” said Suzanne Bledsoe, Charlotte division president for U.S. Trust, a wealth management subsidiary of San Francisco’s Charles Schwab Corp. “Wealth management implies something that could be intimidating.”
Of course, these and other firms also make house calls to their clients’ homes, offices and country clubs.
Most wealth management firms serve their clients with one adviser, sometimes called a “relationship manager,” who acts as the point person for a team of specialists in financial planning, asset management, banking, estate planning and other services. Merrill Lynch & Co., for example, has a “Total Merrill” program that seeks to package checking accounts, mortgages, investments and other options for clients.
Many of the firms have been pitching financial planning as the focus of their services. They typically charge customers an annual fee that is a percentage of client assets, usually between 1 percent to 2 percent, with that percentage declining as a client’s wealth grows. Not all customers, of course, concentrate their business with just one firm, maintaining other family advisers such as lawyers and attorneys.
In some cases, wealth advisers become close with their clients, often working with multiple generations of a family as they handle complex inheritance and estate issues.
“We’re at weddings. We’re at the hospital,” said Joel Walters, head of the Charlotte region for Wachovia’s wealth management division. “We become part of the family.”
Wealth management has its roots in old-line banks, where trust departments once acted as conservative stewards of wealthy clients’ money. In years past, these trust officers might even have walked their customers’ dogs or picked up their mail when they traveled.
That has changed as the industry has become more diverse and sophisticated, today’s advisers say. But they still provide the kind of personal service that your average investor would never expect.
Consider these examples.
Rick Verdone, who advises wealthy clients for Citigroup Inc.’s Smith Barney unit in Charlotte, recently visited an older customer’s house to help her set up online services on her home computer. The client wanted to use online bill-paying to simplify her finances, he said.
“It’s not in our job description to do this kind of thing, but it comes from professional responsibility and friendship,” Verdone said.
At Bank of America’s Private Bank, an adviser in North Carolina recently had a client who wanted help buying a certain type of helicopter, said Brenda Seligmann, head of the private bank’s operations in North Carolina. The adviser called the bank’s aviation group, which had a specialist find an available model at the best price, she said.
Fidelity Investments recently introduced a concierge service for its “private access” clients, who have at least $1 million invested with the Boston-based investment firm. Last month, one of the big requests was for World Series tickets, said Gail Graham, a Fidelity senior vice president. In another case, a client used the concierge to hire a famous chef to prepare a special birthday dinner for his wife, she said.
“It’s something that reflects that these clients are extremely busy and extremely successful,” said Graham, declining to name the chef. “It’s not that they can’t do it. They need efficient and cost-effective way to do it.”
All these perks are nice, but wealthy investors also want good returns, especially after the turbulent market of the past few years. From 2001 to 2002, U.S. households with investable assets of at least $250,000 saw the value of their assets decline more than 10 percent, or nearly $2 trillion, to $15.4 trillion, according to Boston Consulting Group’s survey of 29 wealth management firms.
Beside personalized stock and bond portfolios, wealth management firms offer so-called alternative investments such as hedge funds, which can range from risky, high-return investments to ones carefully calibrated to minimize losses. Wealthy clients also can make equity investments in private companies that can yield big returns if the firm later goes public or is bought by another company. Smith Barney offers its wealthiest clients the opportunity to make private investments alongside top executives such as Chairman Sandy Weill.
Other options include oil and gas rights and ranch and timberlands.
For its clients, Bank of America’s Private Bank manages 120,000 gas and oil properties and 2 million acres of farms, ranches and timberland. “We will go in and run the farm for you,” said Bank of America’s Seligmann.
Many wealth management clients leave day-to-day investment decisions to their advisers, preferring only occasional performance updates.
Others get more involved, using online banking and telephone services.
King, a Wachovia wealth management client, met with one of the bank’s municipal bond specialists to choose the securities he wanted to buy. He gets regular updates from his adviser and watches the markets. He is pleased with how the portfolio he and his advisers devised has fared in difficult times.
“Everyone has lost money,” King said. “But the loss was not as bad as it could have been.”
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