A few years ago, Atlantic Trust Private Wealth Management set out to find the right long-term partner. 

As it turned out, word of that search spread from the firm’s Atlanta headquarters all the way up to Toronto, home of the Canadian Imperial Bank of Commerce (CIBC), which was successful in its domestic wealth market and had its sights on entrée to the far larger U.S. high-net-worth space.

“We wanted to create a platform to arrive in the U.S. and then to expand,” recalls Steve Geist, a CIBC senior executive vice-president and its group head of wealth management. “The U.S. wealth market is quite fragmented, so there is an opportunity for entry and for growth.”

Atlantic Trust had appeal on several fronts, he says. 

“Atlantic Trust was highly regarded, they deliver strong results for their clients from an investment perspective, clients were bringing them more money to manage and more clients were arriving,” Geist says.

But hasn’t many a business combination killed the goose that laid the golden egg? This particular union would be a cross-border undertaking, adding to the risk.

Today, Atlantic Trust is a unit of CIBC and the wealth management firm’s chairman and CEO, John “Jack” S. Markwalter Jr., couldn’t be happier. “It’s almost like it was meant to be,” he enthuses about becoming part of CIBC (NYSE: CM), a perennial name on Bloomberg’s yearly list of the world’s most financially sound banks.

It’s easy to understand his excitement. Atlantic Trust manages nearly $27 billion, up from $24 billion since the acquisition closed in early 2014. Offices have been added in West Palm Beach, Fla., and Wilmington, Del., bringing the total to 13. The firm’s footprint in Boston, Atlanta and Newport Beach, Calif., has recently expanded. And head count is up, with some new team members coming from the competition.

Fairy tale endings don’t happen by accident in the hard-nosed wealth management business. This is the story of a flourishing firm that went hunting for more than just a new owner. It thirsted for a partner to share its vision, values and yen to grow, and the best way to find that, Markwalter’s executive team concluded, was to begin the search with a short list of qualities treasured in a potential buyer. These desired characteristics were consonant with how Atlantic Trust ran—and aimed to continue to run—its business, which in turn stemmed from its roots.

From Three Firms To One

Atlantic Trust is the scion of three yesteryear organizations: Whitehall Asset Management, Stein Roe Investment Counsel and Pell Rudman. The Atlantic Trust name was born after Invesco bought Pell Rudman in 2001. By 2004, the other two firms had been acquired and assimilated.

“What we tried to do is take the best attributes of each organization and combine them,” says Markwalter, who has helmed Atlantic Trust the last dozen years.

In the firm’s playbook you’ll find Pell Rudman’s penchant for holistically integrating clients’ investments and wealth planning, along with its appetite for quarterbacking their financial team. The commitment to excellence in both investment management and client service that came from Stein Roe and Whitehall now finds expression in Markwalter’s vision for Atlantic Trust.

“We want to be the go-to wealth management firm for both clients and professionals, and in my mind the only way you can do that is to be the highest quality firm in the industry. Then clients stay with you, they add assets, they refer you to their friends and family, and their attorneys and accountants refer you,” says the 30-year industry veteran.

Aspiring to best-in-class status is certainly a lofty goal, but make no mistake: Under the leadership of the tall, charismatic Harvard MBA from Georgia who’s known for greeting people with a welcoming smile and hearty handshake, Atlantic Trust has posted some enviable numbers. Thirty-six consecutive quarters of increases in assets managed—all of it organic growth rather than through acquisitions.

Atlantic Trust is the number one wealth management firm ultra-high-net-worth clients would recommend, according to a 2014 Luxury Institute survey. It has a 98% client retention rate for the year that ended March 31.

What these accomplishments reflect, of course, is the firm’s culture. That ineffable intangible has always been central to success at Atlantic Trust. For a sense of the firm’s core values, listen to what Markwalter has to say about the Department of Labor’s new fiduciary rule, which some in the financial industry (and on Capitol Hill) are fighting.

“Being a fiduciary is not new to us. Frankly, it’s something that we’ve practiced since inception because we think the best way to take care of families and their wealth is to put their interests first,” Markwalter says.

Atlantic Trust thus sought in new ownership, first and foremost, an organization that would continue its fiduciary ideals and culture. “And we found it with CIBC,” Markwalter says.

The feeling was mutual, according to CIBC’s Geist. “We were probably not 90 minutes into our first discussion with Atlantic Trust senior leaders before we knew we had an alignment in terms of cultural fit. It was very obvious to us that they were truly client-focused,” Geist says.

A Peek Behind The Curtain

Atlantic Trust’s unwavering dedication to clients can be viewed through the keyhole to the office of Paulina Mejia, head of the firm’s Wealth Strategies Group. From the 42nd floor of the Atlantic Trust office in midtown Manhattan, she oversees the group as it works to holistically mesh clients’ investments with their tax, wealth transfer and other plans. She and most of the professionals on her team are trusts and estates attorneys who no longer practice but who have substantial wealth-planning expertise.

“We help our clients think through strategies given their overall asset picture, but we don’t actually draft the documents and put them in place,” Mejia explains, noting that the group’s wealth-planning services are included in the investment management fee clients pay. “We work with the clients’ lawyers and accountants, who play an integral role in the creation of the plan as well, and ultimately they implement the plans.”

Something her team noticed a while back is that families whose wealth transferred smoothly to the next generation had a healthy culture in their families when it came to money. “They’re able to talk about their wealth in a natural, comfortable way and share ideas of what it means,” she says.

That often was not the case in families where the transfer faltered, no matter how technically sound the plan in place was. “Engaging the next generation is hugely important in being successful in the transition of wealth,” Mejia says.

Invigorated with this awareness, Atlantic Trust set out to foster intergenerational involvement in its client families. Their first step, of course, is that they begin communicating about their wealth. If they don’t, heirs might never know their parents’ reasons for leaving assets to them in trust rather than outright, or for bequeathing unequal amounts to siblings, for example. “People get hurt when they’re blindsided. If you’re in this business you must recognize the human element to it,” Mejia says.

To Atlantic Trust, this meant the firm’s relationship professionals, as well as Mejia’s group, who also interface with clients, needed to learn how to identify opportunities for family money conversations. “This wasn’t to train our people to be therapists, but to be able to spot issues and get to things before they become uncomfortable. We want to make sure that not only is our clients’ money protected and growing, but that it’s also transferred in the way they want,” Mejia says.

Atlantic Trust facilitates further money talk with programs such as G2G (Generation to Generation) Impact. Its luncheons and after-hours events help the rising generation prepare to manage their wealth, while family summits, such as the one held at the United Nations in New York in 2014, bring the generations together for discussions about legacy shaping and the family’s long-term plans for community involvement.

“It’s all part of this recognition that we need to engage in activities which promote families openly sharing ideas about what the future of their legacy and wealth means, and hopefully learn and have fun while doing it,” Mejia says.

The Investment Side Of The House

Atlantic Trust’s second requirement of a would-be partner was that it accommodate the firm’s investment platform, a combination of seven proprietary strategies and about 100 outside money managers. As it turned out, CIBC had a long history of using open architecture, so this was not an issue.

For clients, the benefit of using both in-house and outside managers is “we can build a diversified portfolio to include almost any asset class you can imagine,” says David L. Donabedian, the firm’s chief investment officer, at the firm’s Baltimore office.

The expansive palette even includes private equity, something about one in five Atlantic Trust clients pursues. “Typically, somebody investing in a private equity fund is going to have a net worth of $10 million or more—although there are exceptions—have a growth investment objective and be in a position to lock up capital for eight to 12 years. You’re making a long-term investment in exchange for a return premium over what the public markets have to offer,” Donabedian says.

When it comes to asset allocation, forget set-it-and-forget-it. “That’s really not in sync with the times,” he says. “In a world with global linkages, there are both more opportunities and more risks out there, so it’s important to be nimble. Probably two to four times a year we see something where, with a 12- to 18-month view, we think there’s an opportunity to either make some incremental returns or reduce portfolio risk.”

As one example of such a move, in late 2014 the firm’s 11-member asset allocation committee, which Donabedian chairs, decided to shift out of corporate high-yield bonds and into municipal junk. “We saw that the market wasn’t really accounting for, or pricing in, slowly deteriorating credit conditions in corporate America,” he says. So far, the tactical swap has worked out. Last year, corporate high-yield debt fell more than 4.5%, while his high-yield munis returned over 5.0%.

Currently, Donabedian is underweight bonds and overweight equities with a conservative bias favoring U.S. large-cap and the developed international markets. Emerging markets exposure is now minimal and the same is true for its correlate, commodities, after three years of scaling back.

Regarding outside manager selection, size matters to Donabedian in two ways. First, he says, “all the academic research shows that small and mid-sized asset managers perform better than larger firms, whether you’re looking at equities or fixed-income or hedge funds.”

But whether it’s feasible to bring a boutique manager onto a firm’s investment platform is a function of that firm’s size. If it has too many large clients, their assets could drown the boutique manager and wreak havoc with its investment strategy. “We’re good-sized, but we’re not a mega-firm,” Donabedian says, “and we think that’s an advantage because it lets us bring boutique managers onto our platform.”

Deep Pockets Arrive

Lastly, Atlantic Trust wanted new ownership that would invest in it, especially in the areas of technology and personnel. Employees are an integral part of the firm’s precious cultural fabric, according to Markwalter.

“Our people are the most important aspect of our business, so we invest in career development and training and give them opportunities to take on more responsibility, authority and reward over time,” he says. “If you have professionals who are willing to run through walls on behalf of the client and they know they have career upside, they will stay with you because they feel engaged, they feel passionate and they feel committed to the vision of what we want to accomplish.”

The proof is that quite a few folks from all three legacy organizations remain with Atlantic Trust after all these years, including Donabedian, a Pell Rudman alum.

Investing in Atlantic Trust was something CIBC talked about before the acquisition and the bank has delivered, Markwalter reports. In fact, he says that support is the only real change in the CIBC-era.

“We have everything we had before, but now we have a great deal more resources. We really believe that coming together with CIBC is going to allow us to take our business to the next level,” he says.

The Canadian parent is happy so far, too. “Atlantic Trust’s cashflows have been very, very strong and probably have exceeded our expectations,” Geist says. 

Indeed, 2015 was a year of record net inflows from clients, as they collectively added $1.98 billion more to their portfolios than they withdrew. “We think Atlantic Trust has a great growth trajectory,” Geist adds.

Readers may wonder whether this well-backed, disciplined, high-caliber competitor is marching toward them. Could be.

“Our strategy is not to be on every street corner,” Markwalter says. “Our strategy is to be the dominant wealth management player in each of the top 10 U.S. wealth markets. We’re most of the way there.” The firm’s next target is Dallas.

To penetrate a market, Atlantic Trust hits town. Its professionals sit on philanthropic boards and, as a result, they get to know key players in the community. Forming and solidifying collegial relationships with local professionals is essential.

“In order to gain referrals from intermediaries like attorneys, CPAs and financial-services professionals, you’ve got to communicate to those professionals your best thinking through white papers, and you’ve got to communicate to them your investment performance. Then you have to get out and meet those professionals. Last year, we hosted over 60 events around the country,” Markwalter says.

Some events are primarily geared to practitioners the firm has clients in common with or would like to have. Others feature topics of interest to clients and their attorneys and accountants, such as seminars on cyber-security and the outlook for oil.

Providing practitioners with intellectual content and insight through publications and presentations generates referrals. “Now add to that referrals from satisfied clients and what happens is the business grows. We get referrals on a daily basis. The secret, if there is a secret, is to do the highest-quality job possible,” Markwalter says.

Yet growth presents the firm with its greatest test, namely, maintaining its clients-first culture. Bringing the right people on board to begin with can help to a certain extent. “We have to make sure new team members truly believe that the clients are at the center of all we do and that we put the client’s interest not just in line with our interests, but above our interests,” Markwalter says.

There’s more to keeping the culture intact than that, though. About 25% of the workforce has joined the firm within the last two years. “So it’s important for the culture carriers—the people who have built the firm—to spend time with this new generation so that they know what Atlantic Trust’s values are and can keep the culture going,” Markwalter says.

From one perspective, the saga of Atlantic Trust reads like a set of banal textbook axioms. Satisfy clients with top-quality work to get repeat business and referrals. Empower staff. Know what you want in a business partner. Leverage professional relationships.

But it doesn’t take a lot of reading between the lines to see that strategy and the ability to execute it the way that Atlantic Trust has are not one and the same.

“There are only a handful of big things you have to do to be successful as a wealth management firm,” Markwalter concedes. “But what ties those things together and brings them to bear is the culture. The culture is the magic, the pixie dust, the special sauce that makes it all work. As we grow and expand around the country, our biggest challenge is making sure that we preserve our Atlantic Trust culture.”