Wells Fargo Family Office Aims for Clients With $50 Million

Wells Fargo & Co. (WFC), the fourth-largest U.S. bank by assets, is courting families worth $50 million or more with the start of its Abbot Downing advisory unit.

Abbot Downing, which plans to begin operations under its own name in April, combines the businesses of Wells Fargo Family Wealth, the bank’s family office, and Lowry Hill private asset management, an investment-management and financial-planning subsidiary that works with individuals, foundations and endowments, among others, with $10 million or more in assets, the company said in a press release today.

“We’re aggregating a number of capabilities that we’ve had at Wells Fargo under one umbrella,” David Carroll, head of wealth, brokerage and retirement for San Francisco-based Wells Fargo, said in a telephone interview before the announcement. “As arguably the best-capitalized financial institution in the U.S., we think the affiliation with Wells Fargo will be very relevant,” for families looking for intergenerational wealth management, he said.

The combined assets of about $27.5 billion would make Abbot Downing the fourth-largest family office behind HSBC Holdings Plc (HSBA)’s private wealth solutions unit, Bessemer Trust Co. and UBS AG (UBSN)’s wealth-management business, according to data compiled by Bloomberg. Bringing the two units together means Abbot Downing will be managing the finances of about 575 families across the country, and also will serve families’ foundations and endowments, Carroll said.

‘Great Fortunes’

Abbot Downing generally will have a minimum of $50 million for new clients, even though some existing customers brought over from the merged units may have less. New clients with $5 million to $50 million generally will be referred to Wells Fargo Private Bank, Carroll said.

The rebranded unit’s new clients will come in part from the bank’s small-business customers, often owners who work with Wells Fargo in selling their businesses, said James Steiner, an executive vice president of Wells Fargo, who will be the head of Abbot Downing.

“If you think about the instances when great fortunes are realized, frequently Wells Fargo is at the table advising business owners,” Carroll said.

Abbot Downing will offer in-house and third-party investments and will invest in stocks, bonds, hedge funds and real estate, according to Sandy Deem, a Wells Fargo spokeswoman.

There are about 10,000 households in the U.S. with $50 million or more in investable assets controlling more than $1 trillion, according to the release. Small businesses are more likely to get sold than passed to heirs, so the number of ultra wealthy will rise, Carroll said.

Average Fees

Fees will be “competitive with what folks in the industry are offering,” said Steiner, who declined to provide details on costs. Multifamily offices in North America charged new clients an average minimum of $81,500 in annual fees in 2010, according to the Family Wealth Alliance LLC, a research and consulting firm that tracks the industry. The offices had an average minimum for new clients of $13.4 million, meaning the fees would equate to about 61 basis points. A basis point is 0.01 percentage point.

‘Cradle on Wheels’

Abbot Downing is named for the builder of the Concord Coach, the 19th-century stagecoach featured in Wells Fargo’s branding. Mark Twain said the coach was like a “cradle on wheels,” because the type of suspension it used made the coach rock, according to the Wells Fargo website.

Abbot Downing will be competitive by offering personalized service and because of the breadth of resources Wells Fargo offers, Steiner said. Some of its advisers may serve as few as 15 clients, he said.

The name Abbot Downing is being used to show the family office is a separate unit that has the strength and backing of Wells Fargo behind it, said Carroll.

There are more than 3,000 family offices in North America advising on more than $1.6 trillion in assets, according to estimates from the Wheaton, Illinois-based Family Wealth Alliance.

To contact the reporter on this story: Elizabeth Ody in New York eody@bloomberg.net

To contact the editor responsible for this story: Rick Levinson at rlevinson2@bloomberg.net.

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