To our Stockholders, Clients and Friends,
Fiduciary’s 140th year of operation will be measured by our dedicated client service during active global investment markets, and continued growth as new clients migrate to our differentiated offering.
BUSINESS ACCOMPLISHMENTS
The Company achieved its 81st year of consecutive profitability1 and continued to make progress on longer-term liquidity and growth objectives over the course of 2024. Importantly, the Company maintained its decades-long 98% average annual client retention rate during the year. We view long-term client retention as the best indicator of the Company’s client service because it incorporates the tangible results of investment returns, responsiveness, client-specific customization and is a clear reflection of overall satisfaction. Representative of the strength of Fiduciary’s value proposition to existing and prospective clients, the Company also had its best new business year in its history. This is the eighth year out of the last ten in which the Company exceeded the previous year’s result. The combination of high retention and increased new business has accelerated net organic growth noticeably over the last decade.
Several new professionals joined Fiduciary during the year. Eric Cunnane, David Krall, Kevin McAuliffe and Puneet Nevatia all joined as Vice Presidents throughout 2024. Additionally, we promoted five professionals to Vice Presidents: Bryan Gautreau, Erin Goldstein, Ashley Kersey, Ben Mekal, and Nick Ordway. Employee voluntary attrition continued to be well below industry averages and we attribute this to the Company’s strong collaborative culture along with professional opportunities associated with growing companies.
In its eleventh year of operations, the Company’s New Hampshire trust company experienced strong growth. The continued combination of favorable fiduciary laws, our extensive trust expertise, hard work by our New Hampshire team, and the evolving trust needs of the market has made this growth possible. Additionally, 2024 continued the growth trajectory of our “white-glove” custody business as competitive dislocations further differentiated Fiduciary’s client-focused services.
Over the past five years, Fiduciary has been recognized by more than 40 industry awards and recognition from professional organizations. During 2024, the company was named one of the Top Wealth Managers by Massachusetts Lawyers Weekly readers, recognized as “Best Custodian” by Private Asset Management Awards, and received the “Charitable Giving / Donor-Advised Fund” award by WealthManagement.com.
REMEMBERANCE
Sadly, on March 9, 2024, Fiduciary lost a remarkable professional and colleague, Thanda Fields Brassard.
Thanda joined Fiduciary in 2006 as a Vice President & Trust Counsel and in time her role expanded to include also serving as General Counsel for Fiduciary’s New Hampshire affiliate, Fiduciary Trust of New England (FTNE). As a leading expert on New Hampshire trust law, she was instrumental in establishing and growing FTCNE into an industry leader. Thanda was publicly recognized for her contributions with Family Wealth Report’s 2023 Women in Wealth Banking Award and Massachusetts Lawyers Weekly 2019 In-House Leader in Law Award. Thanda is fondly remembered by all who had the pleasure of working with her.
FORWARD PERSPECTIVE
Each year I offer a few thoughts regarding larger changes within the wealth management industry and their implications for Fiduciary. In large part, these observations reflect the fact that the Company continues to operate within the evolving macro-trends of demographics, technology and regulations. At times over the past decade the pace of these changes has been fast (e.g., COVID-related technological upgrades) and other times more gradual (e.g., baby boomer intergenerational wealth transfer). Along this path, at each twelve-month vantage point different themes are more apparent and warrant commentary. This year, as we look forward, two topics stand out: the increasing scarcity of professionals and the ongoing scalability of operations. These are not new, nor are they independent, but they will continue to be a primary focus for Fiduciary and other firms for many years to come.
For a professional service firm, the ability to identify, recruit and retain a distinctive team is the single most important business function of the organization. For years, I have discussed this being a “people business,” dependent not only on the individual talent employed, but its collaboration when engaged. In this business, the primary point of contact—where the rubber hits the road—is the engagement between the professional(s) and each client. The fruition of this engagement is a trusting bond and the ability to assist the client in achieving their life goals through the stewardship of savings and navigation of life’s varied and complex decisions.
However, the realities of wealth creation and career preferences over the last twenty-five years are challenging the industry’s basic relationship tenets. The number of families with more than $5 million has grown at an annual rate of 7% over the past 15 years, while the number of financial advisors employed nationwide has been flat to down slightly during that same period.2 This approximately 8% productivity gap—the difference between the growth in the number of wealthy families and the advisors to serve them—has had a material impact on how the industry has evolved and will continue to do so. A combination of increased loadings of clients per advisor and productivity gains have met this challenge so far. Productivity improvements have been varied and have included the creation of teams of advisors, the addition of specialists, workflow automation, and greater segregation, digitization and delineation of processes. Larger firms, which can make these investments, have continued to grow their client bases despite fewer advisors. Smaller firms have had fewer productivity gains and have been more reliant on recruiting advisors to match their expansion.
