NEW YORK (Reuters) - Bessemer Trust Co, the largest pure-play investment manager, will expand client assets by more than $3 billion this year, building on 2009’s record growth, Senior Managing Director Robert Elliott told Reuters.
The 2008 crisis that hammered the world’s largest banks prompted many investors to move their business to independent advisory firms. Bessemer, founded 103 years ago to manage the fortune of Andrew Carnegie partner Henry Phipps, attracted 170 clients and a record $3.5 billion in new assets last year.
Elliott said he expects the bank’s $56 billion of assets to expand by as much as 6 percent this year, which translates to more than $3 billion, fueled by an estimated 120 to 125 new clients and recovering markets.
“Everything that’s wrong with Wall Street came home to roost, in spades,” Elliott said in an interview this week. “There was a flight to quality, to firms that were safe, stable and conflict-free.”
Bessemer is a family-owned bank that manages the broad financial affairs of extremely wealthy investors. The average account has $27 million of assets and the stated minimum is $10 million. Some of its 2,000 clients have as much as $1 billion.
Elliott said the unprecedented movement of investment management clients initially was driven by demand for financial safety -- “moving money away from banks about to collapse.”
But what followed, he said, was a trend that will persist for years.
“We’re benefiting from a move away from the supermarkets or firms that have conflicts, to firms that are independent or private. That’s lasting,” he said.
Investment advisers generally charge a fee based on assets managed, whereas brokers make their money from commissions and fees generated by trades and other activity. Almost every brokerage has moved to a fee-based advisory model, though critics say the big firms still have conflicts of interest.
Elliott said Bessemer intends to attract fleeing brokerage clients by emphasizing its history, breadth of offerings and scale compared with little boutiques or an office launched by some break-away brokers.
“We’re in a good position. We’ve already evolved to a critical mass, yet we don’t have the problems and financial strains” of the big commercial and investment banks, Elliott said.
In the wake of so many new wealth management firms opening for business, Elliott expects consolidation in the sector. He also stressed that the big brokerages are redoubling their efforts to retain clients.
“You still have strong people at the wirehouses. They will come back,” Elliott said. “Clients have a lot of loyalty to the people they work with.”
This year is not likely to be a big recruiting year, Elliott said. The bank is looking to expand its network in 14 cities by opening offices in Houston and Seattle.
Elliott said he would also like to establish a more permanent presence in Asia, home of the world’s fastest growing economies, but the bank is moving cautiously. It is essential that a U.S. company find the right local partners, he said.
“We will be there,” he said. “It’s a matter of time.” (Reporting by Joseph A. Giannone; editing by John Wallace)
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