Big banks rule dynamic Miami wealth market

Clients own local businesses, have international ties

Feb 11, 2008 @ 12:01 am

By Charles Paikert

Major banks and trust companies, led by Chicago-based Northern Trust Corp., dominate a dynamic wealth management market in Miami, characterized by strong international ties and a growing class of successful homegrown entrepreneurs. "Big brands tend to carry weight in Miami," said John Benevides, president of the Chicago-based Family Office Exchange. "These are names that are known in Latin America, as well as in New York and Chicago, where many clients in Miami have roots." Invariably, Miami is characterized by local wealth managers as the "gateway to Latin America," and no one questions the critical importance of the international market to the city's fortunes (see story on the opposite page).
However, local executives said, Miami's historic connection to the Northeast and Midwest, fostered by retirees and owners of second homes, has been replaced by a thriving generation of locally produced wealth. "You're seeing a tremendous amount of wealth creation going on here," noted Julie Neitzel, president of the Miami office of Palm Beach Gardens, Fla.-based GenSpring Family Offices LLC. "It's coming from real estate, and companies in import/export, hospitality, freight forwarding and other services." "It's a very dynamic, diversified market where we've seen a lot of liquidity," said Richard Sanz, Miami-based senior vice president and regional managing director for wealth management with Charlotte, N.C.-based Wachovia Corp. "Our target is first- generation wealth. Even if people come from somewhere else, they tend to live here full time. The question isn't so much where people are from but who they end up being friends with here, which makes referrals very important." The Miami-Ft. Lauderdale metropolitan area is home to 112,000 millionaire households, or 5.37% of the total, according to the East Granby, Conn.-based Affluent Marketing Service of Phoenix Marketing International. The company uses liquid wealth only to determine millionaire status, so the recent decline in South Florida real estate values is unlikely to shrink the millionaire roster significantly. In fact, Miami wealth managers say an increasing percentage of their clients are wealthier than ever. "More clients have at least $25 million in investible assets," said Charles Porter, Miami-based managing director for The Bank of New York Mellon Wealth Management in Florida. Two of Miami's leading family offices, New York-based Bessemer Trust Co. NA and GenSpring, report their clients have an average of $25 million in investible assets. Not surprisingly, competition is fierce in such a lucrative, fast-growing market, and big brand names rule the wealth management roost there. Two New York-based companies, Goldman Sachs & Co. Inc. and Merrill Lynch & Co. Inc., are widely respected, the former for its cachet among ultrawealthy investors and the latter for its powerful brand. Their Gotham-based rivals Citigroup Inc. and JPMorgan Chase & Co. are well established, as are Wachovia and U.S. Trust Bank of America Private Wealth Management. Atlanta-based regional force SunTrust Banks Inc. is also a player in the market, as are international leaders UBS AG and HSBC Holdings PLC, based in Zurich and London, respectively. Making a run at the big boys are smaller private banks, including Palm Beach, Fla.-based Lydian Bank & Trust and Coral Gables, Fla.-based Gibraltar Private Bank & Trust, and registered investment advisers, including Foldes Financial Management Inc. of Miami, Investor Solutions Inc. of Miami and Evensky & Katz Wealth Management and Singer Xenos Wealth Management, both in Coral Gables. For now, however, Northern Trust is widely considered the wealth management firm to beat. "We run into Northern Trust more than anybody else," said Mr. Porter, echoing similar statements from his colleagues in the market.

Indeed, according to Ken Thomas, an independent-banking analyst in Miami who also is a lecturer at The Wharton School of the University of Pennsylvania in Philadelphia, Northern Trust "sets the benchmark for wealth management in Miami."

Veteran adviser Harold Evensky, president of Evensky & Katz, described Northern Trust as "brilliant masters at marketing ... They know how to position themselves and treat the wealthy. They host events and have big-name speakers. For years, it was kind of a joke around Miami that if you want the best meal in town, go to Northern Trust."

The trust company's "whole marketing focus" revolves around "a more personal touch," according to Sheldon Anderson, president and regional managing director for Northern Trust in Miami.

Northern Trust aims to "surround" the client with both traditional wealth management investment and planning services, and "intimate events," including fine dining, book clubs for literature and history, and tours abroad, Mr. Anderson explained.

Last year, for example, 90 Miami clients went on a Mediterranean cruise with Northern Trust executives, while this year, the firm plans to sponsor a tour of homes in England and Scotland, a number of which will be "hosted by royalty," Mr. Anderson said.

And if imitation is the sincerest form of flattery, at least one competitor makes no bones about emulating Northern Trust's style.

"We're trying to base our culture at Lydian on Northern Trust," said James Meany, the company's Palm Beach-based president and chief executive. "I don't see a lot of firms who are doing it. Northern did a terrific job of carving out a niche in Florida, and I think we have an opportunity to establish a similar niche for Lydian."

Last year, Mr. Meany hired away four Northern Trust wealth managers in Miami, including Orlando Roche, an 11-year Northern Trust veteran who now heads Lydian's Miami-Dade regional office in Coral Gables, an affluent community in the geographic center of the market.

The lift-out underscored the fierce competition for experienced professional talent in a growing market with limited supply.

"That's the biggest challenge for these banks in Miami," Mr. Thomas said. "Competitors are constantly trying to cherry-pick their best employees and customers."

A national talent shortage in wealth management is magnified in Miami, industry observers said.

In addition to the city's high cost of living, particularly for housing, some say the city's Latino culture makes it harder to recruit executives from other parts of the country. Others point to the fact that being able to speak Spanish fluently is a major plus for a Miami-based executive, making qualified wealth managers that much harder to find.

"With the explosion of interest in the area, smaller organizations are building out teams and being very aggressive about recruiting," Mr. Sanz said. "There's a more limited supply, and the greatest value is someone with in-market contacts."

Indeed, Mr. Meany said, it took an entire year to recruit the well-respected Mr. Roche, who has two decades' experience in the Miami market. On average, recruiting a wealth manager takes four to six months, Mr. Meany said.

As the intense war for talent indicates, Miami wealth managers are clearly bullish on the market's growth prospects.

Nonetheless, the downturn in Florida real estate and the possibility of a recession have caused some concern — but hardly panic — among wealth managers.

Many report that their wealthy clients have already liquidated major real estate holdings and in fact see the falling prices as a buying opportunity.

"I think the smart money liquidated a year and half ago," Northern Trust's Mr. Anderson said.

Even so, the slumping real estate market has had "a little bit of a dampening effect," Mr. Porter said.

"Everyone here is affected by real estate, and people are paying close attention," Mr. Meany said.

Wealth managers in Miami are more sanguine about the market's prospects in the face of a recession, pointing out that the city's international ties and the continued viability of tourism — due in part to a weak dollar — tend to buffer Miami from the harsher edges of a weak economy.

"Twenty years ago, Miami would have been very hard-hit," said Ms. Neitzel, a native of the city. "But it's a much more diverse economy today, and not so vulnerable to domestic trends."

Charles Paikert can be reached at cpaikert@crain.com.

For previous cities covered in the Wealth Management Reports series, please see investmentnews.com/wealthmanagementmarketreports.

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