Company Profile: Growth Plans, Challenges For Evercore - Part 2

Charles Paikert

2 April 2012

This is part two of a feature examining Evercore, the US wealth management company. Part one can be viewed here.

Clearly the biggest move Evercore has made since its launch is the Lowry Hill lift-out, which brought in five senior executives, including Martha Pomerantz, portfolio manager and co-manager of Evercore’s new Minneapolis office. Financial terms were undisclosed, but Maurer did say the investment was big enough to prevent Evercore from making a profit last year.

Pomerantz said she fielded numerous offers, but chose Evercore because of its service culture, in addition to its investment team. “There aren’t many other firms that would assign a second senior person to a team,” Pomerantz said. “What appealed to me was a higher level of strategic wealth planning that was very unusual, and which combined with their investment management capabilities, made for sticky relationships.”

Evercore put up the money to establish the new office and its operating platform, made the ex-Lowry Hill executives partners, and pays them a salary. But the new partners also wanted to be entrepreneurs, Maurer said, and are paid a lower salary in exchange for “equity in what they build”.

Matthew Andrulot, east coast regional director for Fortigent, the wealth management outsourcing firm recently acquired by LPL Financial, called the Lowry Hill lift out “a great acquisition that expands Evercore’s footprint and gives them a nice base in the Midwest”.

But one competing wealth management executive who did not want to be identified noted that “every firm lift-out brings cultural issues, especially when it’s in an entirely different city. There’s a temptation to be your own little fiefdom. Even though Evercore likes to talk about being such a tightly integrated firm, when you take on such a big lift-out so far away, you’re putting that at risk”.

Maurer said he wasn’t concerned and noted the “courtship” period between Evercore and Pomerantz and her team only took six months. “We spoke the same language,” he said. “We were able to finish each other’s sentences.”

He said he expected the Minneapolis office to “fill its book” and add partners in the next two to three years. “There are good people in the area and they have a good ultra-high-net-worth prospect list,” Maurer said.

Growth plans…and challenges

Maurer said the firm is targeting clients who have $5 million and above in investable assets, and the average client size is $10 million. Future expansion will be “opportunistic,” he said, and most likely center on Los Angeles, Boston, Washington DC and Florida.

After absorbing the Minneapolis lift-out last year, the firm finally turned a profit in the first quarter of 2012, Maurer said. Asked how he would grade the firm after three-years, Maurer gave high marks to asset allocation, proprietary products and client service, noting that the firm expects to keep the number of client relationships per relationship manager to under 40.

Maurer said the firm could “always do better on new business,” and expressed “a little disappointment in tech,” adding that the firm was looking for more cutting edge technology. “One reason growth is so important is that you can spend more on tech and in-house infrastructure and new innovations,” he said.

Rapid growth and improving infrastructure can be a delicate balancing act, said Fortigent’s Andrulot, an investment manager outsource provider for Evercore. “Excessive growth brings positive revenue but you also have to build out service and infrastructure to service the ultra-high-net-worth client,” he said. “Sometimes it’s difficult to keep pace.”

Growth momentum will be a challenge, and will require “continued organic development and possibly some acquisitions,” said Nesvold, who added that she was impressed by the “potential for new business development coming out of the investment banking side.”

Looking ahead, she said, “My money's on Evercore.”