* New York trading firm Cantor confirms decision
* Courting individuals a cultural twist for Cantor
* Wall Street wants fee-based revenue to offset volatility
By Jed Horowitz
NEW YORK, June 21 (Reuters) - New York firm Cantor
Fitzgerald, which is branching out from its core business of
electronically trading bonds with other brokers, plans to start
managing assets for wealthy individuals around the end of the
year, a company spokeswoman confirmed.
Cantor Chief Executive Howard Lutnick has amassed a wide
range of new businesses to offset lower income from trading
commissions that have fallen due to technology and declining
Cantor Fitzgerald Wealth Partners will cater to people with
at least $5 million to invest, with an emphasis on those with
$50 million, said Stan Gregor, co-chief executive of the new
unit, in an e-mailed statement.
Gregor, a former private banking executive at Wells Fargo &
Co. joined Cantor earlier this year.
The new business would be Cantor's first to work directly
Wealth management is becoming more popular with Wall Street
firms eager for steady fees to offset more volatile investment
banking and trading revenues. Most wealth management firms get
paid a percentage of the assets clients entrust to them.
Cantor will be entering a highly competitive area populated
by large and small broker-dealers, asset managers and
consultants offering different models to successful financial
advisers. Many brokers are shedding licenses that let them
collect commissions on stock, bond and fund sales to become
fee-based registered investment advisers, a transition they say
lets them be more objective about their advice.
On Friday, Morgan Stanley said it was purchasing the
part of Citigroup Inc's Smith Barney brokerage unit it does not
own to offset its volatile capital markets businesses.
Gregor said Wealth Partners will recruit both independent
investment advisers and brokers who prefer charging fees rather
than selling commission-based investment products.
As a firm with a short-term, aggressive trading culture,
however, Cantor could face challenges convincing advisers it
has the patience to build an asset-gathering business.
"They are smart, tough guys, but there is a big difference
between transaction-based, high-tech trading platforms and
fee-based wealth businesses," said a banker specializing in
wealth management, who is familiar with Cantor's strategy. "They
don't like to spend a lot and they are not comfortable with
investments that take patience and time."
Like others outside Cantor interviewed for this article, the
source spoke on condition of anonymity so as not to jeopardize
his current employer or his relations with Cantor.
Lutnick is known for his autocratic management style, as
well as for his philanthropic efforts after 658 of Cantor's 960
New York-based employees were killed in the Sept. 11 attacks on
the World Trade Center.
In his email, Gregor said the wealth unit "will be operating
completely independent and unbiased and free of conflict from
other Cantor businesses."
Wealth Partners will in some ways follow the model of
HighTower Advisors, a four-year-old Chicago-based firm that
recruits brokers from Morgan Stanley, Merrill Lynch and other
big firms with offers of greater independence and, often, equity
in the company, said a source familiar with the strategy.
Like HighTower, Cantor is likely to offer equity to its
advisers and the opportunity to operate relatively independently
as registered investment advisers. The equity could be enticing
if the entire firm ever goes public, another source said.
BGC Partners Inc, a relatively small part of
Cantor, is currently publicly traded.
A Cantor spokeswoman said the possibility of going public is
discussed annually at the firm, which was founded in 1945.
Although wealth management is new territory for Cantor,
Lutnick has been pushing the company into alternatives,
including its Cantor Gaming business that makes accounting
systems for gambling companies and mobile technology for
Cantor acquired a hedge fund of funds called Cadogan
Management in late 2011 as part of its efforts into managing
alternative assets, primarily for pension funds. It also has
been building equity capital markets, loan trading and
investment banking businesses in the United States and parts of
Last October, Moody's Investors Services slashed Cantor's
debt ratings to junk and knocked BGC's junk rating further down
to Ba2. The core bond businesses were likely to suffer continued
low profitability, while the firm's diversification into
competitive capital markets and banking businesses were
challenged by a weak global economy and the need to build
capital, Moody's said.
A Moody's official said he could not comment on the retail
brokerage plan because the rating agency withdrew its coverage
of Cantor in November. Lutnick has pushed for Moody's to drop
coverage since the ratings firm opened a review of Cantor's
strategy in July 2012.
(Reporting By Jed Horowitz; Editing by; Linda Stern, Carol
Bishopric and Andre Grenon)