Glenmede officials don't want their firm to be one of the 800-pound gorillas of wealth management. That's because competing national full-service firms often have too many business lines, causing services for the well-heeled to become a sideline.

Glenmede differentiates itself as a pure investment and wealth management firm, says Al Piscopo, president and chief executive officer of the independent advisory firm, which has its headquarters in Philadelphia. He notes that wealth management usually doesn't generate the biggest margins at huge firms. Their more profitable lines are investment banking or possibly their families of homegrown funds.

"For a firm like Glenmede to exclusively focus on investment and wealth management, we have to deliver truly exceptional services. We can't subsidize our income statement with profits from investment banking and lending," Piscopo says. "Our clients are reassured knowing their assets are held separately from our firm balance sheet."

It's a service model that allows Glenmede to remain focused on clients' long-term interests, firm officials say.

"I think the private firm that is independent has the benefit of having a longer- term time horizon, which is a more appropriate match," says Gordon Fowler, the firm's managing director and chief investment officer, who will become Glenmede's president and chief executive officer after Piscopo retires at the end of the year.

And how do clients evaluate wealth management firms when they're selecting one? A consultant who monitors this industry says that one key for clients is the rate of return the firms garner for them. But that's not as important as other factors.

"Actually, we find the reputation of the firm is just about the most important factor in selecting someone," says Tom Wynn, a director with the Chicago-based Spectrum Group, which rates wealth management firms. "Banks usually come in low on these ratings unless you modify it and say 'private banks.'" Another key factor when clients choose these firms is referrals, either from a professional advisor or a friend or a family member.

This is the advantage Glenmede officials claim over their big competitors-that it's a privately held, independent wealth advisory and investment management firm and that it has 60 years or so in the business.

Four children of J.P. Pew, founder of Sun Oil Company, created the Glenmede Trust in 1956 and they also launched several Pew charitable trusts and engaged in various kinds of philanthropy. Pew's daughter Mabel Pew Myrin, for example, left her 300-acre farm to people with disabilities.

The four children, Mabel plus J. Howard Pew, J.N. Pew, and Mary Ethel Pew, originally designed the trust as a depository-or, as Glenmede officials call it, "a depository where money was cautiously invested and where the program of giving money would be well thought out, always keeping with the interests of the founders."

In the 1970s, Glenmede began broadening its client base beyond the Pew Trusts. Unlike other privately held wealth management firms, Glenmede's founding purpose was to serve as trustee for the family's philanthropic interests. Three generations of Pews are currently represented on the Glenmede board of directors.

Glenmede, which also has branches in Delaware, Ohio and New Jersey, has about 1,700 high-net-worth individuals and institutions with total assets of about $17 billion. That's down some $3 billion from three years ago. Typical clients have a net worth of $10 million to $15 million. Glenmede's average client account is about $8 million.

Glenmede's raison d'etre, its principals say, is wealth and investment management alone, and that model has been critical to its success, say both insiders and industry observers.

Rating The Firms
Independent firms like Glenmede and competitor Bessemer Trust rank in the top ten of a survey conducted by the Luxury Institute, a New York consultant that asks money managers to rate wealth management businesses in several categories.

"Glenmede and Bessemer always seem to rate at the top as far as giving clients what they need," notes Milton Pedraza, Luxury Institute's CEO. He adds that small investment boutiques with an open architecture-and without the pressure to sell a large amount of product-tend to have an advantage over larger firms.

Glenmede also scores high marks for the perceived worthiness of its price premium and for its clients' willingness to recommend the company to others, according to the Luxury Institute.

To Glenmede officials, this is proof that the firm's model works well. In praising all firms high on the list, the institute writes that effective wealth management firms must provide unique services, making "clients feel special across the full customer experience."

A larger firm can't provide service that's as personal, Piscopo says, whereas Glenmede principals are the sort who could, say, visit clients in the hospital. That's the kind of care that only small wealth management firms can provide, Glenmede officials say.

