2019 Annual Report Letter

To our Stockholders, Clients and Friends,

2019 may be remembered as one of the more significant years in Fiduciary’s long history. The Company concluded the initial phase of its reinvestment program, achieved significant milestones in client service, operational initiatives and financial results, and strengthened its advantageous capital structure.


Financially, the Company logged its 76th year of consecutive profitability¹ and increased its dividend for the 36th consecutive year. The Company generated its most revenue within any year, and maintained its solid margins and strong balance sheet. In addition, the Company addressed a long-standing capital structural challenge. Following a supportive vote by Fiduciary’s shareholders and a successful capital raise, the Company terminated its legacy ESOP (Employee Stock Ownership Plan). After 34 years, the ESOP was limiting our cash flow and growth. With the recapitalization completed, the Company remains a private, independent firm whose shareholders include founding families, current and former employees, directors, and clients and their beneficiaries.

While the successful recapitalization and termination of the ESOP may be the most lasting corporate accomplishment of 2019, the Company achieved several other milestones that are noteworthy in their own right.

First and foremost, the Company’s ability to maintain focus during this period of change has been critical. For Fiduciary, this focus has always been on our clients and on improving and enhancing our service to them. It is because of these efforts that Fiduciary maintained its 98% annual client retention rate. It is also because of these efforts that our value proposition continues to attract new families and clients. As a result, we achieved a new milestone in new business during 2019 and helped achieve strong investment returns in those client portfolios for which we are responsible.

During the year, we continued our investment in the next generation of professionals as we added to our ranks, including three new Investment Officers: Jennifer Joyce, Patricia Schneider, and Richard Tyson. Adam Thompson joined as our Head of Corporate Finance and John Avila was promoted to Head of our Tax Department following Mark Spencer’s retirement after 21 years with the firm.

In June, the Company successfully moved its offices for the third time in its 135-year history. Migrating within an 800-yard radius from our three prior addresses (709 Barrister Hall on Pemberton Square, 10 Post Office Square and 175 Federal Street), we seamlessly relocated to the newly renovated fourth floor of 53 State Street, Exchange Place. Bright, welcoming and representing our team-oriented culture, the new offices have been revitalizing.

In the fall, the Company completed its first acquisition in recent history. Structured on advantageous terms, the deal was immediately accretive. The transaction provided a natural integration given that it consisted of the addition of an experienced professional and clients who are aligned with Fiduciary’s existing client population.

In its fifth year of operations, the Company’s New Hampshire subsidiary trust company continued its strong growth. The subsidiary moved to a larger office space within its existing building to accommodate its evolution. The combination of favorable state 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 trust laws and Fiduciary’s capabilities, we foresee continued expansion in this market.

Record of the year’s milestones would not be complete without acknowledging and thanking Robert Holdway, who retired after 25 years at Fiduciary. During his tenure, Bob played multiple roles at the Company including legal counsel, investment officer, Director, mentor and, importantly, a standard bearer of our values. We wish Bob good health and happiness in his retirement.


Companies with long histories are able to maintain their longevity for many reasons—most commonly are their values, client focus and ability to navigate generational change. In large part, these companies have successfully managed the business cycle of inception, growth and maturity. At times, they may be resistant to change or slow to adapt, but for firms that have achieved Fiduciary’s age—135 years—they also have undertaken periods of revitalization. This is true of our company, which has just completed an important five-year reinvestment program. Thoughtful, strategic and staged, our initiatives have enhanced our long-standing service to clients. Our efforts reconfirm our commitment to being an aligned, independent advisor to families and non-profits. Now, as we pivot forward, we reset our compass for the future. Before us, we see a rapidly changing wealth management industry influenced greatly by technology and demographics. The implications of these factors on how we continue to serve our clients, their children and grandchildren are significant.

I have frequently said that wealth management is a “people” business—dependent upon great professionals partnering with great clients. But, wealth management is also a business of decision making. Expert professionals are hired to independently, or in an advisory capacity, assist in decision-making based on each client’s circumstances and goals. Examples of this include: deciding what investments to buy or sell, resolving when to retire and determining the most effective way to make a charitable contribution. While good professionals possess intrinsic capabilities, the core of fact-based decision making has always relied on research, analysis and evaluation. Today, more than ever, technology is instrumental to inform conclusions and monitor outcomes. As we look to the future—and the continuation of the Information Revolution—we are already seeing technology’s impact upon wealth management. The ability to quickly interpret massive amounts of data, identify patterns and test hypotheses continues to improve clients’ cash-flow modeling and helps to mitigate portfolio risks and enhance investment returns. ESG/Impact investing has grown exponentially and will likely continue to in large part due to advances in data collection. Behavioral technology is helping overcome inherent biases, which can improve broad decision making and increase the likelihood of achieving client-specific goals. Furthermore, digital workflow will not only continue to improve cost efficiencies, but also increase client service customization and monitoring of each client’s progress.

