HSBC tops our ranking of firms that manage the money and personal affairs of wealthy clans—a booming

business now dominated by big banks.By AntHony EffingEr And ElizABEtH ody

RichestFamily OFFices

the WOrld’s

PHoto illUStrAtion By dArrEn BrAUn

S e p t e m b e r 2 0 1 1 b lo o m b e r g m a r k e ts 8 3

8 4 b lo o m b e r g m a r k e ts S e p t e m b e r 2 0 1 1

days, you don’t have to be a Carnegie or a Mellon to have a family office cater to your every whim. If you have as little as $5 million, you can take your pick of hundreds of multifamily firms.

Constellation, with $4 billion under management, is tied with Pitcairn, based in Jenkintown, Pennsylvania, for No. 23 in BloomBerg markets’ first annual ranking of family offices. The list, which ranks 50 firms around the world by assets, is topped by HSBC Pri-vate Wealth Solutions, a unit of London-based HSBC Holdings Plc’s private bank. Private Wealth Solutions oversees $102 billion for families in 18 offices around the world. New York–based Bessemer Trust Co. is No. 2, with $44.5 billion

eth abraham, former president of new York’s Madison Square Garden, has used the same barber for 37 years. “I followed him through five salons,” Abra-ham, 64, says. ¶ Abraham is equally loyal to his money managers, Sam Katzman and Paul Tramontano, who

have looked after his assets for more than 15 years. When Katz-man and Tramontano left Citigroup Inc.’s Smith Barney broker-age unit—now Morgan Stanley Smith Barney—in 2007 to form Constellation Wealth Advisors LLC, Abraham also jumped ship. ¶ Constellation is a family office, a luxe kind of financial adviser first established by the Rockefellers, the Guinness brewing family and other dynasties. Family offices manage money, handle taxes and, in some cases, buy private jets, scout vacation homes, hire butlers and find drug treatment programs for wayward progeny. ¶ These

s

Family OFFicesTOP 50

*Only families with more than $50 million are included. Source: Bloomberg

assets assets nUmber as of as of of mUlti- new Client rank firm name 12/31/10 12/31/09 generational minimUm Main office location In millions In millions families In millions

1 hsbC private wealth solUtions $102,000* $77,000 235 None Hong Kong

2 bessemer trUst $44,500 $37,600 2,086 $10 New York

3 Ubs wealth management $34,000 $29,000 250 $100 New York

4 wilmington familY offiCe $26,500 $27,000 309 $10 (A unit of Wilmington Trust, owned by M&T Bank) Wilmington, Delaware

5 wells fargo familY wealth $21,000 $21,000 311 $50 Minneapolis

6 hawthorn pnC familY wealth $19,600 $16,700 500 $20 (A unit of PNC Financial) Philadelphia

7 genspring familY offiCes $19,538 $18,830 732 $25 (Affiliate of SunTrust Banks) Palm Beach Gardens, Florida

8 glenmede $19,200 $17,460 1,700 $3 Philadelphia

9 harris mYCfo $18,258 $17,280 254 $25 (A unit of Bank of Montreal) Palo Alto, California

10 network serviCes pte $17,000 $14,000 5 $50 Singapore and London

11 atlantiC trUst $14,750 $13,268 2,206 $5 (A unit of Invesco) Atlanta

8 6 b lo o m b e r g m a r k e ts S e p t e m b e r 2 0 1 1

12 oxford finanCial groUp $10,441 $6,467 76 $2 Carmel, Indiana

13 veritable investment $10,100 $8,600 181 $20 ConsUltants Newtown Square, Pennsylvania

14 silverCrest asset $9,227 $8,815 83 $5 management groUp New York

15 tag assoCiates $6,700 $6,500 20 $10 New York

16 banqUe heritage $6,200 $5,600 48 $10 Geneva

l tiedemann wealth management $6,200 $5,600 85 $20 New York

18 CommerCe trUst $6,000 $5,200 74 None (A unit of Commerce Bancshares) St. Louis

19 ballentine partners $5,830 $5,341 57 $20 Waltham, Massachusetts

20 bbr partners $5,392 $4,099 72 $20 New York

21 1875 finanCe $4,500 $3,800 3 $5 Geneva

22 federal street advisors $4,158 $3,498 18 $20 Boston

23 Constellation wealth $4,000 $3,800 200 $10 advisors New York

l pitCairn $4,000 $3,400 43 $25 Jenkintown, Pennsylvania

25 marCUard familY offiCe $3,613 $2,510 43 $30 Zurich

26 laird norton tYee $3,609 $3,202 399 $10 Seattle

27 baker street advisors $3,600 $3,360 25 $5 San Francisco

28 athena Capital advisors $3,521 $3,068 26 $20 Lincoln, Massachusetts

29 Clarfeld finanCial advisors $3,450 $3,000 275 $5 Tarrytown, New York

30 monitor Capital partners $2,990 $2,080 70 $20 Amsterdam

31 threshold groUp $2,700 $1,560 19 $50 Gig Harbor, Washington

32 vogel ConsUlting $2,470** $1,992** 24 None Brookfield, Wisconsin

33 Cornerstone advisors $2,260 $2,013 46 $5 Bellevue, Washington

34 signatUre $2,158 $2,088 153 $5 Norfolk, Virginia

35 homriCh berg familY offiCe $2,099 $1,880 30 $20 Atlanta

assets assets nUmber as of as of of mUlti- new Client rank firm name 12/31/10 12/31/09 generational minimUm Main office location In millions In millions families In millions

**Some or all of the firm’s money management is outsourced. Source: Bloomberg

TOP 50 family Offices

8 8 b lo o m b e r g m a r k e ts S e p t e m b e r 2 0 1 1

under management.Seven of the top 10 providers of

family-office services are affiliated with big banks. In addition to HSBC, the list includes Switzerland’s UBS AG (No. 3), San Francisco–based Wells Fargo & Co. (No. 5) and Atlanta-based SunTrust Banks Inc., which bought 70 percent of Palm Beach Gardens, Florida–based GenSpring Family Offices LLC (No. 7) in 2001.

The amount of money managed by the 50 top firms increased 17 percent, to $477 billion, in 2010 from 2009. The number of multifamily-office firms in the U.S. has doubled in the past 10 years, according to Wheaton, Illinois–based Family Wealth

Alliance LLC, which provides consulting services to the industry.

Banks and independent firms pur-sue the business because one client can beget many more as a family grows, says Anna Nichols, a managing director at the Family Office Exchange, a Chi-cago organization that represents 330 wealthy families. “They can be clients for generations,” Nichols says.

To make the list, the normally secre-tive companies had to serve more than one family and provide the amount of assets they oversee and the number of clients they serve. Those that declined weren’t included. (See “How We Crunched the Numbers,” page 92.)

The tussle in the business is between banks and independent firms. The bou-tiques say the banks are more likely to break the cardinal rule in the industry: Don’t flog your products. “The big firms have become manufacturing compa-nies—manufacturers of financial prod-ucts,” Constellation’s Tramontano says.

pUshing Clients to bUY shares of mutual funds or hedge funds run by a bank is a conflict of in-

terest, says G. Randolph Webb Jr., chief executive officer of Signature, a family of-fice in Norfolk, Virginia, with $2.2 billion of assets under management. “Capital is moving away from the product-driven

assets assets nUmber as of as of of mUlti- new Client rank firm name 12/31/10 12/31/09 generational minimUm Main office location In millions In millions families In millions

36 arlington familY offiCes $2,000 $1,500 17 $20 Birmingham, Alabama l private Client serviCes $2,000** $500** 4 $100 Tiburon, California l tag eisner $2,000** $2,000** 100 $5 New York

39 savant Capital management $1,950 $1,583 226 $1 Rockford, Illinois

40 monaCo asset management $1,900 $1,500 120 $2 Monaco

41 highmoUnt Capital $1,877 $1,558 84 $3 New York

42 sentinel trUst $1,700 $1,600 20 $25 Houston

43 brighton Jones $1,685 $1,517 9 $15 Seattle

44 kanalY trUst $1,640 $1,500 486 $10 Houston

45 finanCial management partners $1,575 $1,315 70 $10 Clayton, Missouri

46 meristem $1,550 $1,429 107 minimum annual Minnetonka, Minnesota fee: $30,000

47 bnr partners $1,500** $1,400** 7 minimum annual Chicago fee: $100,000 l Charles a. barragato & Co. $1,500 $1,400 70 $20 New York l manChester Capital $1,500 $1,300 35 $25 management Manchester, Vermont

50 wms partners $1,497 $1,293 21 $20 Towson, Maryland

**Some or all of the firm’s money management is outsourced. Source: Bloomberg

TOP 50 family Offices

9 0 b lo o m b e r g m a r k e ts S e p t e m b e r 2 0 1 1

side of the industry,” Webb says.HSBC offers its families both its own

funds and those managed by outside firms, says Mary Duke, head of global family wealth in New York. “They are not compelled to choose us,” she says.

