Legg Mason Inc. made news last year when it swapped its brokerage network for Citigroup Inc.'s asset management business to become known as a pure-play asset manager.
But the Baltimore-based firm, which has $855 billion of assets under management, did not get out of the customer-facing business altogether. It held back from the deal a trust and investment unit called Legg Mason Investment Counsel.
That unit, formed in January 2004 as Legg Mason Trust through the combination of several businesses, manages $9.56 billion for high-net-worth clients and was renamed Legg Mason Investment Counsel in April.
Legg Mason Investment Counsel wants to grow organically in the low double digits, as well as through acquisitions, especially outside its East Coast footprint, said Harry O'Mealia, the unit's chief executive officer.
Legg Mason's top executives have long been intrigued by the high-net-worth business, because it is not dominated by a single firm, Mr. O'Mealia said.
"The opportunity to build a Legg franchise in that space appealed to them," he said.
Legg Mason Investment Counsel, with a base of what Mr. O'Mealia called "sticky"clients, already provides the parent company with a strong revenue stream, he said. He would not be more specific.
The unit seeks to differentiate itself through the combination of national trust powers, personalized service, and a respected asset management name, Mr. O'Mealia said.
"Trust companies are great for client service, but very few are known for their investment acumen," he said. "We're doing both here."
Legg Mason Investment Counsel has offices in Baltimore, Chicago, Cincinnati, New York, and Philadelphia. It is looking for acquisitions that would bring it into new geographic markets, Mr. O'Mealia said.
He would like to build his business' assets under management to $25 billion in the next five years or so, but says it cannot get there without acquisitions. Organic growth has been modest this year as assets under management have increased only 6% or 7%, he said.
"At the moment we're looking at a couple of" acquisition opportunities, he said.
Legg Mason calls Legg Mason Investment Counsel a "wealth management fiduciary." It provides everything from trust advisory to administrative and family office services to asset management. The unit's 25 portfolio managers run equity, fixed-income, and balanced portfolios, and, coordinating directly with clients, build customized portfolios.
That Legg is a pure-play asset manager does not make growth harder for Legg Mason Investment Counsel, Mr. O'Mealia said. Rather, the media exposure brought by its recent moves, including the purchase of the New York hedge fund manager Permal Group, have raised its profile in a way that can help the unit, he said.
"The halo effect has been tremendous," he said. "Legg was well respected, but kind of a secret." The Citi deal "has actually shined a spotlight on us."
The unit leverages its parent's scale in technology and marketing. Both are becoming more important categories that boutique rivals may be avoiding, Mr. O'Mealia said.
"The business is changing, and there is a tremendous need for areas like technical, compliance, and legal that are critical to the client experience," he said. "These firms don't want to invest in these areas."
Legg Mason Investment Counsel spent its first year getting organized and recruiting. In addition to its 25 portfolio managers, the unit has six trust officers, four of whom are also attorneys. The business is "going from defense to offense this year," Mr. O'Mealia said, referring to its scouting of possible acquisitions and recruiting of new business.
In addition to Legg's own investment management units, it has a number of well-regarded subsidiaries, including Bartlett & Co., Brandywine Asset Management, and Western Asset Management Co., but Legg Mason Investment Counsel uses outside managers as well. Mr. O'Mealia said about 35% of its clients' assets are managed by third parties.
The unit is counting on quality personal attention to succeed, Mr. O'Mealia said. Most of the portfolio managers, who are the primary client contacts, are chartered financial analysts.
Each serves an average of about 50 clients, and those clients' portfolios average $8 million, a Legg spokeswoman said. If the relationship has trust elements, a trust officer works in tandem with the portfolio manager, Mr. O'Mealia said.
