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Saturday, Feb 24, 2024

Wall Street West – Mega-Account Managers in Demand at Top L.A. Firms

The downtown branch of Merrill Lynch recently seized upon a prize: Six premier high-net-worth managers, defecting from the rival offices of Goldman Sachs & Co.

The business of managing ultra-rich accounts, even more than the rest of Wall Street, has swollen of late. As widely noted, the upper strata of America is booming.

“At Goldman Sachs, we were members of teams that managed $10 billion in that branch,” said Glenn Oratz, one of the six who departed for Merrill Lynch.

The other five managers who left Goldman are Mark Binder, Francis Malone, Scott Harries, Craig Chiate and Brian Sears. Seven support staffers also left, most of them having been with Goldman more than seven years.

The minimum account size at Merrill Lynch, in the high-net-worth group, is $10 million. “Our target is to manage the assets of 100 families,” said Oratz. “We often work with entertainers, CEOs, business owners.”

Only a few years back, someone with $5 million was considered “high net worth” by major brokerages, another example of the growth at the top of the wealth curve.

With such jumbo account sizes, the job of Oratz and the other managers is not day-by-day stock picking, but overall management of financial assets choosing between investment sectors (stocks, bonds, real estate, etc.), while keeping on top of tax laws and estate planning.

When it comes to Wall Street and picking stocks, the king-size investors are not too much different from regular Joes, said Oratz. “Some like more risk than others. Some like to be more in bonds, but others call us every day, and are very active,” he said.

Of late, some high-net-worth investors have become more interested in “private equity” offerings, such as pre-IPO stock, which are shares in a company contemplating an initial public offering, said Binder.

“Where Merrill Lynch is offering a venture-type product, or private equity, we will offer that to our clients,” said Binder.

High-net-worth individuals are charged an annual fee an amount equal to a specific, small percentage of the assets being managed for the services of Merrill Lynch.

Why the departures from Goldman? Oratz and Binder were loath to discuss company politics or compensation schemes. However, there has been a change in Goldman Sachs’ business model and compensation plans since the firm went public last year, and other managers of high-net-worth individuals, in other cities besides Los Angeles, have left Goldman Sachs recently. A Goldman Sachs spokeswoman in New York declined comment.

Analyst Shindigs

It’s sort of a daunting thought: 1,400 stock market analysts in your backyard. That’s how many people belong to the Los Angeles Society of Financial Analysts Inc., itself a member society of the Association of Investment Management & Research (AIMR), the national administrator of the Chartered Financial Analyst program.

Stock market analyst wannabes passing three AIMR exams and meeting other criteria can put the “CFA” after their names when signing forms or making business cards, said James M. Lyon, himself a CFA, who is LASFA’s secretary and also a money manager with Oakwood Capital Management LLC in Century City.

The downtown-based Los Angeles Society (lafsa@earthlink.net) holds several meetings each month, some open to the public and others not. On the open side, the “Investment Classics Discussion Group” is free, and consists of monthly readings from seminal works on investing.

Also each month, a publicly held company flies its flag in front of a LASFA luncheon (open to members only) in a forum called a “corporate presentation,” an event usually attracting 30 to 150 analysts. In March, Boise Cascade Inc.’s Chairman and CEO George Harad spoke, for example.

Topical seminars are held also, such as an upcoming look at California real estate on April 18, co-sponsored by the National Association of Business Economists. The real estate investment trust crowd will probably attend.

Though the majority of LASFA events are “members only,” most can be attended by ordinary investors, if they can wangle an invitation from a member, conceded Lyon.

By the way, Lyon’s money management shop, Oakwood, recently opened up a mutual fund in connection with Gilford Securities, the New York-based brokerage. At Oakwood proper, they handle only accounts with $500,000 or more, but the mutual funds will accept investments of as little as $5,000. Started two years ago, Oakwood now has $360 million under management.

But No Jeans

Think about 1,000 lawyers in khaki pants, and you may get the picture of the offices of Morgan Lewis & Bockius, the national law giant with a major branch in downtown Los Angeles.

The 125-year-old firm, always strong in securities work (it is a prime haven for former SEC lawyers and U.S. attorneys with securities experience) has been flooded with Internet-related work in the last few years, as might be expected. Add to that the burgeoning biotech sector, as well as Morgan Lewis’ always-strong relations with hedge funds and venture capitalists, and what you get is a lot of clients who work 16-hour days and do not suffer well hard shoes, suits and ties. In short, the clients are casual dressers.

When in Rome, as they say.

Morgan Lewis has gone 24/7 on the casual look. The Los Angeles office led the way, said John Hartigan, managing partner, now attired often in khakis, the new uniform of the venture-tech world.

“We have more than 1,000 Internet clients, firm-wide, and many of them are here,” said Hartigan. “We are dressing appropriately to our client base. They don’t want to have to put on suits to visit us.”

Court appearances and other official duties, of course, still bring out the formal attire. “I keep a white shirt, tie and suit in the office at all times,” Hartigan said.

The long-established Morgan Lewis, with roots in Philadelphia, wasn’t always such a swinging place. “Oh, we used to have casual dress days,” commented Hartigan. “They were called Saturday and Sunday.”

Contributing columnist Benjamin Mark Cole writes about the local investment community for the Los Angeles Business Journal. He can be reached at sevencontinents@mindspring.com.

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