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.

Regulators would throw questions at the founders, who would then come back with a set of answers-a back-and-forth process that dragged on for months. The entire process took 16 months, compared with the typical application process of six to eight months, Kopczynski says. Along the way, National Advisors Trust did have to make some changes. The original charter application, for example, placed virtually no emphasis on making profits, and placed most of its emphasis on delivering service to shareholders. Regulators demanded more of a focus on profits, partly through a more aggressive asset-gathering plan.

The company was hoping to attract $1 billion in custodied assets in a little over a year. It was a reasonable goal, company officials say, if not for one twist of fate: The company got its charter the day before September 11, 2001.

It was, as Kopczynski recalls, the worst possible time for advisors to try to sell clients on anything new, let alone a total relocation of their assets. In many instances, advisors just held off on trying to move any assets until the climate got better. It wasn't until late last year, in fact, that the momentum started to build, company officials say, to the point where now the company is averaging close to $100 million in transfers a month.

With the acceleration in the growth of assets, the trust company has expanded its array of services, says David Roberts, the trust company's president and CEO. The company has service agreements with more than 20 companies that give clients access to things such as alternative investments, private foundation services, qualified retirement plan services and separate manager products. "We've created interfaces to some of these firms so they can allow their separate managers to run assets, while we do the underlying custody here," Roberts says.

The trust company has found that its 401(k) services are in most demand, comprising the largest percentage of custodied assets, followed in size by basic custodial accounts and then trust accounts.

The trust company has been taking a conservative approach to taking on new members, preferring to concentrate on cultivating services for its existing clients, rather than rapidly taking on new shareholders. The second offering conducted earlier this year, for example, only happened because the company had a list of 26 companies that had been waiting months to be granted access, says Roberts.

National Advisors Trust conducts due diligence on all advisors who apply to be members, Roberts adds. The trust company, he says, prefers fee-based advisors, which it defines as firms that derive 75% or more of their revenue from fees. They also want firms that are serious about using the trust company's services. Indeed, the founders expected those services would be its primary attraction and have been somewhat surprised that its custodial services unit has taken off to the degree that it did.

"We want firms that have an active interest in using the facilities of the trust company, rather than being passive investors or using us as a standby mechanism," Roberts says. "The trust company is designed to support these firms, and since it operates as a co-op, the expectation is that owners will actually use its services."

Advisors who use National Advisors Trust's services say they feel they have a greater influence on service quality than they would with a larger national company. Kurt Brower, president and co-founder of Brower & Janachowski in Tiburon, Calif., says this is reflected in things such as the ability to get a mutual fund quickly added to the trust company's platform, or controlling the format of client statements. "That can be a pretty complicated process with a larger company," says Brower, who is one of the company's founding advisors.

Burkhart of Savant Group says he values the confidentiality provided by custodying client accounts with a trust company, as opposed to a broker-dealer. Another benefit is the ability to forge a multi-generational relationship with clients, he says.

"One of the areas that was an awakening for us is we've lost a number of clients through death," he says. "We now have the ability for you, in your estate planning, to not only name Savant Group as your advisor, but also to name National Advisors Trust as your successor trustee. And the client doesn't pay anything for that."

Roberts sees another aspect to the relationship National Advisors Trust has with its clients. "Number one, they like the idea of having an entity that is responsive to their needs and concerns," he says. "I describe it as both being on the same side of the table. We work very hard not to be perceived as a vendor of service, but a partner in the outcome."