Larry Hughes, chief executive of BNY Mellon Wealth Management, spoke to Family Wealth Report about the firm's recently-announced growth strategy.

BNY Mellon recently rolled out a two-year recruiting campaign for its wealth management business that will result in the addition of around 100 new positions in the US and abroad, reflecting what the firm described as its “profound commitment” to the wealth management industry.  

BNY Mellon Wealth Management, part of BNY Mellon Investment Management, traces its roots back to 1785 and, with $188 billion in private client assets, was last year ranked by Barron’s as one of the ten largest US wealth managers.

Over the past four years, it has made acquisitions in Toronto and Chicago, IL, as well as launching offices in Dallas, TX, Washington, the Cayman Islands and Florida, where it now has seven locations.

Now, it plans to boost is sales force by 50 per cent, while adding private bankers and mortgage bankers, as well as portfolio managers, wealth strategists and additional sales support staff. New employees will be recruited at a number of its current locations, but the firm is also looking to set up shop in what it sees as other key wealth markets.

Lawrence Hughes, chief executive of BNY Mellon Wealth Management, spoke to Family Wealth Report in a little more detail about the growth strategy and why the firm needs more people in more places.

Why now?

Hughes cited a number of factors when asked what has prompted BNY Mellon Wealth Management to roll out this campaign now.

Firstly, the economy is “better than it has been,” and wealth creation is at its highest point in five years, he said.

Hughes also highlighted that an increasing number of clients who own businesses are thinking of selling them. “Mergers and acquisitions activity is up sharply,” he noted. While not up to pre-financial crisis levels, activity in these sectors is at a five-year high, he said.

Meanwhile, corporate executives are earning more through their compensation plans than they have in the past five years, which Hughes added creates an opportunity. “Those people need help with their wealth,” he said.

It’s also an opportunity for the firm to capture more of the assets that “end up in individuals’ hands rather than institutional assets,” he added. “Much of the future of asset management will be driven by individuals so for our company and our business, this is an opportunity for us to take advantage of that market trend.”

But perhaps most importantly, there are a lot of “newcomers” in the wealth management industry, he said. “It’s very much a people business, so one of the reasons we need more people...is because it’s a local business.”

He added: “You can advertise all you want and people can know your name, but if they don’t know a person - someone that they trust, and know and respect - then they won’t do business with you typically. So that’s why we need more people to be in more places in order to grow our business faster.”

It is also worth noting that many firms have been negatively affected by low interest rates in recent years, resulting in certain business segments lagging others. At BNY Mellon, for example, net revenue declined 1 per cent to $3.6 billion in the first quarter of 2013, while fees for investment management and performance rose 10 per cent year-over-year to $822 million.  

Scope

BNY Mellon Wealth Management has a presence in 37 US cities, each of which are “important wealth markets,” Hughes said.

Indeed, some markets are larger than others, so it is to be expected that hires are concentrated in the largest wealth centers. These include places like the greater New York area, and in places where the number of wealthy people is “growing rapidly” - areas like Dallas, TX, Los Angeles and Newport Beach, CA, and Atlanta, GA - so in the Southeast and Southwest, Hughes said.

Outside of these areas, there will be quite a few hires in new markets where the firm might not have an office presence, but where it does have clients.

“We’re looking for opportunities in places like San Diego, CA, and Houston, TX,” Hughes said. While there is a big US focus on the growth strategy, there is also an “important international component,” he added.

This year, for example, the firm intends to add five new people in Hong Kong, with the aim of adding a “similar amount” in 2014. There are also plans to add “a few people” in the Middle East, and potentially in London.  

When asked if the firm had a target for assets under management, Hughes said: “We don’t think of it that way. We don’t target a specific number because there are so many variables that you can’t control.”

Implementation and challenges

The hiring campaign started in early 2013 and Hughes expects that it will continue through 2014, as the firm is deeply set on focusing on the quality of the people and the cultural fit.

“One of the things we’ve done actually is - because that [cultural fit] is so important to us - we’ve asked our employees to help us find people and we’ve put an incentive plan in place for our employees,” he said. The firm declined to comment on the amount.

Other aspects of the hiring strategy will include talking to people with whom the firm does business - accountants and attorneys, for example. “They tend to get called on by other people in our industry and so they often will know folks in the marketplace,” Hughes said.  

BNY Mellon Wealth Management often makes hires that are focused on serving ultra high net worth clients. Last month, for example, Debralee Nelson was brought in from JP Morgan Chase as a senior director to serve UHNW clients in the New York region.

But Hughes explained that BNY Mellon Wealth Management does not intend to divide high net worth and UHNW segments into separate businesses. However, the firm is “very focused on trying to meet the needs of each of those segments,” he said.

Whereas someone with $3 million might focus more on what Hughes describes as “lifestyle needs” - helping grandchildren with university fees and retirement, for example - those with $50 million might concentrate issues such as legacy, wealth transfer and endowments.

“So we need people who have expertise in what those people are trying to accomplish with their money,” he said.

But the hiring process is one of the most significant challenges with regard to growing the business, according to Hughes.

“I could hire 100 people and have them on board and on staff by July 1,” he said. “It wouldn’t be a problem for me to find people with the academic qualifications...but finding people in the cultural fit for us - that’s the real challenge.”

And the characteristics of success have also “changed somewhat,” he added, citing a BNY Mellon white paper called The Conscientious Advisor by Tracy Nickl, executive director of sales, BNY Mellon Wealth Management.

The white paper found that, since the financial crisis, the characteristics of success used to be things like aggressiveness, assertiveness, and the need to persuade people, or “ego drive.”

“Now we find things like thoroughness, detail orientation and skepticism - those characteristics have become more important for our sales people in being successful,” said Hughes.