Exclusive Interview: How BNY Mellon Plans To Crack The Chicago Market

Charles Paikert Contributing Editor Chicago 13 June 2011

Exclusive Interview: How BNY Mellon Plans To Crack The Chicago Market

Here, Steve Appell, who has been hired by BNY Mellon Wealth Management to break into the competitive Chicago market, discusses his priorities and the opportunities he sees for the firm.

The way Steve Appell sees it, size does matter.

Appell faces a daunting task: he’s been hired by BNY Mellon Wealth Management to do no less than break into the Chicago market - one of the country’s biggest and most competitive.

The third-largest wealth management market in the US, Chicago boasts over 24,000 households with investable assets over $5 million, as well as its own “Gold Coast” - the corridor hugging Lake Michigan between the Miracle Mile downtown and the northern suburb of Lake Forest - that has one of the highest concentrations of per capita wealth in the world.

Greater Chicago is also the undisputed economic hub of the Midwest, and remains a thriving manufacturing center dominated by family-run and privately-held businesses. Retailing, transportation, financial services and, increasingly, internet companies are also strong contributors to the area’s resilient prosperity.

Indeed, earlier this month, Chicago-based Groupon filed an initial public offering that is expected to raise $3 billion, which would make the company worth about $30 billion - and create many an instant Chicago millionaire.

The Windy City is also home to a number of well-established wealth management firms with strong local roots, most notably the market’s 500-pound gorilla, Northern Trust. Harris Private Bank, Harris myCFO, The Private Bank, William Blair & Company, Gresham Partners, Altair and Guggenheim Partners are also in the mix, and there’s no lack of national and international financial giants in town, including Goldman Sachs, JP Morgan Chase, UBS, Credit Suisse and the most recent outsider to set up shop, Wells Fargo.

What’s more, Chicago has a reputation as a conservative market where local ties run deep and strong, and are not easily tapped by outsiders.

Ace in the hole

But Appell, who has been in the Chicago market for nearly 20 years, first with Northern Trust and most recently as managing director at The Private Bank, thinks BNY Mellon, with $171 billion in private client assets, has an ace in the hole: its large size and stellar reputation.

“I don’t think there will be a bias of acceptance in the market,” Appell said. “We’re certainly not going to be viewed as a small start-up. There are only a few firms that have the sheer size and breadth of services that we do and that have our credibility. And credibility is pretty much everything these days.”

What’s more, Appell contends that these attributes happen to line up nicely with the segment of the market that BNY Mellon is targeting: high and ultra high net worth individuals; business owners; family offices who need to outsource services, and wealthy families who have over $20 million in liquid assets but not enough to open their own family office.

“We think there are a lot of business owners who have had or are about to have a liquidity event that are looking for a bundled solution,” Appell said. “They used to rely on their CFO, but now they’re going to need someone who can look after all their interests.”

The increasing complexity and global nature of investing also works to BNY Mellon’s advantage, Appell argues.

“High net worth investors are moving into the global markets, and we’re one of the few firms that offer an extremely high level of global research and investing expertise,” he said. “We’re also a large custody organization that can also take care of their accounting, reporting and tax needs.”

The new kid on the block

But BNY Mellon is still the new kid on the block, and in a tough neighborhood at that. And BNY Mellon isn’t the only big-name outsider trying to muscle in on the Midwestern action.

Wells Fargo Private Bank is in the fourth year of an aggressive move into the market that has included adding nearly 80 client-facing professionals. And Northern Trust, the reigning market leader, has a well-oiled sales and marketing machine and is investing heavily in cutting-edge technology to stay ahead of the pack.

Perhaps unsurprisingly, some of the firm’s competitors are downplaying its chances, with one executive saying newcomers to the market face difficulties as clients are still on edge over the economy, and face tough competition from wealth managers with “deep roots” in the Midwest.

But others are more optimistic. “If BNY Mellon really makes a commitment to the market, they will do just fine,” said one industry executive. “They have the resources to make it happen.”

Whatever happens, it won’t be for lack of effort on BNY Mellon’s part. Earlier this year, the bank signed a deal to acquire Chicago-based Talon Asset Management for an undisclosed sum, and Appell said he plans to work closely with Talon co-founders Terry Diamond and Alan Wilson.

Battle plan

Appell said his first priorities are to “expand relations” with existing BNY Mellon clients; “get the message out” about the firm’s Chicago move via the media and local centers of influence such as attorneys and accountants, and to work closely with industry consultants who advise wealthy families.

BNY Mellon will move into a new downtown office this summer, Appell said, and begin hiring advisors to compliment the dozen or so client-facing professionals already in place. Candidates need to be “pretty well networked in the community,” he said, and be able to work with high net worth clients on everything from taxes to trusts.

Appell also sees a big opportunity in working with single family offices that need outsourced services.

“Years ago you needed to have $100 million to maintain the cost structure of a family office,” he said. “Now you need $200 million. We do believe we can play a greater role for offices that don’t have that.”

Despite criticism of wealth managers for aggressive price discounting in Boston Consulting Group’s recently released Global Wealth report, Appell said pricing isn’t driving market share in Chicago.

“It’s less of a problem than it used to be,” he said. “I don’t think anyone out there is buying market share. Ultimately, clients are more concerned with the quality of the people they’re working with and the quality of the services being delivered.”


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