National Advisors Trust wins the confidence and assets of its advisors.
The first time he heard of an idea to form a trust and custodial company that would be run by and for independent advisors, Tom Burkhart was interested enough that he spent the next three years keeping in touch with those involved in the plan. But when it came time for the whole thing to get off the ground, with the founding of National Advisors Trust Co. of Overland Park, Kansas, Burkhart took a pass on participating in the initial offering.
He still liked the idea, but the odds against success just seemed too overwhelming. "We just didn't think it was going to work," says Burkhart, founder and CEO of the Savant Group in San Francisco. "When you're competing with firms like Fidelity and Schwab, the challenge was how to do that. How do you build what they already have, and how can it be effective for clients?"
After only a few weeks, however, Burkhart had a change of heart. He says he finally decided that the advantages to clients of having the independently operated trust company custody Savant Group's assets were too enticing. So was the fact that National Advisors Trust was able to offer Savant Group a fee schedule that would result in no additional costs to clients.
Burkhart, it turns out, was able to make it into the initial offering-which he participated in with gusto. And when National Advisors Trust had a second offering this past March, he used the opportunity to increase holdings. As a result, the once-reluctant Savant Group is now one of the company's largest shareholders, with a stake of 4.9%. Savant now has $85 million custodied at the trust company, with another $100 million in the process of being transferred, Burkhart says. The firm, with 250 clients and $500 million in assets under management, expects more assets to follow, he adds.
"It's really all about independence-that's what everyone is trying to accomplish," Burkhart says. "Not to be beholden to people who are competing with you, even though they say they aren't."
Savant Group's tale actually reflects the journey National Advisors Trust has been on since it was formed in October 2001. The venture had a lot of skeptics and doubters and was slow to start, but has since been building up a momentum that seems to have cemented its place in the trust and custodial services landscape. Underscoring the growth that has taken place at the trust company, it announced in August that it has surpassed the $1 billion mark in custodied assets. It now has a target of $2 billion of assets by the end of next summer and $5 billion by the end of 2005.
A second offering it launched in March brought in 26 more shareholder clients, bringing the total number of shareholders to 106-a collection of firms with a total of about $40 billion under management. And, to the surprise of even some of its founders, the trust company is on target to reach break-even within the next six or seven months. "It certainly has been an odyssey to some degree," says Joe Kopczynski of Universal Advisory Services Inc., who serves as chairman of National Advisors Trust's board of directors.
An odyssey, he says, which began when the founding members of the trust company brought their plan to regulators. The basic plan they presented was that of a trust company owned and operated by advisor shareholders and providing, at minimal cost, services only to its shareholders. Because the company would have only one office and no marketing operation to speak of, its expenses and fees were projected to be atypically low for a trust company.
While a typical trust company operates at a margin of about 1%, Kopczynski says National Advisors' plan called for an operating margin of 0.30% to 0.35%. Some of the fees also were startling. As one example, National Advisors Trust charges an annual $500 fee for irrevocable life insurance trusts, compared with the $1,500 to $2,500 that is more common in the rest of the industry.
It was a unique game plan-so unique, in fact, that the regulators at the Office of the Comptroller of the Currency responsible for approving its charter needed a lot of time to evaluate the application. "They'd never seen anything like this, so it was difficult for them to understand what we were doing," Kopczynski says.