Who Can Wealthy Investors Trust?

BETWEEN THE ROCKY MARKETS, THE SHAKY BANKS and Bernie Madoff, the relationship between wealth managers and their clients didn't stand a chance. Rightly or not, investors first grew suspicious of their advisors and bankers, then contemptuous. Says one ultra-high-net-worth investor, who oversees billions of dollars in family investments: "I'm better off assuming that all these people are only out for themselves."

That kind of deep distrust is starting to dramatically reshape the world of wealth management, where banks, brokerage houses and other investment outfits compete to serve millionaires and billionaires. More than one out of four high net-worth investors yanked money from their wealth mangers in 2008, according to a survey by consulting firm Capgemini and Merrill Lynch. And some bankers believe that as many as four out of five are now thinking about firing their managers and picking new ones.

"The amount of money in motion is probably several orders of magnitude higher than this industry has ever seen before," says Bruce Holley, a senior partner who heads the Boston Consulting Group's U.S. wealth-management practice. "Clients are aware that it's more critical for them to get good advice in such turbulent times, but at the same time, they are more nervous and wary than ever before." For bankers and advisors, he adds, "there's tremendous potential to either win or lose relationships."

That's evident in Barron's annual ranking of America's top wealth-management outfits. None of the top five players, and only one of the top 10, holds the same position as last year, the result of both money on the move and crisis-driven mergers. Another factor: We've tightened our definition of wealth management. We think the term now denotes services for accounts of $5 million and up, verus $1 million-plus in the past, as firms increasingly cater to the very richest.

Bank of America (BAC), No. 3 on our list last year, now towers over the field with $685 billion in accounts of $5 million and up -- reflecting its acquisition last year of Merrill Lynch, previously No. 1, and its earlier purchase of U.S. Trust. Morgan Stanley (MS), No. 5 in last year's listing, moves to No. 2 as a result of teaming with Smith Barney, previously a unit of Citigroup. Wells Fargo (WFC), now owner of the old Wachovia Securities, JPMorgan (JPM), the leader in ultra- high-end private banking and Goldman Sachs (GS), long a powerhouse in the field, round out the top five. But the reshuffling extends deep into the ranks.

Some of the biggest winners were smaller old-line private banking outfits, which benefited as last fall's financial crisis rocked some of the giants to their core. Bessemer Trust, formed more than 100 years ago to manage the money of the Phipps family, partners of Andrew Carnegie, shot up to No. 13 in the ranking from No. 20 last year. Northern Trust (NTRS), long a favorite home for Midwest fortunes, climbed from No. 13 to No. 8. Fiduciary Trust, started during the Great Depression to serve the anxious rich, leaped to No. 30 from 37. "We have just had the two best years in the 16 years I've been working here" in terms of attracting new assets under management, says Henry Johnson, president and co-CEO of Fiduciary Trust.

Johnson attributes some of the growth in clients to the firm's conservative investment approach, which produced returns that looked relatively appealing, compared with the losses on major market indexes. "But," he says, "there's also a big element of a flight to quality happening out there, as clients seek out someone that they feel can help them rebuild their trust in the system."

Even Fiduciary's name can be a plus, since a growing number of potential clients understand the meaning of the word "fiduciary" -- an investment professional with a legal obligation to put the client's interest ahead of his own.