Wells Fargo (NYSE:WFC) announced the launch of its Abbot Downing brand this Monday.  The new division was created by the merger of former Wells Fargo Family Wealth and Lowry Hill businesses which had $32.9 billion in combined client assets. The newly formed division will focus on the country’s crème de la crème, catering to the needs of individuals and families having investable assets in excess of $50 million. Although wealth management services for the ultra rich is a notably fragmented market, notable competitors are the other big banks Bank of America (NYSE:BAC), Citigroup (NYSE:C), Goldman Sachs (NYSE:GS) and JPMorgan (NYSE:JPM) who have also been aggressively pursuing the ultra rich.
We are currently in the process of updating our $31 price estimate for Wells Fargo’s stock in the wake of the bank’s decision to increase its dividend payout.
- How Are Deposits At The Largest U.S. Banks Trending?
- How Much In Domestic and Foreign Loans Do The Largest U.S. Banks Hold?
- How Much Of Total U.S. Deposits Are Held By The 5 Largest U.S. Banks?
- How Much In Domestic And Foreign Deposits Do The Largest U.S. Banks Hold?
- What Are The Current Price-to-Book Ratios For The Largest U.S. Banks?
- Wells Fargo’s Q1 Results Low Oil Prices, Weak Mortgage Activity
UHNIs: A Lot of Money In A Few Hands
The biggest reason that makes targeting ultra high net-worth individuals (UHNI) worthwhile is, well, the fact that there is a lot of money to manage with fewer people to target. Wells Fargo estimates that the U.S. has roughly 10,000 households with $50 million or more in investable assets. Among them, these families control more than $1 trillion. 
Of Course There Is A Catch !
But the same reason makes this an extremely difficult market to expand in. Like everything else about the ultra rich, their financial needs are also markedly different from those offered to the public at large. To make things worse, needs are extremely diverse among the group itself.
Abbot Donning claims to have this problem sorted out though. Wells Fargo insists that the new brand is a ‘one-stop shop’ for everything that the ultra rich individuals and families will ever need – something it illustrates from the fact that Abbot Donning encompasses an asset management division, a private banking channel, a combined trust and fiduciary service, and even a group that addresses family psychology and governance.
So what does Wells Fargo gain from this, you wonder. Well, the usual commissions and fees for wealth management services. But as commissions normally include a percentage of the wealth management gains, we are talking a few hundred thousand dollars per client here. Try tinkering with the chart above to understand how an increase in Wells Fargo’s wealth management commissions revenue affects its stock value.Notes:
- Wells Fargo Launches Abbot Downing Brand to Serve Ultra High Net Worth Market, Wells Fargo Press Releases, Apr 2 2012 [↩] [↩]