(For other news from the Reuters Wealth Management Summit,
* Many wealth management businesses file for U.S. IPOs
* IPO can raise money for acquisitions, compensation
* Quarterly performance measures inappropriate - execs
* No "first mover" advantage for wealth firm IPOs - exec
By Clare Baldwin
NEW YORK, Nov 5 Wealth management firms are
lining up to go public, but some in the industry wonder if
clients will suffer.
Going public might help a firm raise money for acquisitions
or to pay employees -- but it also pressures it to perform
profitably on a quarterly basis in a business some say can only
be evaluated over the long term.
"Our business is a very long term business and you have to
put your client's interest before your own. And I think,
frankly, that it would be very difficult to manage that if you
had the pressure of quarterly earnings," said Glenmede Chief
Executive Officer Gordon Fowler, speaking at the Reuters Wealth
Management Summit in New York.
Still, a number of wealth management firms have recently
gone public or are moving in that direction.
Financial Engines Inc (FNGN.O), which sells financial
analysis based on the work of Nobel laureate and co-founder
William Sharpe, kicked off the IPO rush in March.
Private equity-backed LPL Investment Holdings Inc, parent
of one the largest independent U.S. brokerage companies, filed
for an IPO in June and on Thursday finalized terms that would
enable it raise about $445 million at the midpoint.
Neuberger Berman, which manages money for the wealthy among
other clients, said in June it will will most likely pursue an
IPO at some point in the future. [ID:nN09153611]
And it is not just home-grown companies that are looking to
tap the market. Noah Holdings Ltd, an independent seller of
wealth management products to wealthy clients in China, hopes
to raise about $84 million in its IPO next week. The company
has 300 financial advisers in 28 offices in some of the
most-developed regions of the country, including the Yangtze
River Delta, the Pearl River Delta and the Bohai Rim.
SKIN IN THE GAME
Still, executives speaking at the Reuters Wealth Management
Summit in New York earlier this week urged caution.
GenSpring Family Offices Chief Executive Officer Maria
Elena Lagomasino said being partially owned by management
ensures that a wealth manager's incentives are aligned with
those of customers.
GenSpring is majority owned by SunTrust Banks Inc (STI.N),
but over time Lagomasino hopes a bigger share will be owned by
GenSpring employees, or, potentially, the families they serve.
"There is a huge interest and value from our (employees) to
be able to say to a client, I own a piece of this company ... I
have my skin in the game," said Lagomasino.
Focus Financial Partners, which is backed by private equity
firms Summit Partners and Polaris Venture Partners, is viewed
as an eventual IPO candidate, but founder and Chief Executive
Officer Ruediger Adolf insisted there is no rush.
"I would disagree that there is a first-mover advantage,"
said Adolf. It is better wait and see how the market responds
to the other wealth firms lining up to go public, he said.
Focus also recently refinanced, meaning some of the
pressure to divest has eased as private equity funds typically
hold their investments for 5 years to 10 years before exiting.
"I'm a big believer of not being at the bleeding edge," said
(Reporting by Clare Baldwin; additional reporting by Helen
Kearney; editing by Andre Grenon)