Top Asset Management Team
Wells Fargo
When Wells Fargo comes up in financial conversations, it's fair to say it's usually not about money management. Technology, yes. West Coast power, yes. But it's mostly seen as a big retail and business bank.
And yet chief executive Dick Kovacevich has planted his stake in the ground and expects asset management to account for a quarter of the firm's revenue within three years. About a year ago, these businesses made up 10 percent. Now, that figure's about 14 percent, says Jay Welker, evp and head of regional management at Wells Fargo's Private Client Services unit. The numbers, even in what for years has been a difficult operating environment for money management, are moving Wells' way.
They don't have the bulk, global reach or earnings figures of Citi's asset management, which earlier this year posted 27 percent gains and $105 million in income on assets of $530 billion. But they don't have the federal probes, mutual fund headaches and the rap that it plowed investor money into, say, big client WorldCom even as the stock spiraled downward. Wells also doesn't have the well-mannered culture that Wachovia has a reputation for, which should eventually pay decent dividends for the Charlotte player.
But Wells is well-mannered enough, and just now they are the cleanest, most aggressive shop with a good case for growth, sources say. A.G. Edwards analyst David George notes that Wells trust and management fees are up 15 percent this year, among the highest growth in the sector, and has a relatively low share of wallet-three percent versus the 12 percent deposit market share in states where it has branch networks. And absorbing the $34 billion in Strong Financial assets snapped up earlier this year in the wake of Richard Strong's downfall in mutual fund scandals makes Wells an even stronger play, sources say.
Welker in particular is pleased at the prospect. "What it absolutely gives us is several stronger equity funds to bring under the Wells Fargo family of mutual funds. Everybody's very excited about that," Welker says. "We certainly operate in a much more open architecture environment. Both our brokers and our portfolio managers have access to both proprietary and a wide range of non-proprietary products. The acquisition of Strong has our people very excited on the equity side of the house. It adds a lot of strength to the mutual fund family. It gives them a lot of confidence to talk about the Wells Fargo fund family the way they talk about other fund families."
Overall the market's been rough on asset managers this year, and Wells is taking its lumps, too. Transactional business continues to slump. When taking the market impact into account, investment management revenues on a year-to-date basis are up only about six percent, Welker says.
But there are enough underlying bright spots to compensate. Two years ago, the firm saw a surge in investment and trust fee income, to $459 million. That continues, Welker says. Fee-based brokerage sales have doubled from a year ago. Investment management and trust sales are up 13 percent on a gross new basis, and on a net new basis up 19 percent. Actual brokerage revenue is up about 15 percent. And Wells has paid attention to both investor inquiries into bonds and safer financial instruments, and interest rate risk. Six months ago the firm set up a short-term asset management group, marketing to clients through portfolio managers in the investment and trust businesses. The idea is to get to clients looking for fixed income, but also looking to maximize short-term results without taking a lot of interest-rate risk. "It's growing assets to the tune of $150 million a month," Welker says. "That group has been incredibly successful."
Like most in the asset management game, Welker sees the business moving away from transactions and toward advice. His players need to become trusted advisors for clients, gaining market share and cashing in on an expanding array of services rather than depending on taking clips from money movement. "If you go back to business ten years ago, everybody played with a predominantly proprietary platform," Welker says. "If you're going to position yourself as truly sitting on the same side of the table as your client, with objectivity, transparency and choice, objectivity is all about doing a lot more planning in helping your client build a financial blueprint. Transparency is about how clients pay you fees so there are no surprises. Choice is all about the best in-house and third-party products to bring onto your platform to give your clients the best execution."
And in places like Los Angeles, San Francisco, Minneapolis and Denver, following through on those ideas is attracting new talent. The firm's doubled its number of private bankers in the last three years. Barring unforeseen injury, those markets should see a Wells at the top of its game.