The firm supplies everything from trust to investment management services, but doesn't manufacture its own products or offer investment banking, Piscopo adds. The panoply of services wanted by the client evolves, he says, after a relationship has developed over the years.

Glenmede Turnover
Piscopo has been with Glenmede since the early 1970s. He says that the reason investment banks have faced so much trouble is their lack of stability and continuity-one of the reasons they do poorly in providing wealth management services, which need to cater to individuals' needs.

"Firms with high employee turnover suffer because clients don't want to keep reinvesting in the professionals managing their account," Piscopo says. "Clients want to be assured their wealth management firm is stable and positioned to pass their vision and values to future generations."

The transition process for Piscopo's own departure has been going on for over a year. Fowler, his replacement, has been with the firm for about seven years.

Fowler says he believes that national, full-service entities compromise wealth management because they are obliged to cross-sell various products.

"It's easy when you're in a multi-product firm for other products to interfere with your wealth management service," asserts Fowler, who previously worked for a national firm.

Looking For Ms. Or Mr. Well-Heeled
Fowler came to Glenmede from J.P. Morgan about seven years ago. He has been working in the investment business for 28 years. He ended his Morgan years as global head of private client investment management. He he has been serving the high-net-worth client for decades.

What constitutes the average high-net-worth client?

The typical client has much more than $1 million in assets, according to a recent survey by consultants studying the affluent market (see sidebar, page 31). Indeed, the typical client of a wealth management business is generally defined as someone with a net worth of at least $5 million and annual household income of $200,000 or more.

The average client has been with the firm for about 10 to 15 years, according to Fowler.

This is the kind of client that the well-run independent firm is best suited to serve, Glenmede officials say. "If you're independent and private," adds Fowler, "you can retain far more stability in terms of personnel."

Glenmede officials note that despite the market and economic collapse, the firm was able to tighten its belt and had no mass layoffs. The firm has also expanded its client interactions, including investor conference calls and outlook sessions with Fowler.

In October, Glenmede announced plans to open a regional office in New York City. It will be headed by Glenn Switzer, who formerly led a team of advisors at U.S. Trust/Bank of America Private Wealth Management.

"We serve a national clientele," Piscopo says. "The increased interest we are experiencing from investors and industry partners in the New York area signals that this is an opportune time for us to establish an office."

Playing Defense
Most of the firm's clients, Piscopo notes, have made their own wealth. It is usually a wealth that has been created through business enterprises or long-term investing. Clients have made some sage moves over the years to generate this pool of dollars, but now they seek comprehensive advice on how to retain wealth across generations, Piscopo explains.

"What they need from us is an understanding of how to protect wealth. They need to understand how wealth will be at risk for the rest of their lives and going beyond their lifetime," he says.

Some clients come to Glenmede later in life, perhaps in their 50s, with wealth they had previously been managing on their own.

"They still want to be involved with their finances, but now they're looking for someone to shoulder more of the load," Fowler says of these clients. Such clients usually end up requiring more than investment management or just financial advice, he notes.

Other clients may have started their relationship with the firm after a liquidity event-through the selling of a family business, for example, or the transfer of an inheritance.

Glenmede serves families that have been with the firm over four generations, with a long history of using the firm's advice on a variety of financial, estate planning, philanthropy and tax issues. Glenmede has about 300 employees, including in-house experts in each of its service areas.

"The scope of any relationship is driven by clients' changing needs and evolves over the lifetime of the relationship," says Chip Wilson, Glenmede's director of client services. "While we administer the full range of investment and wealth management services, there have been occasions when clients ask us to guide them in other areas of life. We recently, as an example, evaluated proposals from retirement and assisted living communities on a client's behalf."

Glenmede, which is agnostic when it comes to product, achieves investment goals with various strategies, including both in-house and outside managers. The firm uses what it calls the Manager Alliances Program, an internal group that acts a gateway to 70 outside managers who use both alternative and traditional strategies.

