A giant San Francisco RIA is poaching a Northern Trust talent to create a Chicago duchy

Brooke’s Note: Out West here, we’re accustomed to seeing East Coast firms open wealth management offices to grab a share of the new fortunes being created — particularly in Silicon Valley. See: U.S. Trust seeks to add hundreds of wealth managers with West Coast-facing poaching campaign. A good example of that was BBR putting an office in San Francisco recently. See: Why a $6 billion New York RIA is finally making its California debut. But big wealth is everywhere, so one of San Francisco’s biggest RIA players is adopting a head-East strategy but not without poaching a local guide with sterling credentials and a restless entrepreneurial spirit.

In bold move, a $4 billion San Francisco-based RIA is setting up shop in Chicago and has convinced a new recruit from hometown fixture Northern Trust, one of the city’s most prominent companies with its 13,000 employees and $700 billion in assets, to open an office and start recruiting new advisors and clients.

The Presidio Group LLC has enticed 18-year Northern Trust veteran Thomas V. Smith to open its third location. The wealth management, under an umbrella with an investment bank, also has an office in Dallas. Smith, who has been in the financial services industry for 27 years, was most recently executive director of Northern Trust’s family wealth services unit. See: Former Northern Trust CIO brings a cool billion and lofty credentials to HighTower.

View of an evolution

Smith, 49, says he was content at Northern Trust. “The things you hear on the street about the culture being positive at Northern Trust are consistent. I was always happy there.”

But doubts about his future there began when Smith participated in study group for the firm a year ago in which the company began evaluating its RIA competition. It became evident to him that RIAs are formidable competition and in some ways are ahead of giant firms.

“I had this front-row seat to the evolution of the wealth management industry and I think the RIA model is one of the fastest-growing groups,” Smith says. “When I looked at the value proposition here at Presidio and also their research, it became very clear to me that they’re one of the best in the industry.”

Phone calls and e-mail requests to Northern Trust seeking comment were not returned by deadline.

New firm in town

Brodie Cobb: We wanted a Chicago
office.

“We wanted a Chicago office to better serve what we believe is an outstanding market with sophisticated entrepreneurs and institutions throughout the Midwest,” Brodie Cobb, Presidio’s chief executive, said in a statement.

Smith fits in perfectly with Presidio’s culture of client care, adds Mark Palmer, head of wealth management for Presidio, who has known Smith about a year. The Smith hire also a fits a company culture of growth by innovative means. See: How an ex-University of Chicago endowment chief is teaming up with a $4-billion AUM RIA to go after $500-million institutional accounts.

Starting from zero

While Presidio is poised for growth, there’s no question Smith faces an uphill battle trying to form an office and attract new advisors, says Jeff Spears, co-founder and CEO of Sanctuary Wealth Services LLC. Smith didn’t bring over assets from Northern and one of his chief responsibilities will be to build out the Chicago office. recruiting clients and advisors alike. See: West Coast breakaway drops UBS in favor of Sanctuary/Fortigent outsourcing.

Jeff Spears: That’s a big challenge,
because you’re trying to get advisors
to go to a firm that
they’ve never heard of.

“I think the challenge is hiring people,” he says. “That’s a big challenge, because you’re trying to get advisors to go to a firm that they’ve never heard of,” he says.

Advisors would be more likely to go to a firm with a stronger brand reputation such as HarrisMyCFO or Northern Trust, Spears says. HighTower Advisors LLC, also headquartered in Chicago, is actively recruiting advisors as well. See: An $18-billion RIA tacks on a $24-billion U.S. Trust cast-off as the grab for UHNW magnets continues.

“What Presidio has going for itself is that it’s an independent, non-conflicted wealth management offering and all of the other firms are conflicted because they get paid for the product they recommend,” Spears says.

But he also points out that since Smith has set up offices before, he likely has many connections he can use.

“I believe to implement it, you need quality leadership, and on paper this guy sounds great.”

Auto biz entree

Despite the competing forces in Chicago, Palmer says his firm has laid the groundwork. Presidio officials have been considering opening a Midwest location for some time, and about 40% of the firm’s client base now resides in the Midwest and on the East Coast. Presidio has substantial business outside San Francisco because, among other things, its investment bank has a niche in auto dealerships, which know no regional bounds.

Smith will be working with Dan Keck, who joined Presidio three years ago from Morgan Stanley Private Wealth Management and has been working out of a home office in Chicago.

“We’ve done well in the Midwest, and Chicago is an important money center and we really like the city,” Palmer says. “We just started saying, let’s build an office.”

Large organization syndrome

While there is a lot of movement from wirehouses to RIAs, industry leaders point out that Northern Trust has created a culture and reputation for cultivating and hanging on to its staff for a long time. Last fall, Margaret Towle left Greycourt & Co. Inc. to join HighTower but before that had worked at Northern Trust, where she had served as chief investment officer of Northern Trust Global Advisors. See: Former Northern Trust CIO brings a cool billion and lofty credentials to HighTower.

Anthony Riotto: My sense is there
are people in wealth management for
a long time … and they
feel they’re not getting the support
they need out of the larger
firms.

Anthony R. Riotto, founding partner, of Riotto & Jones, says there are a number of top executives at giant wealth management firms seeking opportunities at RIAs.

“Professionals in wealth management ,,, feel they’re not getting the support they need out of the larger firms.”

Riotto says that Northern Trust continues to carry a solid reputation and hasn’t experienced the chaos that other wealth management firms, such as U.S. Trust, have encountered. See: Evercore is looking to its future after lifting out a huge team of U.S. Trust financial advisors.

Bigger fish

While it’s true that Smith might be looking for new clients and staffers, he points out that many of Northern Trust’s clients, with their $100 million in assets, wouldn’t be Presidio’s ideal client.

“I think a lot of the clients at Northern Trust aren’t the exact clients who would fit us,” Smith says. “We’re more of a professional boutique.”

While at Northern Trust, he often worked with clients with $100 million or more in assets, and Palmer points out that Presidio’s sweet spot is clients with about $15 to $20 million in assets.

Moving up at Northern Trust

Smith spent his first five years at Northern Trust’s corporate institutional business, building out a practice of services to money managers. He helped start that group from scratch then moved into the wealth management area, where he worked with families that had $100 million or more in assets.

That business has grown from 90 families in the late 1990s to 400 families in 2012. He opened the New York wealth management office and then opened a traditional bank in Minneapolis serving clients with $1 million to $100 million in assets.

Up-and-coming RIA

Smith says he loved opening the new offices for Northern Trust and is excited about opening this one in Chicago. “There’s nothing more exciting than planting the seed and watching it grow,” he says. “You get to hire the right people, and great things will happen.”

He has confidence in Presidio and says the firm clearly hires the right people.

“That entrepreneurial part of me was there for a long time, and I didn’t know it was there. It becomes more obvious when you’re going to a smaller group,” Smith says.

Palmer says he feels that this expansion is significant for Presidio.

“I think growing is all about a great client experience, and it varies depending on the client base,” Palmer says. “Our client base really cares about performance of their portfolio. And I think when we’re doing a really good job with that, they introduce us to more people. We’ve done well with that.”