Legg Mason Inc. is positioning itself to compete with banks in attracting and keeping high-net-worth clients who want one-stop shopping for financial services.
The Baltimore-based broker- dealer obtained a nationwide thrift charter earlier this year that will allow it to provide trust services. And it has been buying asset management companies that cater to the very wealthy, including Berkshire Asset Management Inc., a Wilkes Barre, Pa.-based company with $600 million of assets under management, acquired this week.
The deal is Legg Mason's third money management acquisition in as many years. In 1994 it bought Gray, Siefert & Co., a New York firm that served the wealthy, and in 1996 it bought Cincinnati-based Bartlett & Co., a similar firm.
Raymond A. Mason, Legg Mason's chairman and chief executive, said the firm may have to fashion itself more like a bank and keep the door open to further asset management acquisitions to achieve that goal.
"This is going to be a mammoth area over the next 10 years," he said, referring to financial services for high-net-worth individuals. "We are looking at the top 6% or 7% of the population, and banks believe that's where they make their money."
To attract customers, Legg Mason may have to offer more comprehensive bank services, he said.
"We can't let them offer a service our customers must have and we don't offer it. We may have to create a bank to do that, but we'll probably postpone it as long as long as we think we can."
Michael A. Flanagan, an analyst with Financial Service Analytics, said Legg Mason's objective is "to defend its existing market share rather than take market share from the banks."
Legg Mason already offers credit cards and checking linked to products such as mutual funds. Though they make up no more than 1% or 2% or revenues now, they could be expanded, Mr. Mason said.
"Although I see us having some bank capabilities, it would purely be a service to the client," he said.
Several studies predict that there will be more wealthy people in a decade and that they will get wealthy at a younger age. Already, a generational pass-down of wealth has begun, he said.
The business is important for the 100-year-old Legg Mason to be in because such assets are "stickier" -- they stay with one company for a long time -- and because the stock market regards the wealth management business as a profitable one, he said.
High multiples are important to Legg Mason because a high stock price will help it remain independent. Mr. Mason built a capital market business and an asset management business, now with $93 billion of assets under management, with an eye toward remaining independent.
The company has remained independent even as several of its rivals in the regional brokerage business have been bought by banks over the past two years.