2020 Annual Report Letter

To our Stockholders, Clients, and Friends,

Few periods in Fiduciary’s 135-year history have tested the Company’s fiber as did 2020. However, because of the dedication of all the Company’s professionals, Fiduciary rose to the challenges posed by the COVID-19 pandemic and exceeded its long-standing client responsibilities while also achieving significant corporate milestones that would have been noteworthy even under normal circumstances.

COVID-19 PANDEMIC

Beginning on March 13, 2020 with the onset of the COVID-19 pandemic, the Company transitioned to a largely work-from-home operating paradigm. Due to the diligent work of the Company’s Operations & Technology departments, the Company seamlessly moved to its remote operations without interruption to client service. Throughout 2020 and into 2021, the Company has maintained a “skeleton crew” of fewer than 10 employees working in the Company’s Boston office in order to maintain connectivity to service providers and to perform various functions requiring on-site presence.

The ability of the Company to successfully and seamlessly transition resulted from its comprehensive business continuity planning, the investments made over the prior five years to improve processes and procedures, and the collaboration and dedication of all of the Company’s professionals.

The Company has decided to continue its largely remote operations until the fall 2021, at which point a planned reentry program will begin. In advance of the fall return, employees have been permitted to return to the office on a voluntary basis.

BUSINESS ACCOMPLISHMENTS

While successfully navigating the COVID-19 pandemic was the most material accomplishment of 2020, Fiduciary achieved several other milestones during the year.

The Company’s financial results for the year were characterized by both solid operating results—the Company’s 77th year of consecutive profitability1—and a continued strengthening of our balance sheet. The Company benefited from the combined impact of strong client retention, record new business and the appreciation of global investment markets during the year. In total, client assets grew to $18.7 billion as of December 31, 2020.

The Company continued to act as a stable advisor to our clients during this period of unprecedented global tumult. Because of this client focus, the Company maintained its 98% annual client retention rate. Furthermore, the combination of permanence, independence, and distinctive client service again caused many new families and institutions to choose Fiduciary for their financial management needs. As a result—despite remote operations over the majority of the year—the Company generated the most new business in its history. This marked the fifth year out of the last six during which new business increased year over year.

Investment performance continued to improve across client accounts and has benefited from the coordinated work of the Investment Department. The Company’s ability to maintain a long-term perspective during the initial decline in global markets at the start of the pandemic, combined with macro asset allocation decisions, benefited many clients’ portfolios and enabled them to profit from the market returns over the remainder of 2020.

During the year, we continued to add to our ranks of professionals, including the addition of two new Investment Officers—Emily Griset and Colleen Bartling—who joined us during our remote operations. Additionally, Claire Keefe joined as Head of Portfolio Solutions, Priya Amar joined the Trust & Estates legal team, and Adam Thompson was promoted to Chief Financial Officer.

In its sixth year of operations, the Company’s New Hampshire subsidiary trust company continued its strong growth. Today, we believe it is the largest independent trust company in the state. The combination of favorable fiduciary laws, hard work by our New Hampshire team, and the evolving trust needs of our clients has made this growth possible. With increasing national recognition of both New Hampshire’s trust laws and Fiduciary’s capabilities, we foresee continued expansion in this market.

Fiduciary Trust Charitable, which provides a donor-advised fund and direct gifting program for our clients, also had a strong year, as continued awareness of its ability to facilitate clients’ philanthropic goals fueled its growth.

DIVERSITY, EQUITY, AND INCLUSION

During 2020, Fiduciary—like many individuals and institutions—grappled with the societal issues raised by the Black Lives Matter movement. As a result, the Company has been engaged in its own dialogue on race, unconscious biases, and equity for the purpose of identifying and taking meaningful and tangible actions.

During 2020, the Company launched seven long-term initiatives to enhance diversity, equity, and inclusion today and to lay a foundation for years to come. These broad-based initiatives are both internally and externally focused and include: 1) Education, Training & Discussion, 2) Mentorship / Internships, 3) Volunteerism & Corporate Support, 4) a Diversity, Equity, and Inclusion Committee, 5) Hiring & Promotion Practices, 6) Marketing & Communications, and 7) Measurement & Tracking.

In addition, the Company is focused on transparency in its efforts. In that spirit, on December 31, 2020, the Company had a total of 130 full-time employees. Of these professionals: 50% were females; 17% were non-white; and, 19% were under 30 years of age, 39% were between the ages of 30 and 50, and 42% were over the age of 50. As the Company continues to pursue its diversity, equity, and inclusion objectives, we will continue to share its progress.

