Salomon Smith Barney Inc., gearing up for a big marketing push in Europe for its
separately managed accounts, has added a high-level executive to the consulting group that creates them.
Paul Hatch, the unit's new chief operating officer, is regarded by many as a rising star at Salomon. President and CEO Frank Campanale also had been serving as chief operating officer.
Mr. Campanale says that by hiring Mr. Hatch, he will have more time to focus on expanding Salomon Smith Barney's lucrative fee-based managed-accounts program overseas. The group is getting ready to open a new office this summer in London and launch a big campaign in Europe.
"This allows me to spend more time and focus on the bigger picture," says Mr. Campanale, who adds that it took 10 months to find a chief operating officer. "We will be front and center in Europe," he says.
Mr. Campanale says he would have hired Mr. Hatch earlier had the executive not been tied up with other projects for the firm.
Mr. Hatch will be based in New York. Mr. Campanale works out of Birmingham, Mich., while the consulting group itself is in Wilmington, Del.
While they reach new highs in sales and revenues, Wall Street wirehouses face new competition in selling rich investors fee-based money management such as
separately managed accounts. Major regional broker-dealers and mutual fund companies, for example, are pushing into the market.
a giant market
Mr. Campanale welcomes the challenge.
"Competition is good. It makes a bigger market for you," he says. "The more people that are aware of [separate accounts], the better."
The consultant wrap market is huge, reaching $289.8 billion at the end of last year, according to research from Cerulli Associates Inc. in Boston. A consultant wrap typically uses outside institutional money managers and puts investors' money into separate accounts. Standard minimums range from $100,000 to $250,000 and up.
The wirehouses have a hold on the consultant wrap business in the face of the new competition, according to Cerulli.
Salomon Smith Barney has 27.4% of the market, with Merrill Lynch behind it at 21.9%. Paine Webber, Morgan Stanley and Prudential Securities, respectively, have 11.1%, 8.8% and 6.5% of the consultant wrap market.
Salomon Smith Barney, widely regarded as the industry leader, has slipped slightly in market share, according to Cerulli. At the end of 1999, it had 30.1% of the market, which totaled $248 billion in assets.
Salomon Smith Barney's consulting group generated a hefty $2.1 billion in revenue last year, Mr. Campanale says.
Salomon Smith Barney's expansion in Europe makes sense, observers say.
"The wrap-fee business hasn't hit Europe yet in any significant way," says Mark Elzweig, the head of a New York recruiting firm that specializes in the money management industry.
Wealthy investors in Europe instead might invest with a private money manager at a bank or in mutual funds, he explains. "Europe is the next frontier" for separate accounts, he adds.
Bringing aboard Mr. Hatch is a feather in the cap for Salomon Smith Barney's consulting group, observers say.
"In the past, the consulting group had problems getting responses from the firm," says one source. The addition of Mr. Hatch could change that.
Mr. Hatch will oversee technology for the consulting group. One of his recent projects was giving the firm's brokers the ability to create personalized websites.
Mr. Hatch is a former Salomon Smith Barney branch manager in the Washington area and the Midwest who was also in charge of broker training.
Mr. Hatch has been a troubleshooter at Salomon Smith Barney in the past, says one observer. Most recently, he was deputy director of national sales.
