Milstein's plan was to use the existing infrastructure and charter as a springboard to create a private bank for the wealthy tri-state population. After his election as chairman, Milstein recruited private banking and family office veteran William Fuhs to be president and CEO of the newly established New York Private Bank & Trust. Hannah Shaw Grove, executive editor of Private Wealth, speaks with Bill at the bank's mid-town offices.

Grove: You received your Federal trust powers in 2006, a relatively recent time frame for the old-world business of private banking. What was Howard Milstein hoping to accomplish?

Fuhs: Howard gave me two mandates when I joined the bank in early 2004. The first was to deliver the high-touch, extremely attentive and customized service that most private banks have long since abandoned. The second was to avoid conflicts of interests with our clients.

In the past, it has not always been clear if a private bank's advice or services to their clients is conflicted. Frequently banks, acting as trustee, have also been the money manager. The conflict arises when they manage the money poorly for extended periods of time. If it was outside a trust they would be fired. As a trustee they have a fiduciary responsibility to act only in the best interest of their clients. Should they fire themselves as the money manager? Have you ever heard of a private bank doing that?

To fulfill Howard's mandate to not have our interests conflict with those of our clients, we have chosen not to manage equities. Instead, we select investment managers for our clients, and if or when appropriate, we replace them.

Grove: Are those mandates still important operating tenets of the bank?

Fuhs: Absolutely. We do all the things you'd expect a private bank to do-give advice, act as a trustee or executor, negotiate lower investment minimums for our clients-but we pride ourselves on knowing what the ultra-wealthy client wants and giving our clients access to services and investment opportunities that will fit their needs and lifestyles. For instance, we have the ability to facilitate the acquisition of fine art, or advise families on property, casualty and health insurance needs. This insurance advisory service is a client need frequently overlooked by most institutions.

We recently launched Private Philanthropy Advisors, a division that I expect we will spin off as an affiliated company, whose mission is to assist clients in turning their passions into legacies.

Grove: What types of investments are available to clients of NYPB&T?

Fuhs: Our clients want special investment opportunities and we are fortunate to be able to leverage the Milstein family's, the bank's and other client's access to some very unique and high-quality co-direct investments. We have been able to deliver most of these investments
to our clients on the same terms as the other co-investors, without any additional fees, as an added value.

Grove: How much investing is done in-house?

Fuhs: We believe there is a natural conflict in the traditional roles of trustees and money mangers. With the exception of some fixed
income and cash management accounts, we do not manage assets at the private bank, nor do we create proprietary investments for the sole purpose of selling them to our clients or other investors.

However, clients recently have asked to invest in hedge funds and private equity along side the bank's capital markets group. In response to these requests, we structured a fund that attempts to mirror those investments. The cost of our structuring this fund is subordinated to our clients' receiving a minimum return.

Grove: Given your name, will New York continue to be your only location?

Fuhs: Local service is imperative when dealing with the ultra-affluent and we are in the process of expanding our presence on a state-by-state basis to capture the specific business opportunities in each community. Case in point, we've just hired Diana Cantor as the president and CEO of Virginia Private Bank & Trust. She has an impressive background in financial services and is probably best known for her development and advocacy work on 529 college savings plans.

Grove: Do you have other regional locations?

Fuhs: We've identified two locations in the Midwest that we're in the process of opening. In fact, we've just named Kurt Miscinski from the private wealth management division of Deutsche Bank as the president and CEO of Chicago Private Bank & Trust. Irv Leonard, a former partner at the Cleveland-based law firm Jones Day, will be his counterpart at Ohio Private Bank & Trust. Right now we like the potential in Houston and parts of California and Arizona, as well.

Grove: What other unique things are you doing?

Fuhs: We're starting a business focused exclusively on the private banking needs of professional athletes and entertainers-All Pro Private Bank & Trust. We think there's a big opportunity to make a difference in this market segment and are very excited about it.

Grove: Coincidentally, I've just co-authored a book called Fame & Fortune about the unique financial concerns of high-profile wealth. What are the issues that you find most prominent among athletes?

Fuhs: The limited window for earning is the most obvious, but the by-product of that situation is that most athletes don't have much, if any, of the money they earned during their career by the time they retire. Say a football player signs a 5-year $40 million contract, he suddenly thinks he's worth $40 million! The spending can get out of control, but the $40 million is part of a long-term contract that is contingent on a lot of things including his continued good health. We can help athletes get the smart solutions in place to prepare for the next phase of their life.

Grove: Can you describe your client base?

Fuhs: We have more than 200 clients in New York with average liquid assets of about $30 million. The relationships range in scope from simple deposits to fixed income management, all the way to co-investing opportunities.

Grove: How do you and your clients find each other?

Fuhs: Accountants and attorneys are an important source of new business for us. They know who is planning for liquidity events and the types of services that will be needed. They also know when their clients are dissatisfied with specific providers and can step in and provide a recommendation. We get referrals from our strategic partners, like the philanthropic consultants. Also, Howard plays a key role in building the business as well. His professional and personal networks have produced a lot of new relationships, as has Emigrant Direct, the online division of the original banking entity. They've done a good job predicting interest rate movements and have used it to attract more than $8 billion in deposits across roughly 400,000 new accounts.

Grove: How much business do you get from existing clients?

Fuhs: Probably less than other private banks, but it's still early in our life cycle. We know that most wealthy individuals have several banking relationships, and when we find new clients they are usually looking for something specific they can't get from their other banks. We might compete for a loan or offer a unique co-investment opportunity- most relationships will start small and evolve over time.

Maybe more importantly, our clients act as an informal network to one another and that's truly valuable. Getting the experience and perspective of someone that has faced the same issues is very useful to our clients, especially business owners. I can think of one case where two of our clients partnered on a specific venture after we introduced them. Those types of things generate a lot of goodwill for everyone.

Grove: What trends are influencing your business strategy?

Fuhs: "Open architecture" product platforms are ubiquitous these days. Almost anyone can set-up shop on their own and offer their clients the same types of products as their competitors, so there's no currency in pure product anymore. We find that especially wealthy clients want help managing their situation, applying the products to their specific needs. Things like setting-up a trust for a new grandchild, buying a jet without creating excessive personal or business exposure, settling an estate. As a result, we will keep emphasizing personalized services instead of products.

The second thing we see is growing disenchantment among law firms and accounting firms with the infrastructure costs associated with trust and estate administration and the liability of fiduciary work. We can be an outsourcing solution by making available the same services we provide our own clients to law firms and accounting firms for their clients. We recently formed a division called Private Label Special Services to provide an outsourced, turn-key, private labeled trust and estate administration service for the law firms, accounting firms,
multi-family offices, registered investment advisors and community banks that want to deliver full wealth management services to their clients, without exposing them to a competing financial institution.

Most banks will agree to manage unique assets, such as real estate or operating businesses, as a fiduciary only if they are indemnified from risk. NYPB&T is one of the few private banks that will manage these assets in a fiduciary capacity if the underlying business or real estate passes our due diligence review. We think there is some untapped growth to be had as a services provider and it nicely rounds out our portfolio of businesses.

Grove: You've spent a considerable portion of your career working with wealthy families and family offices. What do you make of the recent influx of multi-family offices?

Fuhs: In my experience, affluent families want everything from asset management to tax preparation to bill paying. Very few firms can deliver such a broad range of services at a competitive price and still make money. It will be interesting to see if all these players can stay in business.

To his credit, Howard has approached this venture with a long-term view. I spend most of my time focused on development, starting relationships, understanding client needs, activities that don't generate immediate revenue, but will lay the foundation for servicing our clients and building our future.

Grove: Speaking of the future, what's in store for NYPB&T three-to-five years down the road?

Fuhs: We will continue to expand regionally through partnerships with local families and a portable systems and operations infrastructure. Controlled expansion allows us to properly vet each opportunity, find the best professionals, attract the right types of clients, and maintain very high standards. There's an extremely promising future for the bank.

It doesn't take money to make people unique, but having money often results in a set of requirements and preferences that are particular to the state of being wealthy. So who better than a billionaire to reinvent the private bank for the 21st century? Howard P. Milstein, founder of New York Private Bank & Trust, expands on the above comment by sharing his perspective on the moneyed set and explaining how that knowledge will translate into a better banking experience for ultra-affluent individuals and families. "Wealthy families like ours require the same kind of diligence and talent in wealth management advice that was applied when their wealth was originally created. This means the bank must act as a fiduciary for our clients in every respect, there must be complete transparency in everything we do, and we must align our employees' compensation with our 'clients first' philosophy.

"We understand that many wealthy families want to preserve their capital base and compound their wealth, so our investment approach
relies on sophisticated processes to do just that. Beyond asset allocation and third-party manager selection, the only "products" we offer are co-investments-the very opportunities that we take advantage of ourselves and consider an important and interesting part of our investment portfolio. Furthermore, our clients can invest alongside the bank on a completely fee-subordinated basis; they get the same terms we do and because we have significant 'skin in the game' our commitment is clear.

"But we know that making wise investments is not the only concern of wealthy families. Keeping the unique traditions and values of a
family alive, and ensuring that subsequent generations are motivated to fulfill their own potential has become increasingly important. Some affluent families achieve this by bestowing financial security upon future generations so they may explore their passion, whether through philanthropy, the creative arts or some other area of interest. Others may simply guide younger family members on the path to productive lives or encourage them to give back in ways that better society as a whole. There is no 'right' answer, it depends entirely on the family and its priorities. We know this because we've faced many of these issues ourselves and worked with other wealthy families to address these concerns.

"Drawing on our experience and taking a steady approach to implementation has helped deliver billions of dollars on the $90 million investment made just 20 years ago... and create the New York Private Bank & Trust you see today."