Despite the trend over the past three years at many large money managers to divest and focus on core businesses, Invesco Ltd. [IVZ] retained its trust unit, Atlantic Trust.
And the decision continues to pay handsome dividends.
Last year was a record year for the Atlanta-based trust company, said Jack Markwalter, its chairman and chief executive officer, as it attracted $400 million of new assets. In the fourth quarter, it completed its 11th consecutive quarter of positive net flows.
“Even through 2008, when competitors had outflows we had inflows,” Markwalter said. “It has been growing at an accelerating rate ever since.”
In 2009, Atlantic Trust increased its assets under management 13.4% to $15.2 billion from a year earlier. Markwalter said he expects double digit growth this year.
“We get the feeling that we are gaining even more positive traction than ever,” he said. “There is acceleration in our momentum. We expect net organic growth to be better in 2010 than it was in 2009. We expect a stronger and better year.”
Atlantic Trust’s growth can be attributed to its model, Markwalter said. The company targets wealthy investors with more than $10 million in assets. He said the average client has between $10 million and $20 million in assets.
To continue adding assets, Markwalter said Atlantic Trust must continue to improve customer service.
“Offering the highest quality client experience leads to referrals,” he said. “Through the downturn, we saw existing clients consolidating assets with us. Assets that were held at other firms came to us and we generated referrals from new clients because of the service we offered our customers. Our philosophy is that if we do an excellent job for our clients more wallet share and referrals will follow. That is our growth strategy.”
He added, “We were able to retail a lot of customers even when markets tumbled in 2008 by offering a high level of client service. We preached capital preservation, a diversified approach, and broad asset allocation. We were able to outperform our competition by preserving capital on a relative basis.”
Atlantic Trust’s client retention rates improved during the downturn, Markwalter said, as did its percentage of customer wallet share. The company did some selected marketing campaigns, but the vast majority of net inflows in the past two years came from existing clients consolidating assets and referring friends to Atlantic Trust.
“Navigating the downturn was all about communication,” he said. “We did conference calls and remained transparent to our clients. It was all about surviving.”
Atlantic Trust uses a fee-only business model. “We are much more of a trust company than a brokerage company,” Markwalter said. “This is really important especially when we compare ourselves with the bigger broker-dealers. We are totally trying to align ourselves with the client and provide them solutions rather than just products.”
By working with its parent company Invesco, Markwalter said that Atlantic Trust can offer its customers a full menu of investment products and services. In addition to client referrals, Atlantic Trust continues to use a network of intermediaries, including trust and estate attorneys, certified public accountants and consultants, to generate new business.
Atlantic Trust has grown rapidly since 2004 when it bought Stein Roe Investment Counsel LLC from Putnam Lovell Equity Partners LP. The acquisition, which added more than $7.3 billion in assets under management, more than doubled Atlantic Trust’s business.
While it will continue to consider potential acquisitions, Markwalter said organic growth will remain “the primary focus for the foreseeable future.”
The company is in the process of hiring executives to “fill out” its offices 11 offices nationally. Earlier this month, it hired three former executives from U.S. Trust, which is a unit of Bank of America Corp. [BAC], to expand its reach in Austin, Texas, and Washington, D.C.
“We want to be very selective about hiring senior professional so that we can find people with substantial books of business,” he said.
Atlantic Trust hired Craig Falls as a senior vice president in Austin and Steven Smith and Jeff Dillman as managing directors in Washington, D.C. Smith generated $4 million of revenue at U.S. Trust. On Monday, it announced it hired Aaron N. Newland as a vice president and business development officer for its Newport Beach office and Christine L. Lucero as an associate vice president and wealth strategist in its Boston office. Newland was a vice president for First American Trust FSB in Long Beach, Calif. Lucero was an estate planning specialist with Fidelity Personal Investments.
Atlantic Trust doesn’t plan to open more offices. It has offices in Atlanta, Washington, Austin, Texas, Boston, New York, Baltimore, Houston, Chicago, Denver, San Francisco and Newport Beach, Calif.
“We believe that we have a national footprint,” Markwalter said. “We are in all of the right markets. We would rather grow and build in those markets.”
Analysts said that Atlantic Trust is uniquely positioned for growth because it can tout its performance during the downturn and its affiliation to a strong parent like Invesco, which has a complete lineup of investment products and services, is also helpful.
Markwalter said the company has significant momentum because competitors have slumped.
“People want to work with a pure play wealth management firm,” he said. “They don’t want to be a part of a bank with all of the intrinsic conflicts of interest. We came out of the downturn stronger than ever and we are growing from here. … We’ve gone through the storm and we’ve been tested and we’re ready for more growth ahead.”
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