After almost two years of partnership with New York-based Morgan Stanley Dean Witter & Co., Wells Fargo Inc. has decided to take its WellsSelect money-management program entirely in house.
The San Francisco-based bank had teamed with Morgan Stanley in 1998 to create the WellsSelect Program, which offered clients a choice of money managers, many not employed by Morgan Stanley or Wells Fargo.
“We wanted to use the product, services and expertise of an organization (Morgan Stanley) that had been successful,” said Jerome Paolini, director of investment consulting group at Wells Fargo. “We thought that was a great way to offer our services. Why reinvent the wheel?”
Wells Fargo provided all the clients and did all the marketing for this fee-based investment advisory program, while Morgan Stanley did all the due diligence on money managers, did all the trading, looked after the back-office functions and kept all the records.
The program has more than $1 billion under management.
The relationship between Wells Fargo and Morgan Stanley was terminated on April 12.
“As with anything else, after you have gained experience and knowledge you can do it own your own,” Paolini said.
The WellsSelect program will continue in the same form, and clients who were in the “old” program will be soon moved to the new platform.
The WellsSelect Program diversifies clients’ portfolios by asset allocation, sophisticated manager research and consolidated performance reporting,in one program for one annual fee. The minimum investment in an account is $100,000 while the average account size is around $400,000.
Besides gaining experience, Wells Fargo has been making acquisitions in the brokerage and money management sectors, which have strengthened its expertise in those areas.
“We acquired a very successful brokerage firm in Seattle, which had all the in-house capabilities and had all the back-office infrastructure that we were looking for,” Paolini said.
The bank has also been strengthening its internal money management operations. In April, the company brought in Roger Palley as its national director of value strategies. Palley, who previously was with Newport Beach-based Palley-Needelman Asset Management Inc., was one of the outside money managers in the “old” WellsSelect Program.
“I will be one of the large value cap managers,” Palley said. “We will be competing with outside money managers in this program because we (Wells Fargo) are also offering our services.”
Palley said that most of the money managers that were in the old program have been approved and are there in the new WellsSelect Program.
With money management, he said, “We feel we have a more robust program than what we had with the Morgan Stanley platform.”
“I will personally be going out in the next several months to some of the offices around the country talking about my record and how I manage money,” Palley said.
With a change in the investing climate where value is back in demand, Palley said he sees an opening to attract clients to the value portfolio he is heading.
“I am a known quantity to the people who are in the program, and I am a known quantity to the bank now,” he said. “I am hoping that this is going to be a very successful launch and that this will raise a lot of money, especially among people here (in Orange County) who know me.”
Last year, Palley was among the better performing value managers in Orange County. In 2000, his portfolios were up an average of 5.3%. In the first quarter, his investments declined by about 4%. n
