Guardians of the Wealth

While Challenges Lie Ahead, the Gables Remains a Hub for Firms That Grow – and Protect – Private Fortunes. Now They Are Dealing With a Whole New Influx of Cash.

Mention “private wealth management,” and some people think about picking investments that can earn them a high return, fast, with little regard for the long-term. That view makes Jim Davidson shudder.

As a wealth manager, Davidson thinks first of financial planning. He helps people map out goals to build and safeguard assets for themselves and future generations. He helps them decide where best to put their money, keeps tabs on investments and goals, and stays in touch. He earns a fee for continuing services, not a commission for selling or managing products. He gains as the client’s assets grow. 

“The field is becoming more sophisticated, and it’s extremely competitive,” says Davidson, co-founder and CEO of Coral Gables Trust Co., which now has some $2 billion in assets under management. 

Coral Gables stands out as a hub for wealth management firms. The affluent and growing city is so alluring that Chicago-based Calamos Investments decided to run its entire US wealth-management division from the Gables. And Miami-based City National Bank of Florida just hired a longtime Gables banker to lead its wealth-management division from the bank’s executive offices in Coral Gables. 

Indeed, it was Gables-based certified financial planner Harold Evensky who literally wrote the book on the subject in the mid- 1990s. He later helped develop the personal financial planning program at Texas Tech University, teaching post-graduate courses there. 

Today, wealth-management firms in the Gables oversee tens of billions in assets for families locally, nationwide and abroad. They’re benefiting from a big influx of capital from tech and finance executives moving to Florida from California, New York and other high- tax states. Coronavirus also has raised awareness of the need for financial planning, prompting more folks to seek their services. 

Yet the firms face challenges too: A younger generation seeking a more “hands- on” approach; entrepreneurs too busy working to properly plan their finances; “do-it- yourself-ers” who eschew professional help; and a headache common in many industries – finding talent in today’s tech-driven age. 

“Newer graduates, millennials and
Gen Z are not that interested in the finance industry,” says Davidson. “They’re looking to create that next great app.” 

Who’s Who in the Wealth Management Landscape 

Wealth management in South Florida differs from many U.S. areas because of its wider range of players: local, national and international; small and large; independent and linked to banks and investment houses; generalists and firms offering specialized services from trusts to alternative assets. 

“Everyone is competing here,” says Jerad Waggy of Firestone Capital Manage- ment, a one-office firm in the Gables with some $625 million under management. “The Miami area is special, because you even have competition from international banks with Latin American headquarters.” 

Many firms work as Registered Investment Advisors or RIAs, which act with a fiduciary duty to put client’s interests first. Those firms typically have lots of certified financial planners and don’t sell proprietary investment products. They usually charge an annual fee based on the client’s assets – with the rate typically ranging from 1.5 percent to .85 percent, the percentage falling as assets climb. 

The local veteran is Evensky & Katz/ Foldes Financial Wealth Management. It began in 1985 in a more traditional mode – selling investment products for commission before switching to the planning-based, fee-only model that is now the standard practice, says David Evensky, chief marketing officer and the founder’s son. Today, the firm has some $2.5 billion under management, operating from three offices nationwide: its Gables headquarters, Texas and since 2020, Seattle. One key difference from peers: Nearly half of its 33 employees – many of them, certified financial planners – are owners. That makes the team more sensitive to business-owner clients and fosters continuity of staff, says Evensky. 

Coral Gables Trust, founded in 2004, largely focuses on South Florida, operating from the Gables, Fort Lauderdale, Boca Raton and West Palm Beach. It differs by accepting clients with assets of less than $1 million; many firms require larger amounts. It also differs by managing estates and trusts – separate accounts that hold assets to minimize inheritance taxes and ease transfer of wealth after the client dies, says Davidson. 

Newer to the area is Calamos Wealth Management linked to the Chicago area. The firm started in 1977 by investor and self-made billionaire John P. Calamos. He’s credited with a “risk-aware approach to investing,” using corporate bonds that can be converted to stock. The affiliate entered Florida in 2014 and now manages U.S. operations from the Gables with a staff of 15. The local office has some $1.5 billion under management, or roughly one-third of the firm’s total. One key differentiator: Investment strategies focused on such “alternative assets” as convertible bonds and “private offerings not easily accessible to the public,” says Joe Nader, head of the wealth-management division. 

Also expanding quickly: City National Bank, the second largest bank based in Florida. This spring, it hired experienced Gables banker Steven Hayworth to lead its wealth-management division, which works on a planning-based, fee-only business model. The division now has some $1 billion under management, largely from bank clients. One difference in its offerings: The bank can offer complementary services, acting as a corporate trustee or escrow agent, says Hayworth. 

Even New York-based firms are keen on the Gables. Fiduciary Trust International Company, part of investment giant Franklin Templeton, moved its office from Miami in 2015 and now employs 20 at Alhambra Plaza. It differs because it can leverage Franklin Templeton’s global research and resources, says Michael A. Cabanas, chief of the Gables office, which has some $1 billion under management. 

