At the company's inception, one of its larger selling points was its complete lack of a retail division-an attribute that other firms like Raymond James Financial have also accentuated-addressing concerns that some advisors have that Schwab's retail efforts infringe on their markets. Now, with 45 advisor relationships after less than a year in business, Shareholder Services Group officials feel they're in the market to stay.
Mangan says the company's advisor clients have come from a mix of areas, including other custodians and wirehouse advisors looking to make the transition from commissions to fees. "There seems to be more of that going on than there was in the past," Mangan says of the wirehouse defections.
Company spokesman Barry Boyt says the nonretail aspect of Shareholder Services Group's offerings has played a large role in attracting clients. The company also feels its competitive fee structure, including a $25 flat fee on mutual fund trades, is also attracting advisors.
"Far and away, the number one concern we're seeing is the fact that their clients are being approached (by their custodians) and they just don't want to have those issues anymore," Boyt says.
The company is keeping its total assets under management confidential. Mangan feels, however, that this aspect of the business is becoming less and less consequential. He notes that 20% of the company's advisors are using a fee structure other than one predicated on managed assets, and that he expects the number of firms using hourly fees, annual retainers or other nonasset based fee structures to grow. "Advisors are paying less and less attention to assets as being the basis of their client relationships," Mangan says.
Another custodian, National Advisors Trust in Overland Park, Kan., is taking the slow and steady approach to growth. Unlike its competition, National Advisors Trust was founded by a group of advisors, is run by a board of directors composed primarily of advisors and was initially established to be a trust company first and a custodian second. Since then, the custodian part of the business has grown at a much faster pace than the trust unit.
The thinking behind the company's founding was that an advisor-run company could do the best job at filling the custodial and trust service needs of its advisor clients. It also meant the company would not be pursuing a growth-at-all-costs strategy.
Since it was formed in October 2001, National Advisors Trust has only accepted new advisors as clients through periodic stock offerings. (To be a client of the company, you must also be a shareholder). Through the end of March, the company had about 112 advisor clients and shareholders, and was in the midst of a private placement stock offering, according to company President and CEO David Roberts. The goal: recruit no more than 130 advisors and keep the company's roster of advisor clients at that level.
"At some point you have a combination of enough advisors to support the business model," Roberts says. "If you get too big, you start not knowing the firms and not knowing how to respond to them."
Even with a fixed number of advisor clients, the company feels it has much room for growth. The company currently has about $1.9 billion of assets under management, with about 80% in custodial services and the rest with its personal trust and employee benefit services.