“We don’t try to make people rich,” says Jim Davidson, Chairman and CEO of the Coral Gables Trust Company. “To do that you are going to have to take excessive risk.” The goal, he says, is to grow wealth in a steady, safe way. “In an upmarket we do better than average. And in a down market they [our clients] don’t go down as much as the general market.”
“If you make a higher return it’s not a life changing event,” says Faith Xenos, a founder partner of Singer Xenos. “But if you lose your capital that is a life changing event. The money cannot be replaced, and once it is lost on a [risky] venture, it’s gone.” What most wealth managers strive for is an annual return of somewhere between six and eight percent, averaged over time. Some clients are in a position to invest more aggressively, knowing that such investments are precarious. Others want to move in a safer direction. Knowing what your clients want, say wealth managers, is perhaps the most important aspect of their jobs.
“Returns? That is a common question and a hard question,” says Carlos Carbonell, a partner in Firestone Capital Management. “We are not an institutional fund, so we don’t have standard returns.” Rather, says Carbonell, the mission is to understand the financial goals of each client, and whether those have been achieved. “Success for us is not measured by performance on a given year. It is, instead, ‘Did our client retire on time with the monthly income they wanted? Or did they get their kids’ college costs financed?’” How banks acquire clients in Coral Gables and the neighboring communities of South Florida is another part of each wealth management firm’s strategy.
Brickell Bank, for example, operates from a glass tower on Brickell Avenue, long considered the banking capital of Miami. But it pays particular attention to Coral Gables, providing financial support for the Actor’s Playhouse, the Coral Gables Art Cinema and the Coral Gables Garden Club. “We don’t have a physical presence in Coral Gables, but we do have a lot of customers there,” says Frederick Reinhardt, Chairman and CEO. Reinhardt also lives in the Gables.
Formally known as Espiritos Santos bank, Brickell specializes not only in wealth management, but in trade finance and residential mortgages for foreigners. The majority of its clients are from Latin America, followed by Europe – an astute advantage for serving an international community like Coral Gables. By handling commercial transactions for clients, they are able to win their confidence for wealth management as well.
Coconut Grove Bank is another area player with a focus on Coral Gables, where it maintains a branch. Like other banks with a strong wealth management component, it is all about finding the right balance for each client, says bank president Charles Porter. “The key to investing [for clients] is asset allocation, between stocks, bonds and other types of assets,” says Porter. “That is the biggest challenge.”
What determines allocation between the more volatile stocks and the safer bonds “is really governed by the client’s risk tolerance. If they are comfortable tilting toward equities, the returns can be higher. If they are tilting toward fixed income, the returns are lower. You have to live within that risk-return spectrum and be reasonable about the outcomes,” says Porter.
As a full service bank that offers a variety of commercial services, Coconut Grove Bank derives much of its wealth management clientele by helping them grow their businesses. “As the big brand-name wealth managers have gone higher and higher on the minimal scale [required], we are still very comfortable with the millionaire next door,” he says, because these are the future men and women of great wealth.
For some asset managers, the targeting of potential clients is even more focused. Xenos, for example, specializes in wealth management for women.
“A few years ago, I started with an overview of wealth management for women, including women having sudden equity events. Now it’s [also] protecting women with inheritances,” she says. “The daughter may be left with a large amount of assets that they have never managed. A lot of women come to me with [such situations]… They are not going to their husband’s person. They want to find their own person and have their own relationships.”
The resources that each firm brings to the table also vary considerably. Some wealth managers use largely their own in-house teams to decide where and when to invest their client’s assets; others use outside specialists who focus on where to invest, so that they can pay closer, individual attention to their clients.
Among the trends for wealth management today is to go beyond purely investment advice, moving the arrow to a more holistic approach, with consultation about things like business succession, estate and charitable planning, and life insurance planning.
Frank Dolph of Dolph & Associates is a member of The Nautilus Group, a service of New York Life, one of the top-rated mutual life insurers. He regularly works with wealth management advisors to help them provide a full spectrum of insights, a differentiator compared to more traditional wealth management firms.
