In 2004, Coral Gables Trust Company was founded by a small group of local investors who put up $3 million in initial capital and started out with a handful of clients, mostly shareholders.
Despite competing against much larger trust companies and financial institutions like Northern Trust, JP Morgan Chase and Bank of America, this small firm was able to grow successfully over the years. Today it manages about $1.1 billion in assets for hundreds of clients, most of them from South Florida
“We saw that a lot of people in the Miami area — smaller investors with around $2 million — were getting less attention from the big guys,” said James Davidson, who co-founded the trust company with Dean Klevan.
Large financial institutions give close personal attention to major investors with $10-$20 million and upwards, he said, but small and mid-sized clients typically did not have access to personal service or customized investment plans. When small investors called, no one wanted to bother with them, or they were offered in-house products (proprietary investment options) based on commissions.
“We recognized the need, especially among families and friends, did our research and took advantage of an opportunity,” Davidson said.
A trust company, which may operate independently, as CGTC does, or as part of a commercial bank, acts as an agent, trustee or fiduciary for clients, who may include individuals, companies, charitable institutions, estates and other entities. The company, chartered and regulated by the state, does not own any assets it manages. CGTC does not have a lobby or tellers, and investors meet directly with the company’s financial advisors in their offices.
“With large financial institutions, their primary source of business is something other than trust and wealth management, generally lending and checking accounts with retail and teller operations, ” said John Harris, chief wealth advisor.
CGTC, a full-service trust, estate and wealth management firm, provides fee-based services for managing assets — stocks, bonds, property, etc. — and does not sell proprietary financial products that other institutions offer on a commission basis, often with fees attached.
Most important, it offers personal, boutique investment services, stressing preservation of capital, investment safety and long-term asset growth, as opposed to risky strategies like trying to time the stock market and shooting for the high short-term returns. Its staff is made up of highly experienced financial professionals.
How did this small institution grow? CGTC, which now has clients with assets ranging from about $500,000 to $50 million, expanded through recommendations and referrals.
Since the company’s shareholders were clients and local residents, management decided to advance an aggressive word-of-mouth strategy, using shareholders to tell other local investors about the benefits of a small trust operation that paid personal attention to every client and provided long-term growth as opposed to flash-in-the-pan investment tactics.
These in-house “salespeople,” along with company employees, offered presentations on investment strategies and met with potential clients at social gatherings and charitable events.
Company name: Coral Gables Trust Company.
Founded: 2004 in Coral Gables by James “Jim” Davidson, chairman of the board and CEO, and Dean Klevan, member of the board of directors. Davidson was a founding general partner of Banyan Investment Partners in Miami and worked for 20 years with Goldman Sachs & Co. Klevan, currently a financial consultant who teaches finance at the University of Miami, previously held senior positions at Morgan Stanley, Merrill Lynch and Citicorp.
Ownership: About 50 shareholders, including Davidson, Klevan, other board members and senior management. No single individual holds more than 10 percent of company shares.
Leadership: Davidson, chairman and CEO; John Harris, managing director, chief wealth advisor, and Mason Williams, managing director, chief investment advisor.
Financials: CGTC charges annual fees ranging between 0.75 percent for investments of more than $2 million to 1.25 percent for investments of up to $1 million. From the end of 2010 to the first quarter of 2017, assets under management (which determine revenues) grew from approximately $150 million to nearly $1.1 billion. During the same period, revenues increased at a compound annual growth rate of more than 28 percent, the company said.
The difference: Clients can access their personal banker and receive flexible, customized investment advice from CGTC’s experts, an experience normally reserved for major investors who work with mega financial institutions. CGTC does not work with commission-based financial products, charges a set fee for managing clients’ assets and offers boutique options to clients.
Clients: Mainly high-net worth individuals and families, as well as companies, foundations, charities, assets held in escrow and special-needs accounts (set up for people with disabilities or families with children who have special needs). Clients come from all over the U.S. and overseas, but most are in South Florida.
Competitors: Northern Trust and SunTrust, plus many smaller and larger institutions like JP Morgan Chase and Bank of America.
Employees: 27, with 20 in Coral Gables, four in Fort Lauderdale and three in West Palm Beach.
Headquarters: 255 Alhambra Circle, Coral Gables; offices in Fort Lauderdale and West Palm Beach.
Client view: Arnie Gellman, a trial attorney in Coral Gables, has invested with CGTC for several years, and is pleased with the results. Gellman met the company’s chief investment advisor, Mason Williams, when he was working at another firm and followed him to CGTC, where the company manages his IRA and per sonal investments. Gellman previously had invested in different businesses — “Every lawyer thinks you should own a bar or a building,” he said — and had used stockbrokers. But he decided that he needed expert financial advice that focused on his needs.
“He put me in a diversified portfolio — stocks and bonds with a substantial share of dividend-bearing stocks,” Gellman said. “This protects my principal, gives me a reasonable return and I pay a fair fee. His remuneration is based on the performance of my portfolio, not on buying and selling financial products,” which many other firms do, he said. “I want to be able to pick up the phone and deal with my personal banker. You must have a balanced portfolio. You can’t get caught in the ups and downs of the stock market. His business is taking care of my money, and my business is being a lawyer.”
Business lesson: The company started promoting itself to investors in terms of financial performance, instead of differentiating itself from competitors by talking about its personal, locally based attention to clients, high level of expertise and range of services that include wealth and estate management and trust services. The company works to build portfolios over the long term and stresses capital preservation over excessive risk-taking.
Best decision ever: To obtain the best investment options for clients, the in-house team works with a third-party firm that does advanced analytics, which are then used by CGTC officers to develop investment plans. “One of our best business decisions was outsourcing the first level investment manager analysis to a highly-credentialed third-party firm,” Davidson said.
Strategy and outlook: “Our strategy is to keep doing what we’re doing, keep hiring the best people and continue helping our clients,” Davidson said. The company plans to expand opportunistically within Florida (perhaps to Naples, for example), and add services like financial and family planning, retirement options and 401Ks.
The strongest growth in the industry will be away from potentially abusive investment products and services, such as proprietary funds, high-churn, commission driven formats, high-load investments, illiquid investments sold to inappropriate clients and products with large imbedded fees, and toward client-centric services like those offered by CGTC, Harris said.
Challenge: The biggest is to continue getting the company’s message out to potential clients in local markets, especially to people who have had bad investment experiences or who aren’t sure how to make sound, long-term investments.