Thomas Hull, Lowry Hill's chief investment officer, was hired by Norwest to manage money with the group in 1983 with the specific promise that such a spinoff would occur. "The thought behind the spinout was that we could have a dedicated group that was not necessarily bank-associated, committed to high-net-worth individuals," says Hull.
By focusing on affluent clients-which at that time was defined as those with a minimum of $2 million in liquid assets-the thinking was that the group could concentrate more services for individual clients on a more cost-effective basis than could be achieved at the bank. Distancing itself from the bank's trust department, however, was also seen as a strategic advantage.
That's because, among affluent clients at least, banks had a reputation for stodgy investment performance, Hull notes. Another drawback was the high turnover rate of personnel at banks, which made it impossible to build up personal relationships with clients, he adds.
"They just weren't gaining customers, especially high-net-worth customers," Hull recalls. "They were holding their own and maintaining their relationships through the trust business, but they weren't attracting new money-especially entrepreneurial wealth."
Much of that money, he says, was ending up at brokerage firms such as Goldman Sachs and Morgan Stanley. One of the strategies behind the spinoff was to confront the competition head-on with an experienced capital management group that could also offer affluent clients financial planning, estate and trust services.
"They [Goldman and Morgan] did not offer the extra stuff," Hull says. "That was something unique about our model. In addition to asset management, we brought services like tax administration and estate planning."
The spinoff happened in 1986, with the bank seeding the entity-then called Norwest Capital Advisors-with about $400 million worth of assets, according to Steiner. The initial organization had ten principals owning up to 40% of the company and Norwest retaining ownership of the rest, he says.
At first, business was slow, Hull recalls. This was partly due to the stock market crash that happened a year after the spin-off. Being brand new in a tough environment was also a challenge, he says.
"When we first spun out, I think there was a concern as to the longevity of the operation ... We just didn't have a track record and we didn't have any credibility," Hull says.
It took several years before the firm started to see substantive growth in its client base and assets, he says. Most of it was through word-of-mouth and referrals by existing clients, he adds.