Following the Money

NEW YORK -- A handful of well-dressed professionals gathered in a gallery at Christie's auction house here the other day to listen to a South Asian art expert discuss works soon to go on sale, including several by Maqbool Fida Husain, considered India's Picasso.

No one in the crowd planned to buy any art. In fact, few even cared about it. They just wanted to sound smart at a cocktail reception later in the evening.

After the presentation, the group, made up of Merrill Lynch & Co. financial advisers, adjourned to a conference room to plan strategy for the event. "We would like you to meet as many people as possible and hopefully bring in some new business," said Jyoti Chopra, head of Merrill's South Asian business development unit. She explained that the crowd would include dozens of "pre-qualified" prospective clients, meaning those able to invest around $1 million.

The Christie's event provides a snapshot of Merrill's aggressive effort, replicated to varying degrees among Wall Street firms, to harness demographic shifts in American wealth.

The Merrill effort, headed by three-time cancer survivor and former star financial adviser Subha V. Barry, has so far focused on wealthy South-Asian Americans and Latinos in a handful of big cities, including the District, but is expanding to include Native Americans, African Americans and Chinese Americans.

A quick look at demographic and economic data makes clear why big brokerage firms such as Merrill -- along with other U.S. industries -- are scrambling to extend their reach. Hispanic Americans represent about 13 percent of the U.S. population, and their numbers are growing faster than any other group. Latino wealth also is rising, as second-generation Hispanic Americans earn more than their parents. Latinos in the United States are expected to have nearly $1 trillion in purchasing power by 2010. According to Merrill Lynch surveys, 25 percent of South-Asian Americans earn more than $100,000, far more than the average.

While commercial banks have made targeting minorities a priority, brokerage houses have done less, analysts say. That inactivity leaves Wall Street balance sheets vulnerable, especially as the first wave of baby boomers begins to retire in the next few years and starts spending money rather than investing it. "Brokerage houses not paying attention to these new markets are going to slip behind, and it's going to hurt their earnings," said Richard X. Bove, banking analyst at Punk, Ziegler & Co.

Barry recognized all this. Her second successful battle with Hodgkin's disease had inspired a desire to do something different, and in 2001, she chose to junk her brokerage career. She noticed that neighborhoods around her Princeton, N.J., office were changing as upper-middle-class families of Indian, Chinese and Korean descent moved in.

But for years, Barry, who came to the United States from India in 1983, remained the only nonwhite adviser at her branch. "It wasn't because they were bigoted," she said of her colleagues. "They just didn't see any reason to change."

So Barry pitched the idea of a multicultural business unit to E. Stanley O'Neal, then head of the firm's private client group and now the only black chief executive of a major Wall Street firm. She described her effort as different from Wall Street's typical approach to diversity, namely recruiting a few women and minorities to pepper the ranks of white men.

O'Neal, known for attention to the bottom line, liked the idea. But only enough to give Barry a staff of three and a slim budget of $500,000. He demanded that she record exactly how much her unit helped bring in. That wound up helping Barry win over skeptical financial advisers such as Paul T. Sullivan, manager of Merrill's advisers in New York and among those at the Christie's event. At first, Sullivan thought Barry's unit might just be touchy-feely. "Then I got involved and realized this was the real deal," Sullivan said before the Christie's cocktail party. "Frankly, I don't know anything about art. But we are here to do business."

Since its official launch in 2001, Barry says, her small unit has helped Merrill bring in 3,000 new accounts and $6 billion in assets. In 2002, those accounts earned $5 million for the firm, she said. In 2004, that number jumped tenfold, to $50 million.