2016 Annual Report Letter

To Our Shareholders, Clients and Friends,

2016 was an important year for the Company: financial results were sound, we maintained our 98% annual client retention, we had our best new business year ever and we continued to lay a strong foundation for the Company’s future.


The Company made significant progress toward its long-term objectives during 2016.  Many of the year’s accomplishments were related to the second full year of the Company’s growth programs. Enhancements in both core corporate functions and performance management, which began in 2015, continued with the addition of initiatives to refine our investment process, increase brand awareness and expand our Officer corps.  Notwithstanding these strategic projects, the Company continued its commitment to assist clients in achieving their financial and personal goals, and extended its decade-long 98% annual client retention record. The Company views client retention as an important overarching performance metric and corporate objective due to the individualized services we provide.

In addition to meeting our existing clients’ service needs, we had our best new business year. While it is still early days across many of our growth initiatives, we are encouraged by the doubling of new business revenue over the past two years. Many factors helped achieve this milestone, including a more systematic approach to marketing, the strength of our client value proposition relative to competitors and the dedicated work of our professionals.

During 2016, we spent significant time and effort refining our investment process. In July, Peter Andersen joined us as our Chief Investment Officer. Under Peter’s leadership, we sharpened our investment philosophy and reorganized many of our historic investment practices and processes. While each client’s goals are unique, there are some commonalities across clients’ investment objectives that include: preserving and growing purchasing power, avoiding permanent loss of capital and pursuing tax efficiency (for taxable clients). With these objectives in mind, we leverage a fundamental set of guiding investment beliefs that inform portfolio decisions.  These beliefs are based on extensive academic research and experience from within and outside the firm. They include:

  • Asset allocation is the primary driver of returns and risk,
  • Diversification enables superior risk/return results,
  • Capital market efficiencies vary by asset class, and
  • Long-term horizons generally produce better results

Under these guiding principles, we are now using a “core / satellite” paradigm to conceptualize our investment approach and communicate it to clients and prospects. We find this paradigm simplifies and more clearly articulates the customized investment programs each client account is pursuing. While only a few months into this work, we are seeing early signs in client investment performance.

Equal to the progress made on our investment process was the comprehensive revitalization of our marketing efforts. Under the leadership of our Chief Marketing Officer, Todd Eckler, who joined Fiduciary in 2015, we completed the following during the year:

  • Rebranded the firm, inclusive of a new logo and corporate image
  • Launched a new website with our first Company video
  • Launched an automated email system that facilitated communications throughout the year
  • Received or was a finalist for 12 firm or officer awards – including acknowledgment for the best marketing campaign by the Family Wealth Report
  • Facilitated over 55 media appearances including on/in, Forbes, CNBC, Bloomberg, The Boston Business Journal and The Wall Street Journal

Based on the belief that awareness of Fiduciary’s specialness is a critical component of our future growth, these marketing steps help lay a multi-year foundation for our future.

Since Fiduciary’s incorporation as a Massachusetts depository trust bank in 1928, the Company has provided custodial services to clients, independent trustees, registered investment advisors and family offices. This has been a pillar of our being a “trustee’s trust company” for almost ninety years. During 2016, given significant changes in the competitive landscape with many mega-custodians abandoning the business of servicing clients having less than $2 billion in assets, Fiduciary made a strategic decision to expand our custody business. Specifically, we have recruited additional experienced custodial professionals, restructured the custody department and increased marketing activities. Again, like many of our strategic initiatives, it is early days; but we have seen significant positive progress and look forward to more.

In its third year of operations, the Company’s New Hampshire subsidiary trust company had a strong year with the addition of two professionals and ended the year responsible for four times the amount of client assets as it began. Launched to offer special fiduciary opportunities for both existing and new clients, we continue to see a positive future for this effort.