An interesting analogy to this “talent gap” within the wealth management industry can be seen in the adjacent trusts and estates legal industry. Experiencing the same increase in demand for services from affluent families as the wealth management industry, law firms have struggled with this growth in demand. Law firms have seen more stagnation in the number of practicing trust and estate lawyers than financial advisors, and the work that trust and estate lawyers perform requires significant one-on-one engagement. Add the fact that trust and estate lawyers’ business model is based on hourly pricing—which does not necessarily reward productivity gains—and one sees the ingredients for a constrained ecosystem. The results of this disconnect have been noticeable: with a limited amount of capacity, trust and estate lawyers have migrated up market, and many families have been challenged to find counsel.
While the future dynamics of the wealth management industry will probably play out differently than the trust and estate industry, it is likely there will be some common characteristics. Given the growing scarcity of advisors and the demographic needs of graying consumers (i.e., older individuals are more likely to seek financial advice), wealth management pricing will likely continue to be stable across advice channels.3 Additionally, firms that are able to expand the number of advisors will have an advantage over smaller or shrinking firms. As has always been reality, less affluent consumers will continue to migrate to less expensive direct advice channels, and the threshold at which families find it cost effective to benefit from personal advice may rise more than expected. Today, online channels have a higher percentage of clients with less than $1 million. Whether that threshold increases to $5 million or $30 million due to this dynamic remains to be seen.
Finally, the scarcity of talent will likely benefit larger firms which can invest in operational and service improvements that enhance both the client and professional experiences. Larger firms already have an advantage in growing their own talent and developing the next generation of professionals. Additionally, onboarding mid-career professionals requires patience and capital. It takes time to re-establish relationships, understand different processes and come-up the learning curve at a new firm. As a result, larger institutions are better positioned to support the “J curve” associated with mid-career transfers. Once at a larger firm—if the company is able to combat the bureaucratic tendencies that can come with scale—the professional can benefit from improved processes, a broader suite of products and services, and more professional collaboration. Importantly, larger firms have greater potential to make that professional more productive.
Intertwined with addressing the scarcity of talent will be the industry’s ongoing scalability. To date, wealth management has benefited from breaking up the end-to-end industry value chain which has mitigated the effects of limited growth in advisors. A century ago, the stewardship of family wealth was dominated by large banks, within which all the functions of relationship management, investments, trust administration, cash movement, custody, reporting and compliance resided. Following regulatory changes, technology enabled the segregation of activities and launched new adjacent industries (e.g., standalone trust administration, multi-custodian platforms). Today, a one-person RIA can access all the scale benefits of leading custodians and investment managers through best-in-breed client reporting platforms relatively quickly, easily and cheaply. This industry technology transformation has improved client outcomes and made possible the evolution and scalability of wealth management.
As a result, most firms’ second highest priority—following their talent strategy—should be their partner/vendor strategy. While many wealth managers do not explicitly articulate this critical function, I use this term to define the strategic selection and maintenance of products, processes, and technology each firm combines across the industry value chain. For example, which combination of custodians, mutual fund managers, private equity general partners, reporting systems, tax preparers, office space and more have been combined to serve clients. This vendor ecosystem defines material components of each company’s value propositions to both clients and professionals. Not surprisingly, flexibility and agile management of vendors has become a competitive advantage and determines scalability. At the same time, as the number of vendors increases, so too does the complexity of managing them, mitigating external risks and staying current.
Given the ongoing and increasing need for advisor productivity, it is unlikely that partner/vendor strategies will become any less complex or important in the future. Fortunately, the possibility of new AI technology coordinating across multiple providers is promising. Furthermore, the possibility of AI facilitating platform transitions is material. For example, many established companies become dependent upon legacy technologies. While new applications exist, the time and cost to transition data from one system to the next becomes a material impediment (i.e., multi-year technology projects). If those migrations became materially shorter and less risky through AI, the industry as a whole would adapt faster to client and advisor needs. Given the advantages provided by a growing advisor base, the ability to enhance internal processes and attract and retain professionals will become an even greater advantage going forward.
Over the past century, Fiduciary has evolved—like most of the industry—toward a more “open system,” as opposed to a “closed system” in which all activities are conducted in house. Given the collaborative launch of Fiduciary’s trust company in 1928, the firm’s investment process has always been a hybrid open architecture approach (e.g., the company outsourced investments to Scudder, Stevens & Clark for decades). Furthermore, because of the company’s many initial family office clients, Fiduciary has always pursued a complementary à la carte offering. This flexible business model, based on collaboration with other financial service providers, along with a focus on the professional, has served Fiduciary and clients well.
Looking to the future where advisors are more scare and productivity gains are needed to match client demands, Fiduciary is well positioned. The company has made material strides in technology over the recent past, and has plans for more in the future. Additionally, the firm continues to focus on connectivity, culture and the next generation in order to be as competitive as possible among distinctive professionals.
While we look to the future, we also take stock of the present. For me, I continue to be grateful to lead Fiduciary and want to thank the entire professional staff for their client focus, collaboration and hard work. We are proud of our accomplishments to date and look forward to wrestling with many of these issues in our evolving wealth management industry.
Best,
Austin V. Shapard
President & CEO
1 We believe Fiduciary has been consecutively profitable since the incorporation of its Massachusetts trust company in 1928—96 years—but do not have the records on profitability prior to WWII.
2 CapGemini, Cerulli.
3 McKinsey.