“We are not giving investment advice and we are not trying to accumulate assets under management. Our goal is to review the client’s current plan and make suggestions so that their local advisors can make the client’s plan better. We work with the advisor as a team and do not step on the advisor’s toes,” says Dolph. While some wealth management firms have insurance specialists on their in-house team, they typically seek the help of firms like Dolph’s because many do not have access to the highest-rated insurers, like New York Life.
Regardless of where the expertise is sourced, focusing on other services beside purely the return on assets will be an increasingly important part of the wealth manager’s job, says Harold Evensky. As the founder of Evensky & Katz/Folde (now managed by his son), Evensky is considered the grand old man of wealth management services in Coral Gables. “We don’t sell performance,” he says. “We have an expensive crystal ball and a ouija board, but they don’t work. Our focus [is now] on tax efficiency and expense reduction, because we are looking toward a decade of low returns. So the management of costs is a bigger focus.”
Beyond bringing in outside professionals to help with tax and estate planning, as well as insurance needs, some wealth management firms turn to outside pros for even investment advice.
Davidson of Coral Gables Trust, for example, says his firm screens investment fund managers from across the country, and from 25,000 such managers ultimately picks the dozen best. “Starting out we decided to do [investment fund management] in-house, but found out we couldn’t do it as effectively if we wanted to spend time with clients,” he says. “There are many outside firms that do these advisory services.” Using these, “we can design a portfolio that perfectly fits the risk tolerance of the client.”
Regardless of their different approaches to clientele, all of Coral Gables wealth managers agree on one thing: That Coral Gables is an excellent place to do business. “It’s where our clients are,” says Carbonell of Firestone. “It’s a convenient location for clients. They don’t have to deal with the traffic and hustle and bustle of downtown. It’s easy to get here and a pleasant place to visit.”
Midwest-based First American Bank, for example, purchased the Bank of Coral Gables four years ago. Previously it had operated only in Illinois and Wisconsin. Here they hired Gables resident and business owner John O’Rourke, a former wealth management banker for Northern Trust. “First American had been coming down to South Florida for the import and export business, doing a lot of commercial lending,” says O’Rourke. “Wealth management came about from our clients, where it was a time in their lives when they were selling their business, or inheriting money. They’d had good experience with the bank but it wasn’t offering any wealth management or fiduciary service.”
First American focuses on fostering relationships with small business owners, taking clients starting with just $500,000 in their portfolios. “The real key is what defines you as an organization. In our case it’s the banking side, expertise in commercial and industrial lending. We are a certified SBA [Small Business Administration] lender.”
Almost all of the wealth managers of Coral Gables charge only a single fee, based on the amount of assets under management. It typically starts at one percent annually for the first million dollars, and drops as the assets grow. This frees the investment advisor from the approach of brokerages, for example, so that clients are not placed into stock and bonds just to generate commissions.
“We are considered a fee-only firm, and that fee is determined by assets under management,” says Carbonell. “There is one fee and that is disclosed. It is a clean, simple, up-front model, and it removes the conflict of interest, in terms of a commission. I want what is best for the client… Our dollars collected only increase if the value of the account grows.”
That intense focus on client needs and client relations, along with a long-term, steady growth approach to asset management, is ultimately what defines the locally based firms that advise and manage the wealthy of Coral Gables.
“We focus a lot on client relations, differentiating our bank from the big wire firms, like Merrill Lynch and Morgan Stanley, the big trust houses, like Bessemer and Northern Trust, and the big banks,” says Brickell Bank’s Reinhardt. “We are focused on the hand holding of our clients and keep in close, close touch… It’s an experience our clients don’t get in New York.”
“The whole concept is to be locally owned and operated with decisions made here, not in New York or Charlotte,” says Davidson of Coral Gables Trust. “We have people with experience in the big firms and we bring that experience to bear. But we provide it on local, personal basis.”
View article on The Coral Gables Magazine