Wealth manager ups the ante for clients

Doggone, it's tough all over.

In a world rocked by high unemployment amid a faltering U.S. economy, fears of recession in the debt-strapped European Union and widespread famine in east Africa, the local silk-stocking, family-office trade was a-twitter over the phaseout of Lowry Hill by next spring. Lowry Hill is the private money management, banking, trust and estate business created a quarter-century ago within the old Norwest Bank's trust department for families with net worth of $10 million or more in today's dollars.

Several days ago, about half of the 25 principal relationship managers at Lowry Hill left to launch the new Minneapolis office of Evercore Wealth Management or join another of the independent boutiques and trust companies who compete with Lowry Hill.

"[Evercore's] ... sophisticated investment platform and its independence from the internal conflicts that are inherent at so many big financial institutions will strongly appeal to private clients in the Midwest," said Martha Pomerantz, a veteran Lowry Hill portfolio manager who jumped to Evercore. "The business model at Evercore is closest to the one we had at Lowry Hill in terms of service, culture and investment platform. We just can't do that in a big bank."

These moves were precipitated by the decision of huge Wells Fargo (successor to the former Norwest) to consolidate its regional, family-office boutiques in Minnesota, North Carolina and elsewhere into the new Wells Fargo Family Wealth business. Wells Fargo has acquired the operations through bank acquisitions in the past 15 years.

"We're really excited," said Jim Steiner, the veteran Lowry Hill chief who will run the consolidated family office for Wells Fargo from Minneapolis. "The combination will be beneficial. Wells Fargo is investing in additional services and resources. The new brand name will be 'Wells Fargo,' but the model will be very much the same [as Lowry Hill] ... a high-touch model. Client services will be much more significant in the areas of financial planning, tax planning, wealth transfer."

Lowry Hill manages about $5 billion in client assets. Steiner expects the consolidated Wells Fargo family office to start with about $30 billion.

When Peter Heegard, a Norwest trust executive now long retired, started Lowry Hill in 1986, the minimum family net worth required was $1 million. Today it takes $10 million to get in the door. And when the cutover to the consolidated Wells Fargo family office is complete next year, the minimum will be $50 million to enjoy private banking, trust, investment management, financial and estate planning and a few nice receptions and preferred seating at plays and concerts.

Steiner, who is trying to keep clients being lured away by Lowry Hill defectors, said Wells Fargo will grandfather in all existing customers, regardless of their net worth.

The new minimum at Evercore is $5 million per family.

Evercore, based in New York, was started by former U.S. Trust brass who left after U.S. Trust was bought by Bank of America in recent years.

"It's fascinating," said Jerry Johnson a founder of Meristem, another local family wealth management firm. "Lowry Hill was a phenomenal firm and a great competitor. But a $50 million minimum goes contrary to what's fun about this business. Somebody with only $12 or $20 million doesn't want to hear, 'Oh, I'm getting grandfathered in.' That doesn't resonate with some of the great people who are leaving Lowry Hill. I wouldn't want to deliver that message."

To be sure, outfits like Meristem, which acquired the old Pillsbury Family Office in 2003, who take in families with as little as a few million may benefit from the Wells Fargo consolidation. The stakes are high. The base fee usually is around 1 percent of assets for financial and investment advice. There often are additional fees and charges.

The key, whether in brokerage or a family office, often is the trust between the relationship officer and the client. It's the critical emotional aspect of a relationship that spans everything from investment returns, to estate law and how much to leave kids and how much to leave to charities.

Pomerantz and others are trying to take their old Lowry Hill clients. Steiner and his team are trying to retain the profitable, long-term relationships.

There is no lack of competition to manage the ballooning wealth of America's richest.

Neal St. Anthony • 612-673-7144 • nstanthony@startribune.com