Energy drives booming Dallas wealth market
Like Texas itself, the Dallas wealth management market is big, growing and brimming with opportunity.
Like Texas itself, the Dallas wealth management market is big, growing and brimming with opportunity.
Skyrocketing crude oil prices have turbocharged the market’s already powerful oil and gas industry, and the ripple effects, including the added demand for more energy-related service industries, have further bolstered the local economy.
What’s more, the steep rise in gas prices has transformed the Barnett Shale natural gas deposit, which lies directly underneath much of the area, into a veritable gusher of wealth.
“Higher gas prices have made it more worthwhile to drill, and people in the area have been able to sell the mineral rights underneath their land,” said Chuck Thoele, managing director of Robertson Griege & Thoele, a Dallas-based wealth management firm. “That, along with money from production and drilling, is an important source of funds and income.”
“We are thrilled to be so close to Barnett Shale,” said Lori Bensing, managing director in Dallas for the Stanford Financial Group of Houston. “It’s been very positive for the market.”
But local wealth managers stress that energy is only one of many sources of wealth in this prosperous market.
OTHER SOURCES OF WEALTH
Nearly two dozen Fortune 500 corporations are headquartered in Dallas, including ExxonMobil Corp., Texas Instruments Inc., Southwest Airlines Co., and, by the end of the year, AT&T Inc.
Real estate, technology, biotech, construction, transportation, retail and service companies are also major drivers of wealth and employment in the market.
The Dallas-Fort Worth metropolitan area is the fastest-growing in the United States, with more than 6 million people, up 20% since 2000. The high end of the market has grown accordingly.
According to the annual Merrill Lynch Capgemini World Wealth Report, the number of individuals with $1 million or more in assets, excluding their primary residences, increased by a fifth last year, climbing to 84,778 in December from 69,710 at the end of 2006.
Wealth management firms with clients who have $5 million or more in investible assets say a sizable majority of their clients have first-generation wealth derived from the sale of a private business.
In fact, closely held or private businesses are the source of money for more than 40% of Tolleson Wealth Management’s clients, noted Eric Bennett, chairman and chief executive of the firm’s private wealth management division, which manages more than $2.5 billion in assets.
“This is a very diversified market,” said Mr. Bennett, whose firm concentrates on the high end of the market, only accepting clients who have at least $20 million in investible assets. “Dallas is an incredible place to do business, and it’s incredibly easy to start a business here.”
Mr. Thoele agreed.
“This is a very entrepreneurial, risk-taking environment, and there are lots of successful entrepreneurs,” he said. “It also has a very entrepreneurial set of wealth management firms who are innovative, aggressive and growth-oriented.”
Strong independent firms, many of them local, and branches of some of the financial industry’s biggest players compete fiercely in this lucrative but highly fragmented market.
In addition to Tolleson and Robertson, other notable local firms include Bluffview Wealth Management LP, Lee Financial Corp., Quest, and Penn Davis McFarland Inc.
Among independents headquartered elsewhere, San Francisco-based Presidio Financial Partners LLC and Houston-based Stanford are also well established.
New York-based The Goldman Sachs Group Inc. and JPMorgan Private Wealth Management are cited by insiders as the most formidable of the major financial institutions competing for wealthy clients in Dallas. Citigroup Inc.’s Smith Barney unit, Merrill Lynch & Co. Inc., Morgan Stanley and Bernstein Global Wealth Management, a unit of AllianceBernstein LP, all of New York, are also considered top competitors, as are Minneapolis-based RBC Wealth Management and Zurich, Switzerland-based UBS AG’s private wealth management unit.
And then there are the firms who aren’t in the market but would like to be, including heavy hitters such as The Bank of New York Mellon Corp.
“The short-term and long-term demographics both look positive, and the concentration of wealth and the competitive landscape both look attractive,” said David Lamere, Boston-based chief executive of BNY Mellon Wealth Management.
The Dallas market is indeed tantalizing, investment bankers agree.
“It’s a huge market opportunity,” said Liz Nesvold, a managing partner at Silver Lane Advisors LLC of New York. “There are a lot of prospective clients who fall below Goldman Sachs’ minimum [of $5 million to $10 million in investible assets]. There are a lot of people with $1 million to $10 million.”
“I think Dallas is one of the hottest wealth markets in the country,” said Steven Levitt, managing director and co-founder of Park Sutton Advisors LLC in New York. “Many companies that want to employ wealth managers are expressing strong interest in this marketplace.”
Local wealth managers see more competition as inevitable, but are skeptical that newcomers can grab significant market share quickly.
“It’s a pretty crowded market, but a good competitor will always break through,” said Colin Carter, a Goldman Sachs alumnus who is now a managing director for Presidio in Dallas. “But it takes three to five years to achieve critical mass. It’s hard to just hang out a shingle. You have to go out and actively recruit business and develop a referral base.”
Jeff Rupp, managing director for Bluffview, estimates that independent firms account for nearly a third of the Dallas wealth management market.
“They’re a big piece of the equation here,” he said.
There may be an opening for large national or international firms to enter the market, he said, “but it depends on their expectations. To do $15 million to $20 million a year in revenue — maybe. But $45 million [in annual revenue] — no.”
To be sure, companies already in the market also plan to grow.
Revenue for JPMorgan in Dallas increased more than 20% in 2007, from 2006, according to William Bogart, who heads the company’s private wealth management business in the market. Assets under supervision increased by one third.
“Dallas is by far one of the most lucrative private wealth management markets in the U.S. and we are committed to growing our market share and will be adding to our advisory staff to support this effort,” Mr. Bogart said.
Bluffview, which manages $1 billion in assets, wants to reach $4 billion and expand beyond Dallas, Mr. Rupp said.
The recent restructuring of large Wall Street firms may provide a boost for Bluffview — and other independent firms. “We’re interested in talking to producers from big firms who are good brokers or advisers but not businessmen,” Mr. Rupp said.
Robertson is also looking for an “experienced team of advisers that have existing business,” Mr. Thoele said. “They could be a pretty significant part of our growth.’
GIVING BACK
Philanthropy is also a “very important” part of the wealth management business in Dallas, Ms. Bensing said. “It’s crucial to understand it,” she said.
“There’s a lot of new money here and parents are very concerned about teaching their children to give back,” Ms. Bensing said. “I was at a charity event the other night and it was the biggest topic of the evening.”
Mr. Bennett agreed.
“The biggest fear [wealthy] people have about money is, ‘what will it do to my family?’” he said. “And they’re using foundations and charities to start educating their children about money.”
E-mail Charles Paikert at [email protected].
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