Wealthy Demand Advice, Services

For all of the uncertainty surrounding the U.S. economy at least one thing is for sure — wealth management advisors are in high demand. Wealthy clients, whose portfolios took a hard hit during the recession, are no longer taking chances when it comes to their personal investments, area financial advisors say. They are demanding transparency about their investments and are turning to wealth management experts to craft a new approach to keep their money working for them. “We are entering a critical decade where the greatest risk (clients face) is they do not get the right advice,” said James Hillman, BNY Mellon Wealth Management’s managing director of portfolio management and client services for Southern California. Banks and money management firms with a presence in the San Fernando Valley region say they are seeing an uptick in business as more investors seek professional advice. To keep pace with demand and increased competition for business, they are ramping up their hiring and expanding their offices. Clients who seek wealth management services may have as little as $50,000 to invest, though often they are high net worth individuals with hundreds of thousands, even millions, to invest. Generally, these investors are private people, and their advisors go to great lengths to ensure that privacy. Requests to speak with clients were turned down. Investors who live in the Valley region and are seeking wealth management services are slightly different, than those on the other side of the hills, said Hillman, who lives in Calabasas. They tend to be “more subdued and less flashy,” and many work in the entertainment industry, real estate business, or are entrepreneurs, he said. After being personally impacted by the stock market’s wild fluctuations, wealthy investors in the region are paying more attention to how their money is invested, said Scott Hansen, regional director for wealth management at the Westlake Village office of Wells Fargo. “They realized how scary it was to leave something like that unattended,” Hansen said. With a recovery taking shape, area wealth management advisors say the wealthy now show risk aversion in their investment decisions, as they try to protect themselves in the event of another financial crisis. Prior to the recession, the municipal bond market was an easy and safe way for an investor to grow their nest egg, said Rob Baron, head of investments in Los Angeles for JP Morgan, the private banking arm for JP Morgan Chase bank. Post-recession that investment is not as safe, because many municipal bond insurers having poor ratings, Baron said. Investors now are asking the bank’s municipal bond market team for a new direction for their portfolio, he said. Advisors at JP Morgan and Morton Capital Management in Calabasas say structured notes are popular with investors. A structured note will cap the amount of the return, but also offers a buffer on losses if the market turns bad, said Lon Morton, president of Morton Capital. “The bottom line is it is a good way to get protection,” Morton said. Expanding services, increased competition A high concentration of wealth in the Southern California region is prompting banks and money management firms to expand in the marketplace, Morton and others say. Brokers from the wire houses have gone on to start their own firms, while existing brokers spanning from Newport Beach to Santa Barbara have expanded in some way to capture the affluent market, Morton said. JP Morgan Chase plans to base three private bankers at Chase bank branches in the San Fernando Valley this fall, said Leslie Lassiter, manager of private wealth management for JP Morgan in the Los Angeles area. Already this year, JP Morgan Chase has added in Los Angeles four new private bankers and one wealth advisor, who formerly was a trust and estate planning attorney, she said. Wells Fargo’s Encino office, which opened in 2007, is packed to capacity with 50 employees, and more staff likely will be added to accommodate the growing demand, Hansen said. For clients seeking wealth management services, Wells Fargo maintains separate offices, which are not labeled and are located in office buildings, he said. Wells Fargo also is seriously considering investing in the Santa Clarita Valley, Hanson said. “It is home to thriving businesses,” he said. “In terms of the population in that area, it is a good median income and a lot of professional people.” BNY Mellon Wealth Management also is experiencing a growth spurt, Hillman said. Over the past six months, the company has added five sales directors and four service representatives in the Los Angeles area, he said. The firm has placed a priority on growing its visibility in the Valley, Hillman said, noting last month it hosted a wealth management seminar that drew about 60 participants. As the demand for services heats up, the competition among wealth management service providers also is increasing. Wells Fargo, JP Morgan Chase and the others say they are looking for ways to differentiate themselves from competitors to gain clients. Chase takes a team approach by giving clients access to private bankers and wealth advisors, Lassiter said. When it comes to growing a client’s portfolio, it takes a broader market and socioeconomic view, she said. “We take all the resources of the firm and deploy them in the best balancing act between risk and return,” Lassiter said. Richard Gershen, executive vice president of wealth management at City National Bank in Sherman Oaks, said the company connects clients with its own portfolio managers, as well as with outside managers who have access to asset classes the bank does not have. There is a base fee charged for the advice, and there is no additional cost for using City National proprietary services, Gershen said. “It is the blended (manager) opportunities with the objective fee structure that sets us apart from many of our competitors,” he said.