Bryn Mawr Trust's investment management business, the long-time sidekick to the bank's prestigious and better-known trust business, has pulled off the trickiest of feats. It has morphed into the star.
The bank has long been known for serving the trust needs of customers in Philadelphia's affluent Main Line suburbs. But over the past year and a half, investment management has overtaken trust services in assets under management.
Indeed, the wealth advisory business has grown so strong that the Pennsylvania-based community bank now sees itself as an investment house. "We grew up as a trust company but we're really an investment management firm now," says Frank Leto, executive vice president and head of the Wealth Management Division.
The bank isn't keeping mum about the growth. In the spring of 2009, it launched a marketing campaign trumpeting its "world-class wealth management." The campaign has increased the awareness in the community of Bryn Mawr as an investment house, and "not just an old stodgy trust company," Leto says of the campaign.
Ever since Leto assumed leadership of the Wealth Management Division in 2009, the bank has moved aggressively to put its wealth management services in the spotlight. In addition to the marketing campaign, the bank launched a series of initiatives to grow the wealth management business and give it greater support.
The initiatives have proven effective. The bank reported $7.2 million in revenue from wealth management services in the second quarter of 2012, up 42.1% from the $5.1 million generated a year earlier. And its assets under management and administration soared to $6.3 billion as of the second quarter of 2012, from $1.9 billion in 2009. Its investment management assets, which account for more than $3 billion of the $6.3 billion, have outpaced what the bank holds in trust assets by a wide margin, according to Leto.
The bank's headlong rush into wealth management stems partly from large brokerage firms and RIAs reinventing the business of investment management. The trust business was once ongoing and regular, Leto says. But today it "doesn't exist in the way it used to," he says, acknowledging the diminished role of trust companies as corporate fiduciaries across the nation. "Most brokers and most RIAs are not managing trusts. They're managing individual's money," he says.
While the bank is not about to abandon the trust business, it simply "wanted to move to where the rest of the world has gone," Leto explains.
Not surprisingly, that place is where the money is. "There are trillions of dollars in retirement money that's going to come out of 401(k)s that people are going to need to have managed over time," Leto says.
As management was putting a strategy in motion to grow its wealth business and more specifically its fee-based income, it knew it had its work cut out. When it rolled out the strategy in 2009, the bank was bringing in wealth business, but it was losing almost as much through a "back door being open," Leto says. For example, when trusts were terminated, they simply got distributed. "We didn't do a good job of retaining assets," Leto recalls.
The time had come "not for evolutionary changes but revolutionary changes in the wealth group," the bank's CEO proclaimed. One of the first initiatives in the ensuing reorganization of the wealth division was the creation of a wealth services group to support the "frontline folks" with day-to-day contact with clients. The group, which has seven people and will soon have two more, handles routine tasks for trust officers and investment managers, thus freeing up their time to focus on client service.
As Leto sees it, the challenge for the bank as it grows larger is to maintain the high level of personalized service for which it is known. "With growth, it very easy to lose sight of service," Leto says.
Indeed, personalized service is the reason why Bryn Mawr has been able to attract assets from large banks and wirehouses in recent months, Leto insists. "One of the reasons why we're getting the business we're getting is because they have lost sight of the client," he says of the larger competitors. For example, in a move to increase profitability, large banks are placing trust accounts into pools serviced by a group of people, which compromises the personalized service customers want, Leto says.
Whatever the reason for the wins, Bryn Mawr Trust is bucking the overall market trend, according to Chip Roame, managing principal of Tiburon Strategic Advisors. "If measured in assets, RIAs are winning, wirehouses are second, banks are third, and private trust companies are fourth," Roame says.
To grow its fee-based business, the bank also set out to instill a business development culture across the division. The bank established new business development goals for everyone, something that had never been done before. In addition, it implemented an incentive program to nudge everyone to think about business development. While there was some trepidation at first, employees eventually warmed up to the idea, especially as they began to see the rewards for their referrals in their paychecks, according to Leto.
The bank also formed a financial planning department as part of its strategy to build its fee-based income. While the bank always had a financial planner on staff, it was not until recently that it identified financial planning as a separate business unit within the wealth division. The bank now offers financial planning to all new and existing clients. "We found that financial planning for existing clients is a good tool for people who are incentivized to bring in new business," says Leto.
The bank also ramped up its stagnant brokerage unit, which had not seen much growth in either assets or revenues in 10 years. It brought in two brokers from UBS, boosting assets from $85 million to $285 million. The unit also switched to a fee-based brokerage business to ensure a continuing base of fees.
Among other initiatives to grow the wealth management division, the bank created a new trust company in Delaware. The company quickly built up $850 million in assets without adding virtually any staff. "We worked off our existing relationships," Leto says. The company expanded the division's geographic footprint and allowed clients to take advantage of Delaware's unique tax and trust laws.
All told, the initiatives contributed about $2.3 billion of the roughly $4.4 billion gained in new assets since 2009. The remaining $2 billion in new assets came from strategic acquisitions. In May 2011, the bank purchased the Private Wealth Group of the Hershey Trust Co. and one year later purchased Davidson Trust Co. Each acquisition brought in $1 billion in assets.
The bank aims to continue to grow its investment assets. By the end of 2014, it wants to add approximately $2 billion in assets to the wealth group. It also wants to increase the group's contribution to the bank's bottom line. Today, non-interest income accounts for 41% of the bank's income, with wealth management contributing the biggest piece. It wants to increase non-interest income up to 50%, according to Leto.
Most of all, it wants customers to absorb the message of its marketing campaign. "You don't have to go to a large New York wealth firm. Right here in Philadelphia is top-notch wealth management," Leto says.