Geller looks to expand reach of investment management

The task, however, will be formidable, say industry observers who cite the high cost and risk of upgrading Geller’s investment management expertise and competing in a brutal marketplace.

Geller’s ambitions were underscored by the hiring of high-profile wealth manager James “Jamie” McLaughlin from Convergent Wealth Advisors this month.

Mr. McLaughlin, who was named chief executive, will be given a “significant capital commitment” to build up the investment platform and acquire top talent, according to Steven Fadem, the chief operating office of parent firm Geller & Co.

Until now, the five-year-old Geller family office unt has been best known for its parentage. Geller & Co. is a prominent accounting firm with an elite client roster that includes New York Mayor Michael Bloomberg.

MARQUEE NAME

With $4 billion in assets under management from fewer than two dozen clients, Geller is ranked as the top family office by average client assets in the annual Family Wealth Alliance industry survey, set to be released this week.

“Having a marquee name behind the family office is definitely a plus,” said William Rankin, chief executive of Shelterwood Family Services LLC. “But the single biggest challenge facing Geller is the need to hire a highly reputable chief investment officer with a track record to give the firm a selling proposition for prospective clients.”

To be sure, selecting a chief investment officer will be a “huge” decision, said Mr. McLaughlin, who will also be hiring a chief operating officer and at least seven new wealth managers.

The next 12 months offer the “richest opportunity” to snare top talent in recent memory, he said.

“Other firms are licking their wounds right now, and there’s a surfeit of talent available,” Mr. McLaughlin said.

Leslie Voth, president and chief operating officer of Pitcairn Financial Group, a multifamily office with more than $3 billion in assets under management, also thinks that Geller faces a tough challenge.

“Geller’s expertise in accounting is an advantage, because it’s a good part of what wealthy families need, but committing limitless funds to an investment platform is not a guarantee of success,” she said.

“We’ve seen other big firms try to move into this space and it has not worked out. Hardly anybody has built a successful platform that does everything,” Ms. Voth said.

To date, Geller has focused on passive and fixed-income strategies, Mr. McLaughlin said.

In the next 18 months, he said, that he intends to build out a “rigorous” investment platform that will include portfolio management, research, investment management selection and monitoring.

“Our goal is to offer fully transparent, purely unconflicted advice,” Mr. McLaughlin said.

“Our bet is that’s where the forward demand will be,” he said. “The platform will have a high cost structure, but one that has the potential to deliver a high payoff.”

Moving away from its passive-investing past and into the world of active management is a high-risk proposition, some industry observers pointed out.

“Geller is going to have to decide what they want to put resources into: wealth management or investment management,” said Scott Budge, managing director of RayLign Advisory LLC. “Choices have to be made, and they’re not the only firm that has to wrestle with it.”

Boutique multifamily offices such as Pitcairn, Shelterwood and Threshold Group Inc. will be Geller’s primary competition for the firm’s target market of ultrahigh-net-worth clients who have at least $25 million in investible assets.

What’s more, Geller will make its play for “a large share of that marketplace” in New York and the Northeast region, Mr. McLaughlin said.

“There’s no reason for us to build out [a national] cost structure or organizational mass in the short term,” he said. “We can reach over half of our target market here or by getting on the shuttle to Boston or Washington from LaGuardia.”

Not all Geller’s competitors agree.

“The New York market is arguably overserviced already,” Mr. Rankin said. “We think the best growth opportunities are outside the Northeast, where there’s more demand and less supply.”

Creating a separate identity from Geller & Co. will also be a challenge, according to industry executives.

“They have to differentiate themselves in a very crowded marketplace. They either have to leverage their tax expertise or change the market’s perception of the firm,” said Brian Hughes, managing director of strategic relationships for Threshold.

“Clients have hired Geller to provide specialized tax-related services, and they have to reposition themselves as a credible wealth manager,” said Jeff Spears, principal of Sanctuary Wealth LLC.

Geller will emphasize the family office’s advisory capabilities when it launches a marketing campaign next year, but doesn’t want to lose sight of its “brand equity” as an accounting firm, Mr. Fadem said.

“People no longer trust institutions, and we see an opportunity to leverage that in the marketplace,” he said.

“A FIXTURE’

Hiring Mr. McLaughlin, an industry veteran and popular public speaker, was also seen as an indication of the importance of the family office business for Geller.

“Jamie’s been a fixture in the industry, especially in New York. Bringing him on shows a real commitment to the business,” said Tom Livergood, chief executive of The Family Wealth Alliance LLC, an industry trade and research group.

“He totally gets integrated wealth management and has been a great advocate for the client,” Mr. Hughes said.

“Geller is a competitor, but Jamie’s appointment is good for the entire industry. We want them to succeed,” Mr. Hughes said.

“Geller’s competitors would kill for their clientele,” Mr. Spears said. “Jamie’s been a thought leader as the industry has evolved, and now he has one of the best opportunities in wealth management.”

Related Topics: Wealth Management