On October 31 Montreal-based Fiera Capital Corp. announced that it had closed on the purchase of not one but two U.S.-based wealth managers. The Canadian investment firm, which had C$57 billion ($54.5 billion) under management at the end of 2012, bought Bel Air Investment Advisors in Los Angeles and New York–based Wilkinson O’Grady & Co. The deal, which added C$8.5 billion to Fiera’s assets, signifies the ongoing evolution of the private wealth advisory marketplace, as deep-pocketed individual investors become more sophisticated and demanding in their investment needs.
Launched in 2003, Fiera Capital has grown largely through acquisitions in its domestic market. “Up until last year all of our organic growth was concentrated in Canada,” says Fiera president and chief operating officer Sylvain Brosseau. But in 2011 “we decided that we were ready to expand into the U.S.” The following year Fiera started to develop its U.S. institutional presence, building relationships with investment consulting firms and looking at acquisition targets. “Our acquisition goal in the U.S. had two segments — institutional and private wealth,” explains Brosseau. His firm looked at more than 20 different organizations before settling on Bel Air and Wilkinson O’Grady.
Brosseau insists that the key to Fiera’s success has been its ability to maintain the boutique cultures of the firms it acquires, while enabling them to benefit from the expertise and resources of the larger organization. The Canadian firm had 20 different investment teams on its platform prior to its recent U.S. shopping spree.
The ranks of the rich are growing. An annual report on the world’s wealthy published in September by Paris-headquartered technology outsourcing company Capgemini and Toronto-based asset manager RBC Wealth Management put the total 2012 high-net-worth market, defined as $1 million or more in investable assets, at $46.2 trillion — well above the pre–financial crisis high of $40.7 trillion, which was reached in 2007. The number of people with $30 million or more in investable assets — the ultra-rich — is growing at an even faster rate. According to Capgemini and RBC, globally there are 111,000 ultra-high-net-worth individuals, representing 35.2 percent of the high-net-worth market, or $16.2 trillion in assets.
Fiera’s two U.S. acquisitions represent very different segments of the investment adviser market. With $2.1 billion in total assets, Wilkinson O’Grady specializes in clients with $4 million to $5 million in investable money. The firm, headed by CEO Donald Wilkinson, offers four different funds: one each in domestic, global and international equities, as well as a global balanced product. Wilkinson will be looking to introduce some Fiera strategies to new and existing Wilkinson O’Grady clients.
Bel Air Investment Advisors, as its posh Los Angeles neighborhood name and location, two blocks from Beverly Hills High School, suggest, caters to an ultra-wealthy demographic. The firm has $7.3 billion under management as of September, and each of its clients has at least $20 million in investable assets. Bel Air uses an open-architecture model, meaning it is open to all third-party investment managers. Unlike Wilkinson’s noted effort to incorporate Fiera strategies, the firm will retain its long-standing open-architecture model, Brosseau says, and employ Fiera’s“strategies only when we have demonstrated that they are competitive to anything else in [Bel Air’s] product lineup.”
The way wealthy investors manage their money is changing. Increasingly, their portfolios are starting to resemble those of foundations and endowments, with allocations in alternatives, including private equity and hedge funds, instead of just in stocks and bonds. According to the Institute for Private Investors, a New York–based membership group for family offices, the portfolio of a typical high-net-worth investor has 32 percent equities, 18 percent hedge funds, 17 percent bonds, 10 percent private equity, 7 percent cash, 6 percent real estate, 5 percent commodities, 2 percent venture capital, 2 percent direct investments and 1 percent miscellaneous investments (such as art, for example).
Many high-net-worth individuals experienced significant capital depreciations during and after the 2008 market meltdown. One upshot of the recession was the revived awareness among high-net-worth individuals of the need for top-quality investment advice. Financial scandals such as the Bernard Madoff Ponzi scheme put this into even greater relief, as many who lost funds in the massive fraud were ultra-wealthy.
For Bel Air, which was launched in 1997 by former Goldman Sachs wealth advisers Todd Morgan, Reed Halladay and Darell Krasnoff, the Fiera deal provides a way to manage its succession planning. The firm’s three founders are now in their mid-to-late 60s. Whereas they are committed to staying with Bel Air for another five years, the deal gives them a long-term exit strategy while providing younger partners with some equity. “I’m not going to leave,” says Morgan. “I left Goldman Sachs 16 years ago. This was my dream.” Morgan has been named chairman of the Fiera Capital Private Wealth North American division. “We think there is a new growth spurt coming for the wealth management business,” Morgan says. “The next ten years are going to be very positive.”
Fiera paid $125 million for Bel Air. In addition to freeing up equity, the deal allows Bel Air to set up shop across the U.S. Morgan says San Francisco, San Diego and Houston are all on the partners’ wish list, as is possible further expansion within Los Angeles. “It is about hiring strong talent,” he adds.
Further growth will not be easy, however. Bel Air has one of the strongest brands in the U.S. wealth advisory sphere, but whereas the number of rich and ultra-rich is growing, so too is the number of wealth advisory firms looking to manage their money. Additionally, with some of their traditional revenue sources either becoming less lucrative or in the case of proprietary trading, regulated out of existence, investment banks are increasingly reliant on asset management for growth, with wealth advisory being an important part of that strategy.
High-profile hires on this front have demonstrated a new, serious intent on the part of the banks. In 2011 Citi Private Bank hired Stephen Campbell, formerly head of Zefram, the Seattle–based family office of Amazon founder Jeff Bezos, to be the global head of its U.S. family office business. This May Merrill Lynch Wealth Management announced it had hired Ashvin Chhabra, formerly the CIO of the Institute for Advanced Study in Princeton, New Jersey, to head up its ultra-high-net-worth wealth business. Merrill Lynch, for its part, has been on a talent hiring spree. In September it recruited a Denver-based wealth adviser from Goldman Sachs Private Bank and a team based in Miami from Morgan Stanley. This month the firm added another top-producing Goldman Sachs private banker, who is based in Dallas. As for Goldman Sachs, CEO and chairman Lloyd Blankfein has repeatedly stated the bank’s intent to grow its wealth management business.
For more about wealth management, see Institutional Investor’s newly launched registered investment advisers channel.