At the same time that technology advancements will continue to assist advisors, technology has the potential to further empower wealth holders (i.e., clients) and dramatically change industry competitive dynamics. True to other relationship-based industries, the selection process within the wealth management industry is antiquated. As a result, a significant number of families and nonprofits can be ill-informed consumers when it comes to selecting the best advisor. Unlike buying a car, where buyers can now easily access relevant data about model features, manufacturer’s cost and dealer mark-ups to make informed decisions, many families rely on imperfect inputs, such as legacy brand associations and “apples to oranges” comparisons of investment performance or fees. Unfortunately, few prospective clients speak to references, are aware of potential conflicts of interest, or can differentiate between materially different business models. As a result, the selection of an advisor becomes much more of a leap of faith than a high conviction choice. Considering the importance of the decision, the process needs improvement.

Information technology’s ability to educate families and non-profits as they select advisors is nascent but evolving and will improve the odds of selecting wealth advisors who can noticeably improve clients’ outcomes. Web-based research by prospective clients is now common, but we envision much greater transparency in the future that will highlight points of differentiation between firms, assist clients in their negotiation of services, and accelerate competition across firms on material issues—not just the magnitude of their marketing spend. Fortunately, despite these current limitations, families and nonprofits do find their way to a few firms, like Fiduciary, that are comprised of high integrity professionals who place their clients’ interests first and work tirelessly to help them achieve their goals.

If technology advancements will be an accelerator of change within the wealth management industry, demographics will be a force multiplier. Changing expectations for client engagement, evolving service needs and differing investment biases across demographic groups will be intertwined with new digital solutions. The digitization of client communications has already begun and will only increase. While Millennials are leading this change, Baby Boomers are active followers. Today, 88% of Baby Boomers use the Internet, over 53% have smart phones and almost 60% use online banking. In addition, client experiences with technology like Netflix, Amazon, Google and Facebook now inform families’ expectations of their wealth advisor’s online portals. As Generation X and Millennials’ wealth increases, we believe these expectations for more customized, detailed and digital communications will similarly rise.

Wealth management firms’ services and in-house expertise will need to evolve and adapt to shifting demographics. Increased longevity and the changing nature of retirement are just two factors that will require firms to increase their capabilities in sophisticated cash-flow modeling, principal guarantee investments, and healthcare planning in order to continue to serve Baby Boomers well. Millennials will similarly benefit from increased cash-flow management, but their future needs will focus on a larger proportion of their wealth in 401(k)s and IRAs and an increased connection between their investments and their social beliefs. The implications of these divergent needs across populations will be that fewer firms—like Fiduciary—will have the requisite scale, technology infrastructure and experts to serve multi-generational families well into the future.

One final generational change that is already occurring relates to inherent client biases towards investments. Today, few Millennials hold portfolios solely composed of domestic stocks and bonds. More likely, they have a diversified mix of low-cost ETFs. In contrast, a large majority of the members of the Silent Generation (currently ages 75-92) hold portfolios entirely composed of U.S. Large Cap stocks. Furthermore, members of Generation X have a higher likelihood than other groups to hold multi-asset class mutual funds. What these diverse investment strategies demonstrate is generational preferences largely set by industry dynamics and academic research popular at the time that a particular generational cohort came into wealth. Tax consequences, rising markets and industry economics have caused the shift among generational preferences to be slow. However, as we look to the future, lower transaction costs and increased transparency due to technology advancements and a greater proportion of wealth residing in tax-deferred, individually controlled accounts (i.e., 401(k) and IRAs) will likely overcome generational biases and improve investment outcomes.

The implications of these technological and demographic trends are significant and will likely influence the wealth management industry for years to come. As a result, we believe that forward-thinking firms—like Fiduciary—need to pursue a few basic tenets to ensure great client service and outcomes. Specifically,

  1. Continue to have client needs drive priorities. Success for Fiduciary is defined by the aggregation of our clients’ individual successes. Therefore, as our clients’ goals evolve, we are actively listening to their changing priorities and expectations. Unlike many of our competitors who are driven by different objectives, our alignment with our clients’ long-term goals makes setting Fiduciary’s strategic path based on our clients’ needs straightforward.
  2. Focus on true differentiators of client outcomes. Technology will “level the playing field” for many wealth management firms and increase competition, which should ultimately benefit wealth holders. We believe that firms that are truly differentiated in their client results will excel and maintain their permanence.
  3. Have a technology plan. Technological change is happening and will continue to accelerate. In just the same way we believe that families and non-profits need to develop a carefully considered financial plan, we believe that companies need to have technology plans. As demonstrated by our recent investments in a new client online portal, public website, client app, workflow processes and more, Fiduciary is already executing its strategic technology plan.
  4. Prioritize distinctive professionals. As mentioned earlier, this is a people business dependent upon great professionals engaging with clients over decades. Technology is an important tool, but people ultimately determine client results. Continuing to identify, recruit, and retain distinctive players is not only consistent with Fiduciary’s long history, but also critical to its future.
  5. Embrace change and master change management. Change and evolution are inherent in the human condition and have been for centuries. However, technology is increasing the pace of change due to the speed of information sharing. Not surprisingly for businesses that are dependent upon information and decision making, they will need to adapt at an equal or faster pace.

As demonstrated by 2019 and the prior five years, Fiduciary is actively focused on perpetuating its distinguished history for years to come. 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 the work ahead.



Austin V. Shapard

President & Chief Executive Officer


¹ We believe Fiduciary has been consecutively profitable since 1928—91 years—but do not have the records on profitability prior to WWII.

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