Banking On Business The principals at Firstrust
Financial Resources (FFR) in Philadelphia say their business model is an unusual one. The wealth management firm operates independently but is a wholly owned subsidiary of Firstrust Bank, a Philadelphia-area community bank started in 1934 and in its third generation of family ownership. The bulk of FFR's clients have no affiliation with the bank.
FFR provides wealth management, financial services, retirement planning, life insurance and other products to the bank's customers, as well as to their own clients. "There may be other wealth management firms that have some similar structure to what we have, but I think our model is unique and no one else has done it as successfully as we have in partnering with a community bank," says David Fleisher, FFR's president.
Large national banks usually have their own wealth management department. Smaller banks generally don't have the heft to create their own investment division, so they frequently refer customers to large, third-party companies. In the case of Firstrust, the bank's customers who need wealth management or investing services use Firstrust Financial Resources.
Only about one-third of FFR's clients come from the bank, though. The rest come from clients developed independently of the bank. Fleisher says the arrangement helps the bank develop long-term relationships with its customers.
"They [Firstrust Bank] have a conservative attitude towards people's money and that fit with our philosophy, which is one of the reasons we partnered with them," Fleisher adds.
Fleisher and his two partners, Andrew McIlhenny and Adam Sherman, are no strangers to working with banks. The trio started together at a large financial planning firm, but after the Gramm-Leach-Bliley Act passed in 1999 (which allowed banks to provide investment services), they smelled an opportunity.
"We had enough foresight to see that big financial institutions had the resources to provide their own financial planning services, but community banks could not do that," Sherman says. "A community bank is the financial resource center for the middle market and the mass affluent. Being able to provide wealth management services helps differentiate a community bank from its competition."
They started their own firm and partnered with Progress Bank in the Philadelphia region. Their firm, Progress Financial Resources LLC, was a subsidiary of the bank.
With Progress Bank, the firm provided exclusive financial services, wealth management and life insurance for any of the bank's customers who wanted to work through the bank for their financial planning needs.
Progress Bank was bought by Fleet Bank in 2003, but Fleisher, Sherman and McIlhenny didn't want to be absorbed by a larger bank. Instead, they formed an independent financial planning firm that operated under the Progress Financial Resources name.