Fowler notes that improving economic data is causing an uptrend in earnings and this could cause a sustained upturn. However, the American consumer, along with the financial sector and government, still need to de-lever and this creates what he deems "unfinished business."

With short-term cash rates next to zero, selective risk taking is necessary to grow the real value of a portfolio, he says. In a recent note to its clients, Glenmede recommended buying higher-quality and high-yield bonds, while keeping bond maturities for most core fixed-income positions at short to intermediate levels. Fowler also recommends investing in high-quality growth stocks and overweighting international equities and fixed income.

Glenmede Investment Philosophy
How are Glenmede clients' assets deployed today?

A moderate to aggressive-risk investor with low liquidity needs would likely have about 23% in cash and fixed income and about 77% in equities and alternative investments.

The alternative part of the portfolio is about a third, with 15% of the portfolio in hedge funds, 12% in private equity, 5% in real estate and 4% commodities. Stocks make up about 40% of the portfolio, with about a two-to-one ratio of U.S. stocks to international stocks. The cash and fixed-income part of the portfolio is 23%, with less than half allocated to tax-exempt bonds.

Previously, the average Glenmede portfolio underweighted equities. Now equities will have a neutral position in the average portfolio. In the future, stocks might be overweight, according to Fowler.
Glenmede has substantial endowment and foundation business, and the firm usually invests a little more aggressively in this segment.

"That's because endowments tend to have longer time horizons and are more prepared to invest in illiquid and complex securities," Fowler says.

Tax planning is also a key part of generating better returns for high-net-worth clients. So Glenmede officials say they are preparing for higher taxes. That means more low-turnover investments, fewer hedge funds (which are likely to have higher taxes) and more municipal bonds. These are all strategies that will help boost the client's bottom line, according to Fowler.

What Clients Want
Managing investments is the firm's No. 1 goal. This usually means preserving wealth across generations. But the private wealth practitioner also needs to be as good in offering advice and services for other estate planning and personal issues, Fowler says.

Clients often come to the firm primarily for investment advice, Fowler says. "But as the relationship deepens, they also tend to put more and more value in the administrative services that we provide," Fowler says.

These services include ensuring that monthly payments are made, trusts have been set up and are properly administered and that advice is provided on estate and financial planning. If the client hasn't drawn up a financial plan, Glenmede officials will write one, Fowler says.

Spectrum Group's Wynn says financial planning and estate planning are the key services for successful wealth management. While the typical wealth management firm isn't required to have every potential personal service, he says, it must "know where to find them and act as a quarterback. It must oversee all of these services."

Each client, Glenmede officials explain, is assigned two senior staff members: a portfolio manager and an administrator. Fowler says administrators usually have experience in trust and estate law and financial planning. "Their advice can range from how to set up or run a trust for a grandchild to how to set up a 529 plan," Fowler says. "As stewards of our clients' wealth, our services must be comprehensive and personal."

The Good And The Bad
Glenmede officials say the essence of wealth management is found in a firm's culture. Who controls it? And what is it? If a company is run purely for the purpose of asset gathering, then it is not truly committed to wealth management clients, Fowler says. Such corporate environments can also foster a lack of teamwork, he adds.

Indeed, the essence of a superior wealth management service, Fowler concludes, is a team approach. But it is also the result of the right model. Fowler doesn't believe that merely hiring lots of people with big credentials is the key element in the success of a Glenmede or any other provider of financial services to the well-heeled.

Instead, Fowler believes being an independent firm dedicated to wealth management and nothing else is the key to delivering the highest level of advice and service. He promises it will remain that way during the years he will be leading Glenmede.
"Absolutely," he insists. "All of the stakeholders, from the board to the employees, realize that is a key attribute for our clients. We're running our business totally on this particular principle and no other line of business is or will distract us or cause us to lose focus."