Contango Capital Advisors Inc., Zions Bancorp.’s young wealth management arm, plans to hire more advisers and will consider making a large acquisition to maintain its strong early momentum.
The Berkeley, Calif., wealth manager has substantially increased its assets under management to $1.249 billion from $150 million since it opened 18 months ago, David Magee, Contango’s president, said in an interview last week.
Contango has 23 advisers spread regionally across Zions’ community banks.
The Salt Lake City parent company owns seven banks in the West. Zions, which had $48.6 billion in total bank assets as of June 30, expanded in the 1990s through small acquisitions but more recently has turned its attention to growing from within. Just over a third of its business is in Utah and Idaho; one-third more is in California.
Mr. Magee said Contango has advisers in six of Zions’ seven subsidiary banks in Washington, Oregon, California, Nevada, Arizona, and Colorado. The only bank that it does not yet cover is Amegy Bank in Houston, which Zions bought last year.
Mr. Magee, who has worked for Contango since its inception and was named president in June, said it has estimated that Zions’ banks have 250,000 commercial banking clients.
“These commercial customers are successful small- and middle-market companies that borrow money from these banks,” he said. “These are not Fortune 500 companies. These are smaller companies with individuals owners. We want to service these clients. … That is the strategy: Service business owners, help with liquidity, and capture investments.”
Analysts said Contango has an opportunity to gather considerable wealth management assets just from Zions’ roster of commercial business owners. Burton Greenwald, an analyst in Philadelphia, said many of these potential customers probably already have wealth management relationships with other firms but would be willing to listen to Contango’s advisers since they have an established relationship with Zions.
Mr. Magee said Contango plans to add advisers, specifically one or two more in and around Denver this year.
Earlier this month, Contango hired five wealth managers to work at banks in California, Idaho, and Nevada. He said Contango would continue to add advisers “where there is demand and strong referral flow.”
Contango expects to reach $5 billion in assets under management in the next three to five years, Mr. Magee said, but “that is just organic growth. We could see ourselves making a larger acquisition if that opportunity presents itself, and then, who knows how large we can be?”
Contango has made two acquisitions over the past 18 months to help the company develop more assets under management.
In May 2006, it bought BG Associates in Phoenix to expand its operations into Arizona, and in July it bought a small registered investment advisory firm in Nevada.
Mr. Magee said that BG Associates added “a couple hundred million dollars” in assets and the Nevada firm added less than $20 million.
Contango is willing to consider a larger deal, despite the recent turmoil in the equity markets, Mr. Magee said. He said he did not expect that the recent stock market conditions would affect Contango’s growth strategy over the next five years,.
“We have been anticipating and preaching that this” — a market slump — “was going to occur for some time,” he said. “So when it occurred, it really didn’t take us by surprise. It won’t affect our plans or our goals at all.”
Mr. Magee said Contango will grow as long as it sticks to its main objective: to address a holistic range of needs for all of its clients, including financial planning, estate planning, and tax counseling.
And it will grow as long as it does not become another complacent bank-owned wealth manager, he said.
“When it comes to wealth management services, clients have very low expectations about what a bank can deliver,” Mr. Magee said. “It is the truth. When customers go to a bank, they don’t expect advisers to deliver the wealth management services that they need. Our banking relationship may give us an opportunity to sit at the table and meet with people, but that is it.”
He said he knew from the outset that it would be difficult for Contango to attract clients and even more difficult to attract advisers because it was a unit of a bank.
Mr. Magee said that Contango spent two years — from the beginning of 2004 until it opened its doors in January 2006 — constructing a platform of wealth management products and services to attract both customers and advisers.
“People are invariably surprised by the quality that we can deliver,” he said.
Contango wanted to avoid “the typical bank-owned wealth management strategy” in which a customer is passed from a relationship manager to a single portfolio manager who makes all the investment decisions and pushes the bank’s proprietary products, Mr. Magee said.
“At a typical bank, one person devises your allocation, analyzes your portfolio, selects your stocks, picks your bonds, manages your assets, and rebalances,” he said. “It is a complicated world. It is impossible for one person to know how to do all things. It takes a team of people with different expertise to contribute to an investment program.”
Contango utilizes an open architecture, team-based approach to investment management, Mr. Magee said. It does not manufacture any proprietary products or services.
“We developed a good platform first,” he said. “We didn’t put the cart before the horse. We developed an intelligent approach to investing. It is a modern approach to investing rather than just the tried-and-true, run-of-the-mill, bank strategy.”
