Home Personal Finance First Republic Fallout Hits BNY Mellon’s Pershing

First Republic Fallout Hits BNY Mellon’s Pershing

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That’s because Pershing, one of the nation’s largest custodians, held assets for First Republic’s wealth management clients. BNY Mellon (NYSE:BK) reported on Tuesday that Pershing experienced a net asset outflow of $34 billion, nearly erasing the $37 billion in net new assets the division reported in the first quarter.

Pershing’s total assets were $2.4 trillion, flat from the first quarter and up 9% year-over-year.

When advisors change firms, they usually bring clients and assets with them.

Nearly 300 advisers left First Republic’s wealth management division at the beginning of the crisis, but dozens left when the bank was in turmoil. As of May 1, First Republic had 229 advisers, according to JPMorgan Chase & Co.

It acquired the Bank of San Francisco in May.

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Some of the Advisory Teams that left the First Republic oversaw large sums of money, sometimes leaving in rapid succession. For example, on April 28, his 12-person team that oversaw $3 billion transplanted its vast practice to Morgan Stanley.

On the same day, RBC Wealth Management hired two former First Republic advisers, Mark Friedman and Mitchell Peters, to oversee approximately $400 million. They joined RBC’s San Francisco office, which had hired another former First Republic adviser, Brian Addington, a few days earlier.

Pershing could lose even more assets in the short term, as JPMorgan will likely move remaining assets overseen by First Republic’s advisers to its platform. JPMorgan said last week that wealth management client assets had grown to $2.8 trillion, including $150 billion in First Republic assets. A JPMorgan spokeswoman did not respond to a request for comment.

BNY Mellon executives circumnavigated the loss of First Republic as a client during the earnings call Tuesday morning.

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“Net new assets were negative $34 billion in the quarter, reflecting conversions of regional bank clients acquired in May,” said Chief Financial Officer Dermot McDonough. “Excluding the impact of this ongoing transformation, it is expected to weigh on our reported net new assets for several quarters, which increased at a mid-single-digit annualized rate. We remain confident in Pershing’s underlying momentum and outlook.”

A spokeswoman for BNY Mellon declined to comment further.

Longer term, Pershing is likely to benefit from growth in registered investment managers. RIA is he one of the fastest growing areas in the wealth management field. Pershing manages about 900 clients, 700 of which are his RIAs.

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New York-based BNY Mellon was founded in 1784 by Alexander Hamilton. The company provides banking, investment management, wealth management and custody services worldwide. BNY Mellon announced Tuesday that earnings were up 26% year-over-year to $1.30 and net income was up 23% to $1 billion. Assets under custody or administration increased 9% to $46.9 trillion.

BNY Mellon shares rose 4.1% on Tuesday, falling 13% from a 52-week high of $52.26 to close at $45.33.

Please email Andrew Welsch at andrew.welsch@barrons.com.

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