Winning the wallets of the ultra-wealthy: Local investment firm enters fight for lucrative market

City Securities has placed attorney Stephan Hodge, a former Indiana state securities commissioner, and Kenneth Klabunde, a certified financial planner, at the helm of its recently established three-person Wealth Advisors division. Their goal is to offer portfolio management, tax planning, trust preparation and a host of other financial products to folks with at least $3 million to $5 million in assets.

But they plan to deliver it with a level of personal attention few Hoosiers receive. And much of their work will spill beyond the traditional financial world of stock valuation or cash flow analysis. One affluent client might want help purchasing a ski cabin in Beaver Creek, Colo. Another may need aid setting up a scholarship at his alma mater.

Whatever the desire, the wealth adviser must find a way to fulfill it.

“All of these things intersect with money,” Klabunde said. “So our starting point is the client’s goals.”

With one of the most storied brands in the Hoosier financial market, City Securities has a solid base to build upon. But competition to supervise the assets of the rich is fierce. All the big banks have their own specialty divisions offering exclusive services for well-heeled private clients. And there are plenty of small boutique wealth management firms, each promising to deliver the extreme personal attention they say banks headquartered out of state lack.

Rich people know they enjoy a wealth of choices in the market, said John Wortman, co-founder of Carmel-based Valeo Financial Advisors LLC. They’ll bounce around from manager to manager unless they’re certain they’re getting the most possible for their money.

“Every [money manager] wants to be here [serving wealthy clients], because they think the fees are going to be tremendous,” Wortman said. “Well, they might be for a year or two until [clients] figure out you’re no different than anyone else.”

Broadening the business

City Securities has a proven record expanding into new fields. While maintaining the company’s strong base in public finance and brokerage services, CEO Michael E. Bosway in recent years has launched forays into such areas as corporate finance and real estate.

Since the start of the decade, he’s added nearly 60 employees, bringing the total to 160. Today, City Securities has $2.1 billion in total assets under management.

“The 80-year-old brand name helps a lot when you’re out there in the marketplace,” Bosway said. “It was all about leveraging that name, which was pretty well known in the state of Indiana. It makes it easier to open a door.”

The new division is already landing clients. One of the first is Paul W. Prior, 84, who retired as CEO of New Castlebased Ameriana Bancorp in 1990 and remains its chairman.

Even though he had many decades experience as a banker, Prior prefers to let City Securities manage his affairs. He said he’s pleased with the firm’s financial performance, but even more grateful for its aid setting up a scholarship at Indiana State University for his deceased son Roger.

“It was very comforting to know we could say, ‘We would like to endow this or that, or favor this or that as a charitable part of our estate planning,'” Prior said. “It liberated me from toiling with all of that.”

From being a concierge

to attending funerals

The financial services market for the wealthy is largely based on relationships. To build its book of clients, City Securities relies on recommendations from other advisers to the rich, such as attorneys or accountants.

Wealthy people aren’t necessarily rich because of their personal financial expertise. Highly educated professionals, like doctors and architects, often need help to earn maximum return at minimum risk. Others, like Prior, simply prefer to hand off the job so they can devote their time to other things.

In any case, rich people’s financial affairs can be extremely complicated, said Tom Schnellenberger, an Ice Miller partner specializing in estate planning and income taxes. It’s difficult for even the most conscientious to face the details alone.

“You need to have somebody quarterbacking,” Schnellenberger said. “To the extent you don’t have somebody looking at the overall picture, it’s easy to end up making mistakes in this area.”

Most every financial manager angling for a slice of the wealth market claims to offer unparalleled personal service. But each provides it in a slightly different way. Big banks like Fifth Third Bank trumpet their ability to offer every financial service possible, both for individuals and businesses, before and after a client comes into money.

For example, said Fifth Third Senior Vice President Phil Chambers, many business owners have the bulk of their worth tied up in their companies. When they sell off that ownership, suddenly those former owners have millions to invest.

that “We event want .to happens capture ,” them Chambers really before said. “Because after that event happens, they’re typically out the door unless you’ve created a great relationship with them. They’re calling everyone in the phone book.”

The wealth business can also mean offering clients services that have little to do with money management. The more dollars clients need managed, the more they expect in return.

Some look at a wealth adviser almost like a concierge, counting on help with tickets to events, vacation planning and the like. Others expect to see their wealth advisers at major personal gatherings, such as relatives’ funerals.

Each wealth adviser chooses just how much of this sort of extra value he’s willing to provide. But in any case, said Chap Mitzell, managing principal for the locally based Windsor Group Ltd., an exceptional level of responsiveness is demanded.

“There are times we have internal partner meetings and we have to excuse ourselves to take client calls,” Mitzell said. “When your own meetings internally mean less than a client calling in, that’s about as client-focused as you can get.”

But as important as those sorts of extras may be, wealthy people are most concerned with the bottom line. And these days, providing the outsized returns rich folks expect is a challenge. The stock market alone can’t always do it, said Jeffrey Thomasson, CEO of Carmel-based Oxford Financial Group Ltd.

Wealthy people want help accessing the investments that will outperform the stocks anybody can buy. That often means putting money into hedge funds, buyouts of private companies and other alternative investments.

“When push comes to shove, if they’re paying you somewhere between $10,000 and $300,000 a year, they want to know that you are really, really smart,” Thomasson said.