2018 Annual Report Letter

To Our Stockholders, Clients and Friends,

2018 marked a solid year for Fiduciary Trust, one defined by positive financial results, continued progress on our multi-year reinvestment program, distinctive client service and strong investment results.


During 2018, the Company continued its multi-year growth initiatives and achieved several new milestones. Most important among our accomplishments was continuing to provide distinctive service to clients. We helped many clients achieve their personal goals, provided thoughtful counsel and acted as active stewards of wealth. The impact of these efforts was reflected in maintaining our exceptional 98% annual client retention rate and in the noticeable number of client referrals that helped drive our significant new business growth.

Throughout the year, we were guided by our conviction that this is a “people business,” dependent upon the identification, empowerment and retention of high-quality professionals. As a result, we added a number of professionals during the year, including: Hans Olsen, our Chief Investment Officer, John Morey, our Head of Client Service & New Business Development, and Kristen Manning, our Head of Human Resources. In addition, Jody King was promoted to the new position of Head of Financial Planning, underscoring our long-standing belief that our clients’ interests are best served by combining a detailed understanding of their aspirations with analytically-rigorous financial planning and a coordinated investment strategy.

We continued our refinement of the Company’s investment processes. For the year, our beacon investment guidelines—the Company’s best thinking for varying levels of risk/return profiles—outperformed many of our peers and actively-managed allocation funds and positioned our client portfolios well for what we see ahead in 2019.

The Company’s New Hampshire trust company subsidiary had a watershed year. After launching less than five years ago, Fiduciary Trust of New England ended the year with $1.7 billion in client assets. Attractive New Hampshire trust laws, the hard work of our professionals and the support of clients and advisors, have made this trajectory possible and will continue to fuel future growth.

One of the Company’s multi-year priorities has been to enhance our ongoing client communications. This effort began with an overhaul of our branding, communications strategy and published materials in 2016. We followed those successes with a relaunch of our public website based on easy access to our investment and wealth management content. In 2018, we materially improved our digital client experience with more frequent investment webcasts, a significant upgrade of our secure on-line client portal and the launch of the Company’s first mobile app. As the focus on our marketing and communications continues, we consider the evolution of the way we dialogue with clients to be almost as critical as the content of those communications.

With the impending conclusion of the Company’s lease in June 2019, the Company began evaluating its real estate options two years ago. We started the process by assessing our tenancy at 175 Federal Street. Unfortunately, we concluded that the building was neither economical nor satisfactory in quality or amenities. As a result, we evaluated several options for new office space in Boston. We prioritized cost, our client meeting space, accessibility for our employees, parking for our clients and efficient use of space. Fortunately, we found and negotiated a favorable lease at Exchange Place, located at 53 State Street, which begins in June of 2019. The Company signed a 10-year lease with future renewable options that will allow us to consolidate our operations onto one floor and create a professional work environment that aligns with the Company’s forward-looking objectives.


As we progress with our multi-year reinvestment program, it is important to reconfirm the Company’s long-term strategy and goals within the changing competitive environment each year. Fiduciary aspires to be a distinctive, growing and sustainable company that fulfills the objectives of its clients, professionals and stockholders. Specifically, we prioritize excellent client service and results for our clients, professional opportunities and culture for our employees and the creation of attractive risk and liquidity adjusted returns for our stockholders. To achieve these interconnected objectives, we leverage our belief that this is fundamentally a professional partnership type of business, dependent upon the provision of two value propositions—one for clients and one for professionals—and that our private ownership allows us to make better capital allocation decisions than most of our competitors.

Since the financial crisis of 2008, we have witnessed an increasing divergence between the wealth management industry (in which Fiduciary Trust operates) and the institutional asset management industry. Like a Venn diagram, these industries both overlap and are separate. The overlap involves applying sophisticated investment analysis to make sound asset allocation judgments and to select appropriate investment vehicles within each asset class. However, the distinction between the two is that the institutional asset management industry solely focuses on the creation of investment returns and not on the engagement with the ultimate wealth holder. In contrast, the wealth management industry encompasses a broader category of activities.  It emphasizes engagement with wealth holders in order to provide advice on their broad range of financial and personal concerns.  Wealth management includes not only asset management, but also financial planning, taxes, trust & estates, private banking, and a wide spectrum of other personal financial activities.

The reason to distinguish these two different sectors of the financial services universe is to highlight the very different impacts that demographics, technology and regulation are having upon each and the implications for Fiduciary. Within the pure-play asset management industry, these macro trends have accelerated the industry maturation and have resulted in commoditization, margin compression and consolidation. In contrast, the wealth management industry, due largely to Baby Boomer’s increasing retirements, is stepping into its second or third wave of evolution and growth since the late 70s. Indeed, many of the benefits of the asset management industry’s changing dynamics—for example, significantly lower mutual fund management fees—have accrued directly to wealth holders and their advisors in the wealth management industry.

Fiduciary Trust’s historically strong position within the wealth management industry serves it well today. However, we believe that these macro trends along with the continued evolution of the asset management industry will influence Fiduciary’s future path. We expect some likely broader wealth management industry changes, including:

  • Increased client customization and personalization,
  • Increased “goals-based” financial planning and advice,
  • Increased digital client engagement,
  • Increased emphasis on growing client assets’ buying power—inclusive of taxes, fees, and inflation,
  • Increased professional talent differentiation between “professional partnership” operating models over “manufacturing” models.

Fortunately, Fiduciary is already leading in many of these areas (i.e., client customization and personalization). Other areas—like digital communications—we are addressing and will continue to refine through our multi-year reinvestment program.

One component of the wealth management industry that we don’t believe will change, and indeed believe will only become a greater differentiator, is the role of the “wise” and trusted advisor directly engaging with clients. The identification, recruitment and retention of truly distinctive professionals—individuals who possess strong core values, sophisticated analytical capabilities, common sense, and a degree of empathy—has always been and continues to be core to Fiduciary’s long-term strategy.

As we continue to execute our current operating plans and navigate our evolving industry, I continue to grateful to be at Fiduciary and want to thank the entire professional staff for providing excellent client service and achievement of several new corporate milestones. We are proud of 2018 and look forward to the years ahead.



Austin V. Shapard

President & Chief Executive Officer

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