Review of Bernstein Private Wealth Management 2020

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Updated on Monday, January 20, 2020

Bernstein Private Wealth Management is the boutique private wealth management arm of AllianceBernstein LP, a prominent investment firm with $487 billion in assets under management (AUM) and nearly 3,500 employees. The private wealth division serves affluent individuals, families, foundations and others and is responsible for roughly $100 billion of the company’s total AUM. Headquartered in New York, it has nearly 20 offices around the country.

All information included in this profile is accurate as of January 15th, 2020. For more information, please consult Bernstein Private Wealth Management website.

Assets under management: $100 billion
Minimum investment: $1 million
Fee structure: A percentage of AUM that varies by asset class
Headquarters location:1345 Avenue of the Americas
New York, NY 10105
https://www.bernstein.com/
212-969-2293

financial advisor

Overview of Bernstein Private Wealth Management

Over the last 50 years, Bernstein has grown to manage nearly $100 billion in assets for affluent individuals, families, endowments, foundations and other financial guardians. Today, it’s a unit of AllianceBernstein LP, one of the largest investment firms in the world with nearly $487 billion in assets under management and nearly 3,500 employees across 25 countries, according to its latest ADV form..

Thus, advisors who work with private wealth clients are actually employees of AllianceBernsteinLP. In total, AB has more than 2,000 workers in investment advisory and research roles. To distinguish itself from other wealth advisors, the Bernstein unit leans on this relationship, and its access to AB research and its bench of nearly 300 in-house research analysts.

AB was created in 2000 through the combination of private investment manager Sanford Bernstein & Co. and Alliance Capital Management Corporation. But it didn’t change its name to AllianceBernstein LP until 2006, and it changed its branding to AB in 2015. In 2018, it announced it was moving its corporate headquarters — and approximately 1,050 jobs — from New York to Nashville, Tennessee. The private wealth group will remain in New York.

Today, the firm is jointly owned by AllianceBernstein Holding (AB) and AXA Equitable Holdings, Inc (EQH), known for its life insurance products.

What types of clients does Bernstein Private Wealth Management serve?

In general, it’s clients with deep pockets that turn to Bernstein, including high net worth individuals and families, trusts and estates, charitable foundations, partnerships, private and family corporations and other groups. Individuals may be planning for a certain event, such as selling a company or an IPO, or want guidance on philanthropic giving or passing wealth to future generations.

The minimum investment needed to work with the firm is generally $1 million. Clients with portfolios larger than $25 million are typically considered institutional investors and handled in a different division of AllianceBernstein. To invest in alternative asset strategies, such as hedge funds, clients usually must be willing to commit at least $500,000.

Parent company AB is comprised of separate retail and institutional investor divisions to serve institutions as well as retail clients with more modest portfolios.

Services offered by Bernstein Private Wealth Management

The firm focuses primarily on investing, with the goal of preserving the necessary amount of capital and growing the rest. Your personal advisor will not manage your money, but rather work with a team of tax, estate and trust attorneys and CPAs to create a custom plan for you. Your advisor then uses a number of centrally managed strategies, such as growth equities, as the building blocks for your portfolio.

Clients can implement their custom plan using separately managed accounts, mutual funds, hedge funds and other investment vehicles. Most clients sign up for discretionary management, meaning they don’t need to approve each trading decision.

Families interested in environmental and societal outcomes can choose to invest in standalone ESG-focused portfolio options. Families can also receive education on living with substantial means through family meetings, family philanthropy and the development of investment policy statements.

For most private clients, AB provides the investment management services, while their broker-dealer subsidiary Bernstein LLC provides custody services and order execution for equities. Clients appoint AB and Bernstein to perform their respective services.

