Mellon Financial Corp.'s private wealth management group plans to expand aggressively over the next two years by growing organically and making strategic acquisitions.
Craig Sutherland, Mellon's national director for private wealth management, said in the next two years the group will double its sales force and marketing budget, add private bankers in specific regions, and look for more strategic deals.
The Pittsburgh banking company's private wealth unit has $79 billion of assets under management, he said, and "perhaps we won't be the largest asset manager, but we want to grow. One of our real opportunities is private wealth. It is a quiet secret. It is not something we want to beat our chest about, but it is certainly a place where we can succeed."
Mellon acquired some cash it could use to expand its private wealth business in May when it sold its human resources outsourcing operation to Affiliated Computer Services Inc. of Dallas for $405 million. Martin G. McGuinn, Mellon's chairman and chief executive, said at the time that his company had decided to focus on "growth businesses."
Mr. Sutherland said Mellon set aside some assets from the sale in an "organic growth pool" for selected businesses and a "disproportionate" amount was allocated for private wealth unit expansion.
"I think in the next year or two you will see significant strides from the private wealth business as we emerge from a long defensive period in which the unit has continued to grow," he said. When Mr. Sutherland joined Mellon in 2001, the private wealth group managed $20 billion of assets.
The parent company has been trying to create a national private banking network since 2001 when it sold its retail banking operations, including all its branches, to Providence, R.I.-based Citizens Financial Group, retaining only the business related to high-net-worth customers. It has spent the years since in divesting what it considers low-profit operations, including credit cards, mortgages, and human resources, and it has devoted the bulk of its resources to building asset management, securities processing, and other fee-based businesses.
As Mellon shuttered its retail businesses, it expanded the private wealth business, which has made seven acquisitions since 2000 in an effort to broaden its footprint. The unit now has 60 offices spread among California, Colorado, Connecticut, Delaware, the District of Columbia, Florida, Georgia, Kentucky, Maryland, Massachusetts, Nevada, New Jersey, New York, Ohio, Pennsylvania, Rhode Island, and Washington.
Mr. Sutherland said his unit will add private bankers in places like Atlanta where it already has a presence. And it will open offices in Naples, Fla., and West Los Angeles, he said. The parent company will keep actively looking for boutique firms whose purchase would provide entry to new markets, he added.
"We are going to go back to what has always been successful for us," he said. "We have focused on acquisitions to grow into new regions because then we can bypass two to three years of de novo operations that can be painful."
"When we go into new markets, the preference is always to make an acquisition," he added, "because it is a fabulous way to get the best talent."
Mr. Sutherland said the unit is very interested in making deals in Texas and Chicago and exploring other opportunities in the West. "We have a significant presence in the Northeast," he said, "and we are growing significantly in the South and the Southeast."
"We are still very active," he added, "and we plan to still be active when it comes to making deals." Mellon is also interested in reinforcing its presence in California, Florida, Boston, Atlanta, and New York, he said.
"Our New York clients are serviced well by our group in Boston, but we want to put private bankers on the ground there eventually," Mr. Sutherland said.
His unit also plans to develop a presence in Europe, he said.
"We will be launching a global extension next year," Mr. Sutherland said. "We acquired Newton Asset Management a few years ago. They had a presence with private clients and institutional customers overseas, and they will give us an opportunity to expand from an office in London."
Analysts said that companies like Mellon must be cautious about how and where they make deals.
"Firms have to be sure not to grow beyond their capacity," said Burton Greenwald, an analyst at BJ Greenwald Associates in Philadelphia. "Acquisitions are an excellent growth strategy, but deals just for the sake of growth never work [in the] long term."
Mr. Sutherland said the Mellon private wealth unit could grow significantly because of the range of clients it serves. Of its $79 billion under management, he said, $49 billion is managed for 90 very wealthy families and $30 billion for clients with $1 million to $10 million of assets.
"We have within the private wealth group a very, very high-end practice, and we also manage assets for the affluent and mass affluent," he said. "We are a well-kept secret, and really, we don't want to be any more."
Ultimately, Mr. Sutherland said, Mellon Private Wealth wants to see double-digit growth both in terms of assets under management and profit.
"Our goals are increased for next year," he said. "We will look for sales growth overall. We want to grow 30% in new revenues and sales next year."
