After a $210 million sale, Atlantic Trust appears to be headed into high gear.
Its new parent company, banking giant CIBC, believes Atlantic Trust can grow into an $80 billion to $100 billion business in five to 10 years, says Victor Dodig, senior executive vice president for CIBC and group head for the banks wealth management division. The wealth management firm currently has $20 billion in assets under management.
The high-net-worth market in the United States is $12 trillion and extremely fragmented, Dodig says. Were going to focus on the market segment for clients with $5 million in investable assets and above, and we think there is a significant growth opportunity.
To achieve that ambitious goal, Atlantic Trust plans to expand its national footprint into Florida, and more deeply penetrate the lucrative Texas and California markets. We will make a concerted effort to attract top talent across the country -- particularly relationship managers and business development executives, "says Jack Markwalter, Atlantic Trust's chairman and chief executive
While Atlantic Trust will attempt to grow organically through client and talent acquisition, it will also be on the lookout to buy wealth management firms opportunistically, provided they have the right cultural, strategic and financial profile, Markwalter says.
Ultrahigh-net-worth families with more than $100 million in investable assets will also be targeted. There are over 3,000 households in the U.S. with over $100 million, Markwalter says, and we plan to contact all of them.
Average client size for Atlantic Trust is currently $9 million, and approximately 60% of the firms assets are trust company assets, Markwalter said; the other 40% are managed by its Registered Investment Advisors.
While Atlantic Trust enjoys a solid reputation in the wealth management business, and recorded an impressive $2 billion in net inflows last year, the firm had also been perceived as being overlooked under the ownership of mutual fund powerhouse Invesco, which had been shopping the wealth unit on and off for the past year, industry sources say.
Many observers see Atlantic Trusts cash sale last week to CIBC, Canadas fifth-largest bank, as liberating for the firm.
Atlantic Trust has a national business of great scale and promise thats very attractive, says industry investment banker Elizabeth Nesvold, managing partner at New York-based Silver Lane Advisors. They were not big earnings contributors to Invesco, but on paper they are an exceptional fit with CIBC, an owner who can truly appreciate them and re-invest in their platform.
Industry consultant Jamie McLaughlin agrees. I like this deal a lot, and I think its good for Atlantic Trust, he says. CIBC really wants to be in the wealth business in the U.S. and it looks like theyre going to give Atlantic Trust a level of support they havent had before with relative autonomy. CIBC is a very healthy bank and their enthusiasm bodes well for Atlantic Trusts growth.
Yet the banks aggressive growth plans are quite ambitious and hardly foolproof, notes Michael Kostoff, an industry analyst and consultant based in Naples, Fla.
Its doubtful the kind of growth theyre talking about can be achieved organically, Kostoff says. They will need significant additional acquisitions and that presents challenges. You have to be very, very good at integration when you make acquisitions and you have to be able to retain the talent you acquire.
(The firm may also want to change its marketing materials. A current brochure argues that "large firms -- managing more than $100 billion in assets, for example-- may not offer the personalized service and nimble decision-making that often characterizes small to medium size firms.")
Dodig plays down cross-selling bank products to wealth clients, an often contentious issue following a banks purchase of a wealth management firm.
Access to the banks lending and credit offerings will be client-driven, Dodig says. If clients have demand for the bank's products, they are available -- but this deal was not premised on cross-selling.
New York investment banker Steven M. Levitt thinks the deal offers other payoffs for CIBC.
This is a good story for CIBC, says Levitt, managing director and co-founder of Park Sutton Advisors. Its pure play in wealth management, in a company that has a very good reputation in very good markets and gives the bank a very attractive opportunity to do much more business in the United States.
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