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I recently caught up with an old colleague, Jim Combs. We met 20 years ago when I was running Charles Schwab's mutual fund clearing platform. He was managing trust technology and outsourcing solutions for SEI. In a funny bit of synchronicity, we learned that we're once again serving the same audience.
Jim is CEO of National Advisors Trust Company (NATC) in Kansas City. Like my own company, RetireOne, NATC works with Registered Investment Advisors. These geographically dispersed wealth managers have unique business models that make them disaggregated entrepreneurs who don't consider our businesses core to theirs. Attempting to serve an audience for which your offering isn't core to their offering can make for long, confounding cycles.
Along a pretty mean learning curve, Jim says that his work in the RIA channel has taught him three important lessons that have helped NATC grow. And its growth – from an advisor network of 1,500 two years ago to over 55,000 today – has been remarkable, especially when you consider that they've achieved it among an audience for whom adoption of trusts is incredibly low: roughly 12%.
1. "Declare a major"
Jim arrived at NATC in 2013. Prior to that, he says, "National Advisors Trust was all about raising capital, and oh, by the way, we were a service provider, too!" The message was inconsistent, and often misunderstood.
Though they received their charter from the federal bank in 2001, NATC wasn't a trust company yet. They managed trust accounts but functioned primarily as a custodian.
"The brand image of us was pay-to-play. People would hear about us. Then we'd see them at conferences where they'd say, 'I'm not interested in that model.'"
In his first 100 days, Jim decided, "Okay. We have to declare a major. We're going to be a trust company." It was a pivotal decision. The key to the transformation and successful execution was a firm commitment to work within this niche serving independent financial advisors, coupled with the power of the "directed" trustee model.
As opposed to the traditional "delegated" trustee model, the "directed" trustee model allows advisors to be named on the account as investment advisor. This is a key distinction for RIAs, because, as Jim says, "It's their relationship and it's sticky, because they're written into the document." This isn't true of the "delegated" model, where another entity like a bank may control management of the asset.
The "directed" model also grants NATC status as co-fiduciaries. NATC is the administrative trustee, and the advisor maintains investment discretion, so there are natural checks and balances.
Adding trusts to RIA offerings has helped them grow, which, in turn, has fueled NATC's growth. Jim sees it as a partnership and collaboration that is completely void of competition. The added attraction is that RIA firms don't have to learn trusts inside and out. The experts at NATC guide the advisor and their client through every step in the process.
RetireOne works with advisors who don't have insurance licenses. They can't recommend insurance products themselves. In much the same way that our desk of insurance and annuity specialists are called upon by our RIA partners to provide guidance for client insurance and annuity needs, RIAs outsource their trust expertise to NATC.
Research shows that in the next three decades between $40 and $100 trillion will be handed down through trusts. RIAs and wealth managers can take advantage of this phenomenon and offer trust services as part of their portfolio – something they may have never imagined they could deliver without a deeper bench.
2. Lead with service
Service wins. What may be surprising is how the fiduciary model shapes customer experiences reflexively – even in a business-to-business context. The end client – the investor – sits at the center of everything. The service imperative comes from that end client and is extended through the fiduciary as their trusted advisor.
The trusted advisor – the professional in whom the end client places the greatest trust – acts as the point guard. They address their clients’ wholistic financial needs. When independent advisors work with specialists like NATC and RetireOne they are guided by true partners who provide expertise and never compete for their business.
Jim sees the fiduciary duty as the unifying force that guides the experts at his firm to be servant leaders – to focus on their core business. This elegant ecosystem drives better behavior, because, as Jim says, "The major source of our business is referrals."
Both RetireOne and NATC earn business one client at a time, so both firms are compelled to continuously deliver the best customer experiences. If we make a mistake, we could lose a valuable relationship.
"Growing fast and trying to scale puts a lot of pressure on this model of top-shelf service," Jim says. "We'll have a lot of success, but only to the extent that we can continue to serve these advisors well."
3. Connect to what is essential
Simon Sinek is often quoted for this famous nugget: "People don't buy what you do; they buy why you do it." When you serve an audience like RIAs whose oath is to act in their clients' best interests, it elevates your practice. It provides that clarity of mission that is so essential to driving how your business behaves in the world. It also makes it easy to communicate that mission to your customers.
"Trust business dates back to the Middle Ages," Jim says. "Knights had to leave their property in the hands of others to go fight for what they believed in. They were selfless. The fundamental law of trust is duty of care. It marries up with the fiduciary standard and that resonates with us and our customers."
Ensuring there are no conflicts of interest is a powerful form of stewardship. Investment advisors who serve their clients' best interests succeed with them or fail with them. Everyone takes a seat on the same side of the table.
This coupling of fates has driven a lot of change in financial services. It impacts how products are designed, and priced, how technologies serve those advisors and their clients, and how services are delivered.
A great example of these changes is in the growth of breakaway advisors. Both RetireOne and NATC are helping more and more advisors who have transitioned to fee-based practices. They need our partnership to bring annuity assets and trust business with them.
As the industry works to weed out conflicts of interest, this move to a client-centric approach is a validation of the desire for more transparency. As Jim points out, "People need a purpose in what they do every day, and you get that in the fiduciary world."
Edward J. Mercier is president of RetireOne®, a leading independent platform for fee-based insurance solutions. He has more than 25 years of experience spanning investment and insurance products, including sales, distribution, clearing, and general management. He has held multiple senior leadership positions at Charles Schwab & Co., most recently as general manager of investment management distribution and clearing services.
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Advisor Perspectives welcomes guest contributions. The views presented here do not necessarily represent those of Advisor Perspectives.