Thriving With a Single Product Line
By Larry Collins
In an era when financial institutions are scrambling to broaden their inventory of product offerings, there is one venerable Boston firm that is quite content providing the same solitary service it has been dispensing to thousands of individuals and families since the late 19th Century.
“We don’t offer things like checking accounts, consumer loans, home mortgages and other traditional banking products,” says Douglas R. Smith-Petersen, president and chief executive officer of Boston’s Fiduciary Trust Co.
So just what does Fiduciary offer? “Independent and objective financial advice,” says Smith-Petersen. “The company’s sole focus is investing for individuals and families.”
The absence of other internal banking products at Fiduciary reinforces what the company regards as its most valuable assets: independence and objectivity. There’s no temptation to direct client assets into the firm’s own investment vehicles, because there aren’t any.
“It helps our clients to know that we’re not trying to sell them internal products,” says Smith-Petersen.
Of course, Fiduciary does take advantage of investment vehicles offered by others; in fact, it’s delighted with the broad array of investment opportunities that are out there in ever-increasing profusion.
“Today, our clients need more diversity in their investments, beyond just stocks and bonds,” says Smith-Petersen. “So the investment spectrum has expanded considerably, with real estate investment trusts, private equity investments, venture capital, hedge funds, timberland and international stocks. There is a broader array of asset classes.”
Privately owned by its employees, directors and “founding families,” Fiduciary Trust today watches over more than $9 billion in assets, about half of which it manages directly and the other half which it keeps as custodian for other investment managers and trustees.
Fiduciary started out in 1885 as one of the many family trust operations that to this day are squirreled away in offices throughout Boston’s financial district. Like many other 19th century Yankees, founder Robert Gardiner eschewed the financial counsel of “outsiders” in favor of his own investment acumen. His family’s assets could best be husbanded by family, a common enough Brahmin philosophy.
It went on that way for the next 43 years, but during that span the business gradually became less of a Gardiner family affair, as other well-heeled families were invited into the fold. Then, in 1928 – not the most fortuitous year for the founding of a new financial entity – the family office was incorporated, with a Massachusetts state charter, and Fiduciary Trust Co. was born.
Fiduciary not only survived the Great Depression but emerged stronger. A more recent surge in the company’s and its clients’ fortunes occurred in the boom years of the 1990s.
“We have all kinds of clients, old money, new money, not just Brahmins,” Smith-Petersen laughs.
To join the ranks of Fiduciary clients, one must have investable assets of $1 million or more. Once entered he or she enjoys the attention of one of Fiduciary’s many financial advisers, all of whom are part-owners of Fiduciary. There is no commingling of funds; each client’s assets are individually managed by his or her own adviser. The relationship between client and adviser is often long-term and stable, no small matter in a world where many other financial institutions have disappeared from the banking landscape.
“The fact that we’re privately owned by employees and directors means that we can control our destiny,” Smith-Petersen asserts.
“The bank consolidation that has been going on deeply affects trust clients. Look at Shawmut, BayBank and Fleet, each of them swallowed up. They all had trust departments, so their clients have been bounced from one bank to another, from one unfamiliar trust officer to another. People are tired of that; they come to us and say, ‘I want an institution that has stability and roots.’ That’s what we offer.”
Has Fiduciary Trust itself caught the eye of anyone on the merger prowl?
“Oh, sure, we’ve been approached. We’re just not interested. It’s not in the best interest of our clients, shareholders or employees,” says Smith-Petersen.
So Fiduciary, after all, has another product to offer its clients beyond independence and objectivity in its investment decisions. And it’s a product steadily increasing in value as the floodtide of bank consolidation goes on.
It’s called continuity.