Why so many diverse players? “Because it’s where the money is,” says finance professor and banking analyst Ken Thomas of Miami. He estimates South Florida has roughly 40 percent of the state’s wealth – about 10 percent each in Broward and Palm Beach counties and 20 percent in Miami-Dade. “We’re the third largest state and growing. Like Interstate-95, wealth management is getting crowded.”

What Makes South Florida Different 

Yet it’s not just the range of firms that makes South Florida unusual. It’s also the range
of clients. International clients are common here, especially from Latin America, so firms must comply with U.S. rules to “know your customer” and the source of their wealth, says Davidson at Coral Gables Trust. 

“How to invest money for non-U.S. citizens is a bit different too,” adds Nader of Calamos. “Non-citizens often have 30 per- cent tax withheld from dividends on stocks. So, we don’t allocate them just to stocks that pay high dividends but rather manage a diversified equity portfolio.” 

We proudly bring the investment and wealth advisory services of world-renowned Calamos Investments, founded in 1977, to select individuals, families, athletes, entertainers, corporate executives and non-profit organizations of the South Eastern United States, from our regional headquarters located in Coral Gables, FL. 

South Florida’s tech boom – with companies often bought out for tens of mil- lions of dollars – also means working with entrepreneurs to manage sudden windfalls of cash, sometimes for decades before their retirement. “It’s a unique time, because the valuations that private equity and investment houses are giving tech companies are massive,” says Evensky’s wealth manager Michael Walsh. 

In South Florida, a smaller percentage of the wealth comes from past generations, “so there’s a greater willingness to try new providers than in the New Yorks, Bostons or Chicagos,” adds Jay Pelham, president of Kaufman Rossin Wealth, which started two years ago as an affiliate of accountancy Kaufman Rossin. “Here, I’m not competing for a client who says ‘My daddy and my granddaddy worked with another financial firm.’” 

Greater Miami also has more cash coming in and being created locally than other areas. “Even those who retire here are still doing deals. They’re buying real estate and looking for companies to invest in. There’s an active retiree community,” more so than elsewhere in Florida, says Grove-based Pelham. 

The migration of wealth in tech and finance, especially since Covid hit in 2020, has been “extraordinary,” says Hayworth of City National Bank. “I’ve been in this business
for 40 years, and I’ve never seen anything remotely close to what I’m seeing in terms of the influx of wealth and wealthy individuals.” 

Hayworth expects tax authorities in New York, California and Illinois to check if former residents have really moved their domicile to Florida, partly by looking at where they keep their financial assets. That means huge opportunities for local firms who can tap the wealth of those newcomers, says Hayworth. 

The Future: More Holistic, Younger Clients, Education Consumers 

In 2020, many wealth management firms had their best year yet, as strong stock and real estate markets pushed up the value of existing assets and new clients provided more assets to manage. This year, the out- look is strong for stocks, corporate profits and the U.S. economy generally, again suggesting a rise in assets and greater income from fees. Says Nader of Calamos: “It’s a Goldilocks period.” 

Still, the business is changing, creating new challenges. Certified financial planner Waggy at Firestone says clients are increasingly seeking advice on more than stocks or bonds. They’re looking for help on U.S. Social Security decisions, insurance, business succession, charitable intent and more. That means firms need to broaden their skills or partner with specialists, becoming more holistic. 

Some clients – especially younger ones – also are looking to invest with a greater focus on how companies and institutions deal with the environment, society and governance – so-called ESG factors. Yet, “ESG investing is not as simple as the client might think,” says Pelham of Kaufman Rossin. For instance, a company may perform well on environmental issues, yet have no women or minorities on its boards. 

Younger clients also tend to approach investing – and even meeting – differently, having grown up with information and communication online. They’re more comfortable with videochats and Powerpoint presentations. “And they want to be involved in decision-making, more so than their parents’ generation,” says Nader. 

A growing concern for firms is recruiting talent. With major venture capital funds, hedge funds, investment groups and tech companies from California and New York setting up shop in South Florida and hiring finance grads, there’s a shortage of local finance professionals to fill jobs at wealth management firms, says Davidson. He’s casting his hiring net beyond local colleges, using digital tools such as LinkedIn and Indeed to search afar. Still, he’s considering hiring local professionals in other fields to train them in financial services and build on their roots in the community. 

Ultimately, the biggest challenge for the firms may be spreading the word about what private wealth management is (fee-based) and isn’t (commission-based sales). That’s complicated when more folks selling stocks or other products call themselves financial advisors, and when online tools make investing easier without outside help. 

“We have to be sharp and let potential clients know what’s different” compared to broker-dealers or do-it-yourselfers, says Davidson. He says the years of accumulated experience in wealth management firms foster a less emotional reaction to events that allows a stronger focus on the long-term. “Inexperienced investors often sell when panic hits or start buying when the market has been doing well,” eroding their wealth, he says. A well-educated consumer and investor? That view makes Davidson smile.