In an environment where businesses are risk-averse and banks are looking for ways to increase their non-interest income, a handful of community banks in Massachusetts may have hit on a creative solution – catering to the legions of baby boomers approaching retirement and affluent customers looking for wealth management with a personal touch.
Plimouth Investment Advisors, a limited purpose trust company, originated at Fall River-based BayCoast Bank, formerly Citizens~Union Savings Bank. Dedham Institution for Savings is an equity partner, and South Shore Savings Bank, Cooperative Bank of Cape Cod and Monson Savings Bank are strategic partners.
“We have individual clients. We also do quite a bit as far as charitable accounts, endowments. We do retirement plans, like pension-sharing and 401ks. We also do quite a bit as far as trust work is concerned,” said George Oliveira, Plimouth Investment Advisors’ CEO. He added that the fastest-growing portion of the trust is on the investment management side.
He added that the arrangement has significantly enhanced his bank’s non-interest income and
“There are individuals who represent – I’d term it old-money – who are looking for a more personalized investment management service. Our people are available and readily can meet with their clients basically at the kitchen table,” Nick Christ, CEO of BayCoast Bank, said. “A reduced stress and reliance on its net interest margin.
‘Creative Option’
The trust can trace its roots to 1986, when Citizens~Union Savings Bank, now BayCoast Bank, created a trust services group with the help of seven people from the trust department of Bank of New England.
Christ said he met with the Massachusetts commissioner of banks in the summer of 2008, but plans to form the limited purpose trust company fell apart when the financial crisis hit. The trust company finally got off the ground in September 2011.
When Plimouth Investment Advisors first spun off, the entity had $338 million in assets under management. As of Nov. 30 this year, the company reported that number had increased to $500 million, the lion’s share of which is under BayCoast Bank and Dedham Institution for Savings. Oliveira projected gross revenues for 2013 to be $3 million. The entity has about 625 clients altogether.
David Floreen, senior vice president of the Massachusetts Bankers Association, said there are approximately 35 banks in Massachusetts that have trust powers. But that number includes out-of-state banks with offices here, banks with limited trust powers, such as funeral trusts and banks that have partnered with investment advisors.
Cambridge Appleton Trust Co., a partnership between Cambridge Savings Bank and Appleton Partners, with more than $1 billion assets under management, is an example of the latter partnership, Floreen pointed out.
The limited purpose trust company is more unusual in Massachusetts, though there are some in other New England states, Floreen said, such as Charter Trust Co. in New Hampshire.
“It’s not unique, but it’s clearly in the minority,” he said, noting that most banks with trust departments tend to go it alone.
The limited purpose trust company is “a creative option for community banks that want to offer this service to their client base, but don’t have the critical mass to do it on their own,” he said.
John Carusone, president of the Hartford, Conn.-based Bank Analysis Center, agreed.
“It’s a very effective way for smaller institutions to provide an important product line to their generally more affluent customers without having to surrender the client to a larger bank’s trust department,” he said, “and it’s an opportunity for them to generate fee income.”
With the baby boomer generation approaching retirement and looking to sell or transition their businesses, the environment would seem ripe for such partnerships, but several experts said the steep capital requirements can be an obstacle.
“I think the short-term capital requirements to start a brand-new organization similar to what we have would be cost prohibitive,” Oliveira said. “We’re already in the business, so basically we can leverage our strength to other community banks that may also want to be in the business.”
“The financial commitment necessary is something that requires a great deal of discipline, patience, and a long-term view to success,” Christ said.
Email: lalix@thewarrengroup.com
