The idea behind the Schwab deal was to leave U.S. Trust as a stand-alone, autonomous unit that managed Schwab's high-end clients as they shifted from self-directed investing to a hand-holding relationship with a wealth advisor. At the time, U.S. Trust had 30,000 clients and Schwab had 300,000 customers that could have qualified to be U.S. Trust clients, Maurer says.
Plus, Schwab had marketing muscle and the technological backbone that U.S. Trust needed. Add it up, Maurer says, and the deal made sense at the time.
What they didn't count on was that Schwab's daily average revenue trades would plummet after the tech wreck began in 2000, which not only slashed the size of people's portfolios but also caused Schwab to go into cost-cutting mode.
Maurer stayed with U.S. Trust for two and a half years after the merger, eventually becoming CEO and chairman, but he left after management disagreements with Schwab. After his one-year non-compete agreement ended in 2003, he joined Neuberger Berman, which wanted to grow its wealth management business. Shortly after, the firm was bought by Lehman Brothers, and Maurer became CEO and chair of Lehman Brothers Trust Co. Maurer says he disagreed with Lehman's efforts to mix its brokerage, wealth management and trust company businesses. "It no longer made sense to me and we agreed that I would just leave the firm," he says.
That was in 2007, the same year that Bank of America bought U.S. Trust from Schwab. By then, Maurer had already figured his next move: Form a wealth management firm and staff it with some of his former U.S. Trust colleagues. He says he never recruited that talent while he was at Lehman because the U.S. Trust franchise remained intact.
"But Bank of America had a different model for U.S. Trust, and I thought many of my former colleagues who I had hired out of college or from another firm might prefer to start their own firm rather than change models," Maurer says.
That includes Chris Zander, an Evercore wealth advisor who was the former managing director and head of U.S. Trust, Bank of America Private Wealth Management's Multi-Family Office Group. It also includes John Apruzzese, Evercore's equity portfolio manager, who was a managing director at U.S. Trust and was responsible for managing $2 billion of client assets, including many of U.S. Trust's top clients.
Another person who made the leap is Gary Gildersleeve, one of three Evercore fixed-income portfolio managers. Gildersleeve was a managing director and fixed-income specialist with Columbia Management (part of Bank of America), and before that was a managing director and senior portfolio manager at U.S. Trust.
Others cast their lots with Evercore as well, and anyone who joined the firm within its first year is called a founding partner. "Frankly, it doesn't sound like the acquisition [of U.S. Trust] by Bank of America is going too smoothly, so I'm not surprised people are jumping ship," says one industry consultant who preferred to speak anonymously because he works with companies serving high-net-worth clients.
As of press time, Bank of America could not be reached for comment.
Maurer looked around for an institutional partner because he didn't want to start a new advisory firm from scratch. He says he spoke to many people on Wall Street, and after a "very pleasant" dinner with Roger Altman, found a match with Evercore Partners.
Altman's publicly traded New York-based investment banking boutique provides advisory services to multinational corporations and financial sponsors across a range of strategic corporate transactions such as mergers, acquisitions, restructurings and private placements. It has recently advised on deals involving Affiliated Computer Systems, Burlington Northern Santa Fe and EADS/Airbus, among others.
Maurer's start-up advisory firm allowed Evercore Partners the chance to diversify its revenue stream by managing assets for both institutions and high-net-worth individuals (it owns a majority stake in Maurer's advisory firm). For Maurer, the tie-in offers a potential client pipeline that includes senior executives at Evercore Partners and some of the high-level executives at the companies they work with.
At this point, Evercore Wealth Management's first-quarter revenue of $1.9 million is just a speck on the overall revenue sheet of its parent company, which recorded total revenue of $85 million in this year's first quarter. But Maurer's unit is expected to grow, as is the parent company's 51% stake in it. The game plan calls for the parent to eventually take full ownership of its wealth management division.
"The time in between is an opportunity for us to benefit from our sweat equity," Maurer says, adding this arrangement provides long-range stability for the firm and its clients.
Growth, And How To Get There
Maurer wants to grow his firm mainly from within, and sees it happening two ways. First, with referrals from both existing clients and Evercore Partners executives. Second, from centers of influence-the accountants, attorneys and insurance agents it works with.
"A substantial number of the partners at Evercore Partners have become our clients and we expect that the referrals from them will be an important part of our growth," Maurer says.
To date, Maurer says roughly 80% to 85% of Evercore's clients were former U.S. Trust clients. He notes that all of the U.S. Trust professionals who came to Evercore were subject to a one-year agreement to not solicit former clients.
"Nevertheless, many of our former clients reached out to my partners and myself and asked about Evercore's services," Maurer says. "And many became our clients."
At least one outside observer says that type of client loyalty is a good sign for Evercore. "It speaks to the quality of the people and it bodes well for them going forward," says Benjamin Poor, director of the institutional asset management practice at Cerulli Associates.
About another 15% of Evercore's clients are senior managing directors at Evercore Partners. "We eat our own cooking here," says Schlosstein, who became Evercore Partners' CEO last year and plans to park some of his money with Evercore by year's end after he sells some existing stock positions.
