CHICAGO - Any doubts about Chicago's being the center of affluence in the United States can be dispelled quickly by a short walk around the city's booming downtown "loop," with its jaw-dropping number of entire city blocks filled with towering cranes assembling gleaming new skyscrapers.
"This is a very rich and multifaceted market," said Wallace Head, managing director and chief executive of wealth management for The Private Bank, a Chicago-based division of PrivateBancorp Inc. "There is simply no other big city in the region that's close to Chicago's size."
The economy of metropolitan Chicago, a longtime manufacturing and retailing hub, has been bolstered in the past decade by an increase in service and financial companies doing business throughout the Midwest.
The lodestar of the market's wealth management business, executives say, traditionally has been its high concentration of established wealthy families, corporate executives and prosperous small-business owners.
What makes Chicago one of the country's hottest wealth management markets now, they add, is the addition of a growing number of new businesses, the increasing number of established businesses being sold by baby boomer owners, multiplying generations of old-line wealthy families and the increased appetite for risk by a new generation of wealthy entrepreneurs and younger members of wealthy families.
These factors have combined to make Chicago an increasingly lucrative and competitive market, albeit a mature one, say local executives.
"The tide is rising here," said Alan Robertson, group head of Chicago-based Northern Trust Corp.'s wealth advisory division, summing up the prevailing bullish sentiment of local wealth managers.
Large and midsize banks, led by Northern and Harris Private Bank, have dominated the Chicago market for years, while relative newcomers such as The Private Bank and Gresham Partners LLC, as well as a host of other well-regarded small and midsize wealth management firms, also have made impressive gains in recent years.
How much more competition the increasingly fragmented market can absorb is open to question.
"It's a very well-serviced market," said Peter Rockefeller, a managing director with New York-based Berkshire Capital Securities LLC, "and [it] would be very difficult for a new entrant to gain traction."
But Liz Nesvold, a managing director with New York-based Cambridge International Partners Inc., believes that there is room "for another notable player" to establish a presence in the market.
That may be true, but it wouldn't be easy for such a newcomer to crack the market, wealth management executives in Chicago said, noting the city's famously tightknit inner circles of wealth.
"Chicago is a large city but a small community," said Liz Connelly, Midwest regional director for New York-based JPMorgan Chase & Co.'s private-client-services division, which traces its Windy City roots back to First National Bank in 1863. "It's a relationship-based business, and it's very important to be involved in civic and philanthropic activities."
"There's a lot of interwoven relationships here," agreed John Cregan, president and chief executive of Chicago-based Hotchkiss Associates LLC. "It's certainly harder to break in if you're not local."
Other observers noted that a number of prominent and aggressive wealth management firms have, despite considerable speculation, deliberately stayed out of the market.
The scale that "superregional or national" banks and trust companies would need in order to establish a geographical footprint in the market make it "very difficult to have an impact," said Zachary Lazar Jr., Illinois regional president for Harris Private Bank, a division of Montreal-based BMO Financial Group's BMO Harris Private Banking unit.
For such large firms to "come into Chicago and capture meaningful market share and profitability is a tall order," said The Private Bank's Mr. Head. "They may find they can have a higher payoff elsewhere."
That's not stopping some from trying, however.
Just last month, Alan Rappaport, president of Charlotte, N.C.-based Bank of America Corp.'s Family Wealth Advisors division in New York, said he was adding a new four-person wealth management team to the Chicago office, citing the "increased demand for ultrahigh-net-worth advisory services" in the market.
Those players already established in the market have employed a variety of strategies to carve out a market niche.
At 117 years old, Northern Trust widely is considered the dominant player in the upper end of the Chicago wealth management market, but even that venerable firm is facing challenges on several fronts (see accompanying article).
After Northern, there is a "big falloff" in the market, Mr. Cregan said.
"That's an opportunity for us," he added, "because Northern isn't for everyone."
Harris Private Bank is viewed widely as Northern's closest competitor for the trust and custodial business of clients with $25 million or more in investible assets.
In fact, the bank has a "cradle to grave" business model, said Mr. Lazar, beginning with trying to "capture clients in their wealth-accumulating years" and taking care of their subsequent financial and planning needs, including retail and commercial banking.
But critics say Harris' wealth management star has lost some of its luster. The bank's purchase in 2002 of Redwood City, Calif.-based myCFO Inc. has not drawn rave reviews, and some competitors say that Harris has lost its focus on wealth management.
"I think they have an identity problem," said one rival. "I just don't see them around, and I get out of the office."
"It's natural for people to feel that way" about Harris, because of its multiple lines of business and multinational structure, Mr. Lazar said.
The real wealth management challenge in Chicago, he added, is not market share but: "How do you expand share of wallet?"
To that end, Harris and other area banks are focusing on cross-selling their commercial-lending customers, as well as offering clients more non-proprietary financial products and holistic planning services spearheaded by a relationship management specialist.
ColeTaylor Bank, for example, is conducting an internal review to gauge how well positioned it is to convert commercial-lending customers into wealth management clients, said John Kosik, senior vice president for the Chicago-based institution's wealth management group.
Chase has been so pleased with its team-based approach advocating a "long-term partnership" with the "middle market" of small-business owners, Ms. Connelly said, that it plans to add about 20 advisers in Chicago next year.
And although boutique firms haven't yet had the same effect in the Chicago wealth management market as in other hot markets, such as San Francisco, that may be changing.
Gresham, for example, is evaluating adding trust capabilities to its service offerings next year, according to Craig Rawlins, one of the Chicago-based firm's principals.
And, he argues, boutiques will have an advantage when it comes to attracting hard-to-find top talent.
"One of the biggest issues in this business is getting qualified people," Mr. Rawlins said. "The best and the brightest will be attracted where they can own part of the enterprise. Boutiques have the advantage because of the ownership opportunities."
More on wealth management in cities across the U.S.: