U.S. Trust advisor joins an RIA after surviving the firm's sale to Bank of America
Stacey Reinhart joins Emerson Investment Management to get back to basics
Emerson Investment Management
|Made the break from:||U.S. Trust|
|Custody platform:||Schwab Advisor Services|
|Head of breakaway team:||Stacey Reinhart|
|Date of breakaway/Location:||April 2009/Boston, Mass.|
|[Emerson’s] assets under management:||$475 million|
Brooke’s Note: U.S. Trust prefers to hob nob with clients with more than $10 million and it prefers to recruit advisors who graduated from Ivy League colleges. Stacey Reinhart has a Yale/Wharton School pedigree and some big clients but she still found U.S. Trust to be more than she could stomach — especially after it was purchased by Bank of America. Hers was not a pitchfork rebellion but she’s not alone among impressive talents seeking to leave the white-show patriarch for an RIA. See: Evercore is looking to its future after lifting out a huge team of U.S. Trust financial advisors
For most people, amassing a personal net worth of $1-$3 million is like hitting the ball out of the park. But at U.S. Trust, millionaires were considered second-tier clients, according to Stacey Reinhart, a former senior vice president.
She was so dismayed by the scant attention paid by U.S. Trust to their merely wealthy clients, she says, that she left her job there for the RIA world. She’s now managing director of Boston-based Emerson Investment Management.
“(Those clients) were rarely afforded a personal visit from their advisor,” said Reinhart, who left U.S. Trust for the already-existing Emerson in April 2009. “Instead they were given a 1-800 number to use when they needed to communicate with the office.”
U.S. Trust, with its focus on the wealthiest of the wealthy, may be an extreme example of the trend that’s overtaking the industry. As a by-product of massive industry-wide upheaval, there is intense internal shuffling and focus on the big-ticket clients. (U.S. Trust, sold by Schwab to Bank of America in 2007) did not return repeated calls for comment). See: Consolidation pushes a veteran of Wachovia, U.S. Trust, National City into the RIA space
U.S. Trust stands alone
“U.S. Trust really is an entity unto itself,” said Bing Waldert, a consultant at Cerulli Associates. “It’s a smaller sales force with an extremely affluent client base. A cut-off point there could be anywhere from $2-5 million.”
Experts say most wirehouses are setting limits and different tiers of service for clients whose investable assets are in the hundreds of thousands.
“We have certainly seen this pattern for over a year,” notes Howard Diamond, managing director of Diamond Consultants. “In many cases we are seeing the wirehouses arrive at a cut-off point. In our experience, it has been around $400,000 or $500,000 [of gross production].”
But what if you are handling a family where mom and dad are worth millions, but junior is just starting out? Why should a big firm, or any firm tell you who you should or should not serve?”
Waldert argues that some wirehouses may actually be serving clients better by establishing service tiers. He suggests the average cutoff point within the wirehouse world is closer to between $250,000-500,000 of gross production.
“Sure, it might be a little bit above that dollar figure, but you will still be at the very bottom of an advisor’s book of hundreds of clients. You are not the first call when something goes wrong.”
Why call centers beat brokers
“In many cases, if a client’s investable assets are on the lower end of an advisors book, then due to technological advances, they are often much better off with a call center where a representative can dig deeper into an issue.”
Reinhart, a graduate of Yale and the Wharton School at the University of Pennsylvania, says being at a well-established RIA that is almost three decades old has allowed her to get back to the nuts and bolts of investing. “Here, we have five people that handle investments, including ETFs, a few mutual funds, etc… We pay attention to income generation with a particular focus on the years approaching retirement or early retirement.”
“My move brought about a clean clear focus, where my time and energy are not fragmented. Really tackling the complexities of handling the financial issues facing the high net worth population can’t be done from the 'mass’ level, where advisors handle hundreds of clients. The big wirehouses and banks were very busy taking TARP funds, and generally saving themselves.”
The typical clients that Reinhart serves are exactly that niche which she identified as falling between the cracks in the wirehouse orbit: those with $1-10 million in investable assets.
“We accommodate legacy positions and align what they currently have into their portfolios that we handle.”
Reacting to the lack of contact between advisors and clients at the mass level, Reinhart points to a focus on reaching out and staying in contact. “Here, we value education and communication. Besides quarterly newsletters, we contact clients in a variety of ways, like e-mails the same day when an event breaks. We host investment summits, where we invite clients to come in to meet with strategists and we have a client advisory board.”
Emerson also allows clients to use a wealth strategist, in this case an estate-planning lawyer in order to put all the pieces together for that person’s transition into retirement. “At the wirehouses, it is unusual for somebody in $1-10 million range to have access to her.”
Emerson currently includes 17 employees with $475 million AUM.
“It’s tough to grow quickly,” said Reinhart, “so we are looking to expand in terms of clients and advisors, but in an organic way.”
Having been through the integration of U.S. Trust into Bank of America and then watching the beginning of Merrill Lynch’s acquisition, Reinhart predicts continuing instability, which she says is bound to hurt clients.
“Banks are still in turmoil,” said Reinhart. “Add a whole new set of regulations, and there is another wrinkle. Do they need to be selling off pieces? Do they sell their proprietary trading desk? The reality is that clients and employees can go elsewhere.”
Merrill/U.S. Trust identity crisis
“Bank of America had not even finished integrating the U.S. Trust purchase after two years when all of a sudden the acquisition of Merrill Lynch pops up. What do we do with all these pieces? Does Merrill duplicate us? There was an identity crises.”
Reinhart began her career in financial services at Paine Webber, where she was involved with institutional equity sales. She then moved with her husband to Hong Kong and Taiwan, and then returned to the States, specifically Cape Cod, Mass. “I was with Cape Cod Bank and Trust, which had a billion dollars AUM in trusts. It was a great department, about 20 people strong.”
Wishing for a more sophisticated investing environment, Reinhart left Cape Cod B&T for State Street Global Advisors, which heavily recruited her and offered a step up regarding internal resources.
“I liked having our own research analysts, where we didn’t have to buy others opinions. We also had access to private equity when that was hot, including hedge funds.”
Reinhart then moved to U.S. Trust.