The remaining clients have come from referrals and also from Evercore's recent acquisition of Morse Williams & Co., a New York-based investment advisor whose roughly 50 clients have an average of $10 million in assets. The firm has since moved into Evercore's Midtown Manhattan digs overlooking Rockefeller Center and St. Patrick's Cathedral.
Robert Morse, who's now an Evercore partner, says the deal creates synergies for both outfits. "I've got heavy exposure to foundations and endowments, which is good for them," he says. "And they're an RIA with a very strong trust company and partnerships affiliated with them."
Plus, Morse adds, they have a much bigger staff to take some of the compliance burdens off of his back.
More additions-either whole firms or individual advisors-are forthcoming. In April, Evercore hired Wendy Barasch to lead the firm's business development efforts. Barasch, who started her new job at the end of June, was most recently the managing director at Alliance Bernstein's private client business where she was responsible for hiring and developing financial advisor teams.
"We are looking for people from the brokerage, RIA or bank marketplace that want to play as part of a team in an environment where the client comes first," Maurer says.
Dan Inveen, research director at the consulting firm FA Insight, says Evercore's model could be a draw for RIAs who specialize in the high-net-worth or borderline ultra-high-net-worth space. "Evercore has the trust and investment banking capabilities and a host of other resources that might be attractive to an advisor who wants to more broadly serve their high-net-worth clientele," he says.
Evercore has opened a satellite office in San Francisco, and Maurer says other logical places to expand are cities where Evercore Partners has existing offices. That includes Boston, Washington, D.C., Houston and Los Angeles. Florida is another possible market.
Maurer says when new advisors join the fold, he wants their clients to become Evercore Wealth Management clients. "To a lot of financial advisors, their client list is their security blanket and they're not willing to partner [them with others]," he says. "I think that's unfortunate because having a team available to work with an advisor to serve their client undoubtedly results in a better solution for the client."
Team Approach
Evercore takes a holistic approach to client service that incorporates the clients' estate plan, tax situation, family situation and objectives--including foundations, charitable trusts and family partnerships. "That's the foundation for building the goals-based investment plan," says Chris Zander. "You don't just dive into the investment piece; you have to start with the overall plan, what are the objectives of the client. By working with them through that, it becomes much easier to define risk appetite in the portfolio and the objective."
From there, Zander says, the team can put together the appropriate asset allocation for that client. "Every client is going to look extremely different," he says. "Nobody is going to fit in a model."
All of this is wrapped inside a team approach that involves investment portfolio managers on both the equity and fixed-income sides and a fiduciary advisor skilled on the planning side. In a sense, it's like a family office approach.
"In many cases, there's going to be one person on the team who builds a very good rapport with the client," Zander says. "And as the client relationship evolves, that client probably self-selects who their primary day-to-day person is on the team."
On the equity side of the portfolio equation, Evercore uses a global approach incorporating both growth- and value-oriented stocks. In response to the rising volatility in global markets, John Apruzzese says Evercore is employing more alternative investments.
On the illiquid side, that can include hedge funds, private equity and venture capital. That could represent as much as 7.5% of a client's portfolio. Another 10% could include liquid alternative assets such as gold and foreign-denominated bonds.
Apruzzese says Evercore doesn't look at asset allocation by the security type. Rather, it has created five baskets designed to include anything with similar risk/return characteristics. For example, the bucket with growth assets includes equities plus anything that looks and smells like an equity. In early '09, that bucket included investment-grade or close-to-investment-grade corporate bonds, Apruzzese says, because they were yielding about 12%.
"Well, that looked like an equity to us," he says. "So we were buying corporate bonds but that was not a fixed-income allocation. It was a growth asset allocation because they had the risk/return characteristics of a stock."
When it comes to bonds, Evercore's fixed-income team includes a trio of portfolio managers and partners--Gary Gildersleeve, Sandy Panetta and James Holihan--who've worked together for 15 years and were previously together at U.S. Trust. They're part of a five-person team that includes analysts focused on municipal and corporate bonds.
And now the fixed-income staff is open for business to outsource its expertise to other RIAs. "There have been inquiries from outside RIAs asking if they could tap into [our] capability," Gildersleeve says. He adds that his fixed-income team works with both the advisor and his client to tailor the investment mix.
"We're not going to offer the client anything that the RIA doesn't want them to be offered, so we can be part of their team just like we were a team with any individual client," Gildersleeve says.
Autonomy
Maurer had his former U.S. Trust colleagues in mind when he formed Evercore because he wanted them to do their jobs the way they wanted to. And he joined with Evercore Partners because it was willing to let the advisory firm do its thing.
"We're relying on Jeff and his team to run their business with integrity and manage their business with great performance," Schlosstein says. "As long as that's being done, we're not intrusive and we try to help where we can."
And although none of the Evercore partners will talk trash about U.S. Trust or Bank of America, it seems they're happy in their new work environment. Gildersleeve says his fixed-income team worked in different buildings and were handicapped by various protocols and procedures at their former job. At Evercore, they all work within 15 feet of each other and can knock heads together and move quickly when opportunities arise.
"It's not that we don't have procedures here," Gildersleeve says. "But we have a lot more flexibility and we've found ourselves very nimble and able to act quickly."