HSBC Private Bank, which manages funds for some family-office clients, will no longer maintain overseas ac-counts for U.S. residents, the bank an-nounced in July. The move comes amid a crackdown by the U.S. Internal Reve-nue Service and Justice Department on Americans who use offshore accounts to avoid taxes. Before it announced the global change of policy, HSBC had be-gun sending letters to U.S.-domiciled clients with accounts in India, saying they would need to close their offshore accounts. In April, a New Jersey busi-nessman named Vaibhav Dahake pleaded guilty to conspiring with bank-ers at HSBC to hide money in India from the IRS. Asked about the Dahake case, HSBC spokeswoman Juanita

Gutierrez said, “HSBC does not con-done tax evasion, and we have no fur-ther comment.”

Independent registered investment advisers such as Constellation controlled 11.5 percent of the $13.4 trillion U.S. wealth-management market in 2010, up from 9.5 percent in 2007, according to data from research firm Aite Group LLC in Boston. Brokers from the largest banks manage 38 percent, down from 41 per-cent in 2007, Aite says.

By any measure, catering to the wealthy is a growth business. The num-ber of individuals worldwide with $30 million of liquid assets to invest rose 10.2 percent to 103,000 in 2010, accord-ing to a June report by Cap Gemini SA

and Merrill Lynch Global Wealth Man-agement, a unit of Bank of America Corp. That $30 million club controls $15 trillion of capital in total.

Getting clients with big money doesn’t mean you’re going to make big money, says Elizabeth Nesvold, manag-ing partner at Silver Lane Advisors LLC, a New York–based investment bank that specializes in mergers and acquisitions of wealth-management companies. The heavy increase in com-petition means many new family of-fices are willing to cut rates, she says. Most charge annual fees equal to a per-centage of a family’s liquid assets; 0.35 to 0.75 percent is the normal range, ac-cording to the Family Office Exchange. Labor-intensive work such as taking a client’s son or daughter on a college tour is often included in the fee, Nes-vold says, and if those tasks multiply, profits go down quickly.

Bessemer had a profit margin of 13 percent in 2010 compared with 21 per-cent at Goldman Sachs Group Inc., whose internal family office is called Ayco Co. (Goldman chose not to partici-pate in the ranking.) Bessemer is owned by its employees and the descendants of Henry Phipps, a partner of Andrew Car-negie. Phipps started the firm in 1907 to manage his proceeds from the sale of Pittsburgh-based Carnegie Steel Co. Bessemer now serves more than 2,000 multigenerational families.

John Hilton, CEO of Bessemer, says the advantage of working for a private firm like his is that there are no share-holders to satisfy. And it means he can go the extra mile for his clients. One of his employees once waited in line at the De-partment of Motor Vehicles in New York for a client who had just moved to the city and needed a license. The Bessemer staffer called the client as she reached the

HEAVY COMPETITION MEANS THAT FIRMS ARE WILLING TO CUT RATES TO PULL IN NEW CLIENTS. fEES rAngE froM 0.35 to 0.75 PErCEnt of liQUid ASSEtS And oftEn CoVEr tASKS SUCH AS tAKing CHildrEn on CollEgE toUrS.

assets per familY

Source: Bloomberg

avg. assets nUmber rank firm name per familY of Main office location In millions families 1 network serviCes pte $3,400 5 Singapore and London

2 1875 finanCe $1,500 3 Geneva

3 private Client serviCes $500 4 Tiburon, California

4 hsbC private wealth $434 235 solUtions Hong Kong

5 tag assoCiates $335 20 New York

6 federal street advisors $231 18 Boston

7 bnr partners $214 7 Chicago

8 brighton Jones $187 9 Seattle

9 baker street advisors $144 25 San Francisco

10 threshold groUp $142 19 Gig Harbor, Washington

TOP firms by

9 2 b lo o m b e r g m a r k e ts S e p t e m b e r 2 0 1 1

To write a letter to the editor, send an e-mail to bloombergmag@bloomberg.net or type mag <go>.

front of the line.No. 1 HSBC Private Wealth Solutions

has grown partly by catering to Asia’s newly rich. Last year, the region housed 3.3 million millionaires, according to Cap Gemini and Merrill Lynch, com-pared with Europe’s 3.1 million.

