Among all of the big players in wealth management, Bank of New York Mellon has long been the quiet one. Though it ranks No. 7 in the field, it has kept a far lower profile than rivals like UBS, Northern Trust, and JPMorgan Private Bank. The single best-known thing about the bank may be its spiritual founder, Alexander Hamilton, and he hasn’t been around for more than 200 years.

That is starting to change. BNY Mellon, formed nearly 10 years ago by the merger of Bank of New York and Mellon Financial, has begun to truly flex its muscles in wealth management. In just the past two years, assets under management in accounts of $5 million or more have shot up by more than 35%, passing $200 billion. BNY Mellon Wealth Management, the company’s main private-banking unit, is only getting started. It is hiring scores of bankers, portfolio managers, and business-development types. It’s opening new offices across the U.S. and, increasingly, around the world. It’s deploying ever-more innovative investment strategies.

As BNY Mellon Wealth Management’s CEO, Larry Hughes is aggressively opening offices and filling seats.
Photo: Shawn G. Henry for Barron’s

The driving force behind the expansion is BNY Mellon Wealth Management’s soft-spoken chief executive, Larry Hughes, 56. “I don’t have 5,000 branches the way that Bank of America/U.S. Trust does,” explains Hughes, gazing out at New York from the private bank’s 54th-floor offices on Park Avenue. “I don’t have an investment-banking business the way Goldman Sachs does. And I don’t have the nationwide brand that JPMorgan has. They’ve got this huge advantage. So we have to play to our strengths — a great service reputation and that we’re part of a firm that is the seventh-largest asset manager in the world.”

The buildout started when the Boston-based Hughes was kicked upstairs from running the U.S. division in May 2010. He identified three simple things that needed to get done: Increase awareness of the BNY Mellon brand, hire more talent, and build more branded offices around the country.

In addition to launching a national TV ad campaign, the wealth unit’s first, Hughes has hired some 37 salespeople since April 2013, bringing his total to 132. He’s planning to hire another dozen or so more. In addition, Hughes has snapped up 29 new portfolio managers and private bankers, increasing the total by 6%. The average client account is at $10.2 million.

“This is ultimately a local business with very personal relationships, so you need people out on the streets, joining boards, and standing next to folks at soccer games,” he says.

Hughes was hardly born to the world of private banking. His father was a truck driver in Boston, and his Portuguese mother, a waitress. Hughes put himself through Bentley University and Babson College, in Waltham and Wellesley, Mass., respectively, and went into banking soon after graduating. He joined The Boston Company as an asset manager, a firm acquired by Mellon in 1993. Hughes rose steadily through the ranks and survived the merger, thriving in the new megabank.

In the past four years, Hughes has opened eight new private-banking offices, bringing the total to 42. Among the new branches is Palo Alto, Calif., where there are high hopes that his team will snag a fair share of the young tech titans springing up in Silicon Valley (see Penta, “Invest Like a Tech Tycoon,” Sept. 29, 2014). But Hughes has also followed his U.S. expatriate clients abroad, and now has offices in Grand Cayman, Hong Kong, London, and Toronto.

The expansion will continue even after the hiring spree ends in March. Hughes is eyeing Phoenix and Houston. He also wants to expand the existing overseas operations and build up in Dubai.

The new locations, he says, will benefit the bank’s top and bottom lines, but it’s also important to know that wealth-management teams in different locations have different talents and specialties. The Silicon Valley advisors are comfortable with technology and relate easily to entrepreneurial clients, while a New York–based team might focus exclusively on corporate executives or professionals.

Hughes is trying to leverage such local know-how across the company. Eight years ago, for instance, the bank’s Pittsburgh-based team developed a presentation on the wealth planning of “modern families,” like same-sex couples and blended families, and its approach is now part of the entire division’s national training program on modern-family issues. In Westport, Conn., meanwhile, the firm’s local wealth advisors built expertise in the intricacies of collecting and bequeathing vintage cars, knowledge later put to use by West Coast teams and clients, who were similarly building classic-car collections.

The bank has its believers. Mike Craffey, 54, is a BNY Mellon wealth-management client and a certified public accountant with a practice in Boston. Craffey was managing his own money through a broker but became frustrated by the complexity of his finances some 15 years ago. He found in BNY Mellon “seamless solutions.” When Craffey and his wife bought their current home a decade ago, for example, BNY Mellon supplied the loan at a competitive rate and sped them through the process.

Craffey was so pleased with the bank’s service that he referred “two or three dozen” of his own clients to the wealth-management firm. He calls the bank an extension of his practice. But most important to Craffey, “They’ve done a good job” with his portfolio, generating “stable market-rate returns” that will let him retire in comfort.

Craffey is obliquely referring to an effort spearheaded by Hughes after the financial crisis. BNY Mellon now separates overall asset allocations into two buckets: A more-conservative portfolio is meant to preserve a client’s lifestyle, while a longer-looking portfolio is earmarked for transferring wealth to the next generation. BNY Mellon calls it objective-driven investing.

Hughes and his team are putting their own stamp on this approach. They’re breaking down each individual asset class and carefully explaining its purpose to rattled clients.

For instance, “inflation protection” is made from Treasury inflation-protected securities and commodities, while portfolios needing some “enhanced return” will find assets in private equity, value and growth equity strategies, and so-called 130/30 funds, which take long-short positions on stocks and are riskier investments.

“After two bear markets in 10 years, it made us revisit how clients think about risk,” says the wealth unit’s chief investment officer, Leo Grohowski. It’s about, “What is the probability that this money doesn’t last through retirement? What scenarios would cause me to lose 20% of my capital in a 12-month period?” That’s how high-net-worth families think about risk, Grohowski says.

What are clients paying for this expertise? The fees are quite competitive: 0.75% on the first $3 million under management; for accounts of more than $50 million, it’s just 0.2%.

The big expansion is still a work in progress, and BNY Mellon Wealth Management’s asset numbers don’t yet bear out how much the unit is changing under Hughes’ leadership.

Snapshot

Here is the bank’s model for its lifestyle portfolio, which is aimed at helping clients preserve assets

His total assets in wealth-management accounts of all sizes, excluding those in other units of the parent, have increased just 32% since 2009, to $187 billion, as of Sept. 30. The stock market, by contrast, jumped 77% during that span. But Hughes has been aggressively pruning small accounts, and the new offices and talent should start adding assets.

Hughes knows he has to keep moving. “Back 25 years ago, clients would get their quarterly printed statement in the mail — 15 days after the quarter ended — come into our dining room, and have lunch and a martini,” he says. Now, everyone is “mobile and global,” with a growing number of clients swiping away at their tablets to get real-time updates on their investments.

Hughes has come up with excellent apps and desktop tools, and he has more tech innovations up his sleeve. He thinks that big data will enable advisors to better identify customized solutions for their clients; e-signatures will eliminate the need for printed documents; video-conferencing will help more advisors and clients connect; and biometric security identification, like fingerprints, will change how clients access accounts.

“Anyone who thinks we’re done is naive,” Hughes says. “I think five or 10 years from now, the service experience will have changed again, some of which we can predict, some of which we can’t.” Things have changed considerably since Alexander Hamilton founded Bank of New York in 1784, and if Hughes has his way, more change is ahead.

E-mail: editors@barrons.com