Wells Fargo Gets Serious About Family Offices With New Abbott Downing Unit

Wednesday, November 02, 2011 07:22
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Wells Fargo Gets Serious About Family Offices With New Abbott Downing Unit

Tags: family offices

More and more clients too big to fit into a traditional advisory or even private banking relationship are going to family office providers to meet their needs. Wells Fargo hopes to capture some of those huge accounts.

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The new Abbott Downing unit will repackage Wells Fargo services in a more traditionally "white glove" brand distinct from its street-level banking operation.

 

Target client is in the $50 million and up range, with mere multi-millionaires being shunted back into Wells Fargo's relatively low-profile private banking unit.

 

Since the Rockefellers and other established wealthy families already have family offices of their own -- and in fact built out the market segment -- Wells Fargo is courting "new money" created when entrepreneurs sell their businesses.

 

It arguably takes a lot of small business to create a $50 million liquidity event, but they seem to be hoping that their commercial banking customers will do really well.

 

There are maybe 10,000 American families in that wealth bracket and 3,000 family offices serving them with full "concierge" offerings that go well beyond portfolio management and tax prep.

 

Family offices provide a complete envelope of staffing, legal, payroll and consulting service.

 

The sheer size of the accounts involved can be tempting, but if the fees only boil down to 60 basis points a year, they can also be extremely unprofitable to run as a business.

 

The big private banks -- the JP Morgans of the world -- get by because they do not get quite so involved in the day-to-day management of the family's affairs.

 

Still, we will have to see how this evolves.

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