Here is a comprehensive list of services offered by Bernstein Private Wealth Management:

  • Advanced asset allocation and asset location
  • Philanthropic planning services
  • Estate planning
  • Tax planning
  • Private banking
  • Insurance
  • Business consulting
  • Pre-IPO planning
  • Single-stock diversification strategies
  • Employee stock options
  • Planning for the sale of a business
  • Multigenerational wealth transfer
  • Art valuation
  • Consolidated reporting

How Bernstein Private Wealth Management invests your money

Bernstein touts that what makes it unique from other asset managers is its access to the research services from the larger AB. The latter’s roughly 300 research analysts around the world, often with work experience in the industries they cover, provide portfolio managers with insight on specific companies and industries. Recent examples include flying Chinese automobiles to Europe to break them apart to better understand the potential impact on the auto industry. Portfolio managers also may conduct their own due diligence.

Given how much they value their research, Bernstein recommends actively managed portfolios in most cases. It believes active management can be best suited to outperform over time, despite the higher fees and even though passive investments may outperform active at certain times. However, the firm will work with active and passive accounts.

Portfolio managers use strategies such as long and short term purchases, trading, short sales, options, arbitrage and more. Some portfolios are long trades only, while others include short sales as well.

To create your customized plan, and decide which strategies to invest in, you’ll discuss with your advisor factors such as your goals, liquid and illiquid assets, income needs, taxes, time horizon and risk tolerance. Your team will then create an asset allocation and run various scenarios based on past returns, volatility and valuations that will determine your hypothetical range of future wealth. Your advisor can then determine what percentage of your portfolio should be allocated to preservation vs. growth.

Ultimately, your plan may focus on a single investment strategy, such as growth equities or fixed income high yield investing, or a blend of many approaches. Investment strategies can include one or many of these areas:

  • Fixed income
  • Value equities
  • U.S. and global growth equities
  • Concentrated growth equities
  • Multi asset
  • Asset allocation services such as customized target date funds
  • Passive management including index strategies
  • Alternative investments
  • Real estate services, including REITs

Fees Bernstein Private Wealth Management charges for its services

Bernstein is transparent with its fee schedule, but actually determining how much you’ll pay may be difficult to assess ahead of time. That’s because your fees depend on how your assets are invested (see the charts below). In addition, portfolios of between $1 million and $5 million will owe a 0.25% administrative and servicing charge on the first $3 million of assets. Portfolios over $5 million will not be charged this fee.

Be aware that if you withdraw funds and your portfolio value falls below $1 million, your fees could spike, reaching an all-inclusive 1.85% on the first $500,000 and 1.50% on the next $499,999.

Fees on return-seeking and diversifying assets, such as U.S. strategic equities
First $1 million1.25%
Next $1 million1.20%
Next $3 million1.10%
Next $5 million1.05%
Fees on risk-mitigating assets
Tax-advantaged and taxable bonds0.55%
Intermediate-duration institutional portfolio0.45%

Instead of an asset-based fee schedule, the firm may instead charge a performance-based fee, which is contingent upon portfolio performance. Clients who opt for this fee model will pay a base management fee alongside a performance-based fee. You would only pay the full active management fee if your portfolio beat its benchmark by 2% before fees.

Bernstein Private Wealth Management’s highlights

  • Proprietary research: As part of the AB family, advisors and portfolio managers can tap the knowledge of their in-house research team of nearly 300 analysts who cover dozens of industries and thousands of companies, and live all over the world. Although many firms offer in-house research, Bernstein believes it’s differentiated in this area. The firm tied for second place on Institutional Investor magazine’s 2018 list of rising star analysts in the U.S. equity space, with 12 of its analysts deemed rising stars.
  • Access to private funds: Certain clients have access to alternative investments, including hedge funds advised by AB, among others. These offerings can help clients further diversify their portfolios, or give them exposure to a certain theme they believe in.
  • Focus on minimizing taxes: Bernstein estimates that by managing client taxes throughout the year — not just at year end — and focusing on after-tax returns, the annual benefit to clients is roughly 0.5% to 1% a year. To lower your bill, the team closely analyzes opportunities to offset gains or losses, AMT liability, chances to use tax loss carryovers and ways to save based on life transitions or tax code changes.
  • Tools to decrease complexity for global clients: Many of Bernstein’s clients are foreign investors. The logistics and legalities of moving money between countries can make your head spin. Bernstein offers strategies and tools to minimize United States income, gift and estate taxes for foreign clients. Attorneys and accountants are on hand to help quantify the impact of cross border transactions and their financial impact.

Bernstein Private Wealth Management’s downsides

  • Potential conflicts of interest: AB advises many different types of clients paying varying fees, such as mutual funds they sponsor, hedge funds, private equity funds, institutional accounts and high net worth individuals. This mix puts AB in a position to potentially advantage or disadvantage one client over another. For example, a team member may be financially incentivized to share their best ideas with the clients that pay the highest performance fees, or prioritize one client’s trades in front of another. The firm says it has put policies in place to ensure all accounts it manages as a fiduciary are treated fairly and equally.
  • Opaque fee structure: While Bernstein publishes a transparent fee schedule, you are ultimately charged based on your mix of investments, which you won’t know until your advisor creates your plan. Plus, it will likely change over time. This makes it difficult to know what you’ll pay until you begin working with the firm.
  • Financial incentives to sell certain products: AllianceBernstein discloses that its advisors may receive larger commissions for certain products or referrals than others, potentially encouraging them to recommend the higher fee service or provider to their clients. Also keep in mind that one of AllianceBernstein’s largest shareholders is the financial services company AXA, known for selling life insurance products. Employees of AXA Advisors earn a commission when they refer clients to Bernstein Private Wealth Services.
  • High minimum investment: You typically need at least $1 million to establish an account with Bernstein, so investors with more modest portfolios should look elsewhere. What’s more, if your account falls below the $1 million threshold at any time, your rate will jump to an all-inclusive 1.85% on the first $500,000 and 1.50% on the next $499,999.

Bernstein Private Wealth Management’s disciplinary disclosures

The SEC requires investment advisors to disclose in their Form ADV any legal or disciplinary event that is material to a client’s evaluation of the advisory business or the integrity of the management personnel.

Parent company AB, the actual employer to the Bernstein wealth team team, discloses that while nothing is pending against the firm now, in the past it faced regulatory fines for not registering employees with regulators, and allowing an employee to act as an advisor before the employee had a state license.

More than a decade ago, AllianceBernstein faced more serious allegations of market timing, as well as inappropriate payments for the distribution of its mutual funds. With the former, the SEC found that the firm allowed certain investors to engage in market timing trades in some mutual funds in exchange for putting money in other firm products, such as hedge funds or mutual funds. The firm set up a $250 million fund to compensate shareholders adversely impacted, and reduced certain mutual fund fees by at least 20% for a minimum of five years. The firm also was required to form a specific compliance and ethics committee. The firm says these issues have been resolved.

Bernstein Private Wealth Management’s onboarding process

To set up a meeting with Bernstein, click on the Contact Us tab on the top right corner of the firm’s website. This will bring up a contact form, which requests your name and contact information as well as a brief message.

When you initially meet with your financial advisor, come prepared to discuss your values, legacy and philanthropic goals, since your advisor will try to suss out what money means to you. Clients are required to enter into a written investment advisory agreement with Bernstein before formally beginning a relationship, which will detail how your account will be managed, including the strategy, legal and regulatory restrictions and client-specific guidelines and restrictions.

You are free to communicate with your team via email, phone or face to face in one of their roughly 20 offices nationwide. You also have access to your account details anytime through your online account and the mobile app. Comprehensive performance reviews and strategy reports typically happen quarterly, but you’ll receive monthly portfolio evaluations.

The bottom line: Is Bernstein Private Wealth Management right for you?

AB has been a stalwart in the industry for decades. That doesn’t mean, however, that the private wealth arm Bernstein is the right choice for all customers. With a minimum portfolio size of generally $1 million, investors just starting out or that otherwise lack seven figure portfolios will likely need to look elsewhere. You may also want to seek out alternatives if you’re looking largely for financial planning rather than investing, such as education or retirement planning, since Bernstein traditionally has focused more on investment services.

Always ask your advisor how much in total they earn off your account, including commissions from other parties. Also ask why your advisor is recommending one product over another. Whether you’re considering AllianceBernstein or any other advisor, it’s your job to make sure you understand how that advisor is paid and to suss out why he or she is recommending that particular investment or product.

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