Bernard Rennell, global head of HSBC Private Wealth Solutions, who’s based in Hong Kong, says his group targets families with $500 million or more. Asia’s new billionaires often come seek-ing help with succession plans, Rennell says. HSBC came up with a bespoke so-lution for an Asian tycoon who wanted to pass along a controlling stake in his company to his seven children without giving all of them a chance to meddle in the company’s day-to-day workings.

the banks’ familY offiCes have gotten bigger partly by buying boutiques. Bank of Montreal

bought the name and client assets of MyCFO Inc., founded by technology en-trepreneur Jim Clark, in 2002. Now called Harris MyCFO, it ranks ninth, with $18.3 billion. Atlantic Trust, No. 11 with $14.8 billion, is an amalgam of three wealth managers that Atlanta money management company Invesco Ltd. put together from 2001 to 2004.

Kirk Bowman, a venture partner at Accel Partners, a venture-capital firm in Palo Alto, California, says he looked at the big investment banks before handing his fortune over to MyCFO. “It’s better to have someone who’s in-vestment-vehicle agnostic as opposed to someone who’s got an unnatural

incentive to put you in their product,” Bowman, 45, says.

Unlike the big banks, Constellation is nimble enough to pounce on unique in-vestments, Tramontano says. Recently, Abraham and other clients invested in a partnership that’s buying apartment buildings across the U.S. The venture is projected to deliver a 7 percent cash flow yield, without the fees that come with doing such an investment through a fund. Abraham even got to meet the partnership’s managers before

committing his cash, he says.It’s that kind of personal touch that

makes family offices popular, Tramon-tano says. The strategy has certainly worked for Constellation. It has pulled in almost $4 billion in assets in just four years.

anthonY effinger is a seNior writer at BloomBerg markets iN PortlaNd. aeffiNger@BloomBerg.Net elizabeth odY covers PersoNal fiNaNce at BloomBerg News iN New York. eodY@BloomBerg.Net

asset growth

How we CrunCHed tHe numbersbY bloomberg rankings

Our ranking of family offices is based on data compiled by Bloomberg from information self-reported by family-office firms. Bloomberg surveyed more than 1,000 money management firms worldwide, using a database obtained from Portland, Oregon–based Family Offices Group. More than 130 firms responded; we ranked the top 50 by assets under management. We requested that each family-office firm exclude money they manage for pension funds and other institutions and include funds managed for private foundations. Family offices are included in the ranking

only if they provide both comprehensive investment and noninvestment services to multigenerational families. Seventy-six percent of the ranked family offices manage family assets directly, while 24 percent provide only investment-advisory services and outsource money management. The ranked firms provide a wide variety of noninvestment services, including organizing family meetings, art consulting, estate planning, foundation management and concierge services such as property management, private travel arrangements and shopping assistance. Private banks are included if the bank has a unit that offers direct and comprehen-sive investment and noninvestment services to families.rankings@bloomberg.net

Source: Bloomberg

2010 rank firm name Change in assets assets Main office location from 2009 to 2010 In millions 1 private Client serviCes 300% $2,000 Tiburon, California

2 threshold groUp 73 $2,700 Gig Harbor, Washington

3 oxford finanCial groUp 61 $10,441 Carmel, Indiana

4 marCUard familY offiCe 44 $3,613 Zurich

l monitor Capital partners 44 $2,990 Amsterdam

6 arlington familY offiCes 33 $2,000 Birmingham, Alabama

7 hsbC private wealth 32 $102,000 solUtions Hong Kong

l bbr partners 32 $5,392 New York

9 monaCo asset management 27 $1,900 Monaco

10 vogel ConsUlting 24 $2,470 Brookfield, Wisconsin

TOP firms by