We are a professional service firm whose success is intimately tied to the talents and capabilities of our team members. As such, we are not that different from the best law firms, accountancies or professional partnerships across the country in our strategy and our approach to work. We do not hold special patents, mineral rights or factories that give us a competitive advantage. Instead, we are defined by the positive results of our clients which we influence through ongoing engagement with them—both their investments and their life goals.

It is notable that our perspective regarding our profession contrasts with that of the majority of our competitors. Their mindset has fundamentally shifted over the last three decades toward a manufacturing paradigm. Due in large part to changes in their ownership structures and subsequently their corporate objectives, they prioritize scale over client service. Nowhere is this more evident than in the compensation structures these firms employ. “Product pushing” and department store-like promotional sales drive their financial advisors’ behaviors, which at times may conflict with client objectives. The industry’s resistance to—and likely termination of—the Department of Labor’s proposed “Fiduciary Rule,” which would require financial advisors to place the interests of their clients before their own, further illustrates this prioritization of corporate gain over clients’ well-being. In my view, this is short-sighted.

Long-term sustainability for any institution—particularly for a professional service firm—is dependent upon nurturing the proper alignment of three constituencies:  clients, professionals and shareholders.  Such alignment increases the probability of success for each. This philosophy informs Fiduciary’s performance-based compensation, which prioritizes client service and client retention almost three times more than any other objective. Fiduciary’s long-standing practice of compensating employees with Company stock further reinforces this alignment. And, our belief in sustainability is the basis for the multi-year re-investment program we launched two years ago.

Beyond changes in ownership structures and shorter-term corporate objectives, macro trends are also affecting our industry because of changes in demographics, technology and regulation. They are independent and interconnected, and their influence will likely accelerate in the coming years.

As baby boomers move into retirement and millennials join the workforce, Fiduciary’s client base is changing and so are client needs. The past thirty years have been a boon for large-scale asset managers as boomers accumulated retirement savings. Now, as they retire, their financial needs are largely changing from accumulation to disbursement and preservation. Implications of this include: heightened attention to cash flow management, prioritization of income protection, health care planning and ultimately, intergenerational wealth transfers. These are complex and personal issues that benefit from a good plan and a good advisor.  As a result, we believe Fiduciary’s focus on the interaction between clients and capable professionals to solve life’s puzzles is as important as it has always been.

Technology is transforming both client expectations and how we conduct our business. From a client perspective, new and evolving media has changed how information is digested, how individuals communicate and how we live our lives. From a business perspective, it has altered investment approaches, made global markets both more and less efficient, facilitated productivity gains and created cybersecurity risks. Combined with varying levels of adoption across the changing demographic landscape (e.g., roughly half of baby boomers now use some form of social media), technology evolution has and will influence our business in multiple ways. Fiduciary has always embraced technology, but we, like others, will need to increase the speed of adoption.  This is one of the thematic priorities of our multi-year growth program.

The FDIC, SEC, OCC, CFTC and multiple other federal and state regulatory agencies oversee financial activities throughout our country. Following the 2008 financial crisis, these organizations introduced a wide range of new rules and regulations. However, for both the regulators and the industry, the implementation of these actions has been challenging. Despite the current presidential administration’s perspectives on financial regulation, increased regulatory conditions will likely continue for years to come due to ongoing globalization of the financial markets and technological innovations that can elevate financial and operational risks. Long-term implications include a requisite nimbleness, scale and culture that embraces continuous operational improvements—each of which Fiduciary has embraced as a long-term participant in the financial markets.

Amidst all of these competitive dynamics and macro trends, Fiduciary’s steadfast focus on being a stable and distinctive professional service firm remains. Our foundational values of integrity, common sense and permanence have served us well for over 130 years and we believe our current initiatives will serve our clients along with their children and future clients well for the next century.

I want to recognize the entire professional staff for its dedication and hard work this past year. We are connected through the energy and enthusiasm for the work we do and are pleased with the results we have achieved upon behalf of our clients. We are proud of our 2016 accomplishments and look forward to the work ahead.


Austin V. Shapard

President & CEO

Past President’s Letters

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