FORWARD PERSPECTIVE

Most likely 2020 will be a seminal year—one that we look back upon as an inflection point for what came before it and what followed. I say this because of the confluence of events that defined the American experience last year. The COVID-19 pandemic forced unimagined hardships and adaptations not experienced in generations. The murder of George Floyd forced reexaminations of long-standing wrongs. The contentious presidential election forced recognition—regardless of political party—of our divided nation. The second warmest year on record highlighted long-term environmental issues. And finally, increased economic inequalities forced reflection on shared responsibilities.

All of these events not only affected us on an individual and societal basis, but also forced meaningful re-examination across the corporate landscape. Indeed, global businesses—even prior to the pandemic—were beginning to grapple with their historic corporate objectives amidst the emergence of a more socially conscious generation, environmental limitations and the proliferation of technology-enabled information. The implications of decades-long pursuit of shareholder value creation as businesses’ sole goal has been a point of examination from boardrooms to business schools.

As a result, 2020 and its aftermath have acted both as testing grounds for management teams, but also launching platforms for re-envisioned businesses. This is particularly true for professional service firms. As I have written about in previous annual letters, professional service firms—like Fiduciary Trust—are merely the collection of individuals who come together each day to work towards a common goal. Unlike manufacturing companies or asset-heavy businesses, professional service firms are defined by the quality of their people and their culture.

The pandemic and, specifically, working remotely has challenged these firms’ collaboration, connectivity and many of their binding elements. In large part, firms have worked tirelessly to insulate clients from the disruption caused by the pandemic. In the wealth management industry, clients have continued to open and close accounts, buy and sell securities, move money, pay bills, and receive statements. However, the professionals within these firms have experienced anything but normal operations. Working from home, navigating childcare, having personal and professional time merged, and reworking processes that had been optimized for in-office environments have been not only disruptive, but physically and mentally exhausting.

Indeed, this combination of factors is why I think the effects of 2020 will accelerate a reexamination not only of the relationship between businesses and the societies in which they operate, but also the relationship between professional services firms and their employees.

How companies address these two questions largely depends upon what each company views as its purpose. Private companies and family-businesses may approach them differently than publicly-traded corporations. Furthermore, boutique wealth managers likely view them differently than multi-national manufacturers.  But, what is clear is that firms that solely prioritize only one constituency (i.e., shareholders) will increasingly be less advantageous than more sustainable firms that integrate multiple populations (i.e., shareholders, clients, employees, and their broader communities/society) into their measures of success. As any astute reader of Adam Smith would acknowledge, this is not a new perspective regarding business enterprises, but it is reemerging as commerce and capitalism evolve. And not surprisingly, the evolution requires a more comprehensive management tool kit than just strategy and execution, and includes self-awareness, empathy, and well-formed principles. Post 2020, companies are emerging from the pandemic with greater awareness of their objectives to be both creators of shareholder value and advocates for progressive values.

As it relates to the relationship between professional service firms and their employees, I believe this is already evolving. The necessity to continually improve the value proposition to high-quality professionals in order to attract and retain them has always been a “war for talent.” But, the last 12 months has opened new fronts in this effort, as expectations of increased work-life flexibility, amplified focus on each company’s societal impact, and the need for intentional actions to progress the diversity and inclusivity of firms’ internal populations have become table stakes.

I share these observations because Fiduciary Trust has always lived a clear set of time-tested values based on integrity, hard work, respect of others, perseverance, and duty. They also include: inclusion, diversity, and a welcoming of differences.

Fiduciary also has a true sense of purpose that is beyond the singular creation of shareholder value. I believe we practice a noble profession of helping families and institutions steward their savings and, most importantly, successfully navigate life’s most complex puzzles. During periods like 2020, these values are the clear compass by which we navigate and make decisions. They also act as long-term guide stars to evaluate Fiduciary’s performance over decades.

2020 was an extraordinary year on many dimensions, but Fiduciary rose to the year’s challenges with its historic convictions and success. It is because of the Company’s adaptability and commitment that I am confident that 2020 will proudly stand out among the Company’s 135 years of operations for its unwavering service provided to our clients and to each other. I continue to be grateful to lead Fiduciary and want to thank the entire professional staff for their dedication and spirit in the face of adversity. The pandemic is not over, but we are closer to its end than its beginning, and as such, we look forward to the work ahead with purpose and vigor.

 

Best,

Austin V. Shapard

President & Chief Executive Officer

 

1We believe Fiduciary has been consecutively profitable since 1928—92 years—but do not have the records on profitability prior to WWII.