It’s not just for millionaires anymore. The Wealth Management Division of Bryn Mawr Trust, a $3.44 billion-assets bank outside Philadelphia, formed a new subsidiary, BMT Investment Advisers, and launched a multi-cap mutual fund designed to serve mass-market customers. Now, individuals can buy shares of the new BMT Multi-Cap Fund with a minimum investment of $25,000. By contrast, customers of the bank’s Wealth Management Division need to invest a minimum of $2 million in separately managed accounts.
Stephen M. Wellman, chief operating officer of the bank’s Wealth Management Division, defines mass-market customers broadly—simply anyone not currently served by its Wealth Management Division. “We have had clients looking for a lower entry point for assets under management,” Wellman explains. Bryn Mawr Trust wanted to be able to serve those customers, and it views the initiatives as “good for customer retention overall.”
The formation of BMT Investment Advisers and the BMT Multi-Cap Fund fits within a long-standing focus on trust and investments at the 128-year-old institution located in Philadelphia’s tony Main Line. According to Wellman: “We wanted to streamline our investment division where account minimums are high.” He adds that the bank wanted to serve the needs of its smaller account customers who may want to, for instance, rollover a 401(k) or open an IRA with balances that do not meet the minimum.
“When we are able to aggregate our client assets in a fund, it simplifies investment management, trade execution, trade settlement, and portfolio accounting,” Wellman points out. “That’s what makes it more scalable in managing small client accounts.”
According to Wellman, other small banks could consider launching a mutual fund if their assets under management were of a sufficient scale to support the expense ratios associated with such a mutual fund. “Banks seeking a single investment vehicle, which would be available to a wide variety of client types, would benefit from launching a single mutual fund,” Wellman says.
The Wealth Management Division was able to introduce these initiatives without adding additional staff. Instead, Wellman says that Bryn Mawr Trust employed a strategic sourcing model, using Philadelphia law firm Stradley Ronon, to help the bank fulfill specific SEC requirements, which can be burdensome for small institutions.
The BMT Multi-Cap Fund is long-only and seeks to provide capital appreciation and a moderate level of current income by investing in equity securities of large-, mid-, and small-cap publicly traded companies. The fund invests in common stocks, preferred stocks, convertible securities, and securities of other investment companies. Under normal market conditions, the fund will invest at least 80% of its net assets in equity securities of publicly traded companies.
Expand client base
Wellman says the initiatives, launched in August 2017, broaden the bank’s client base. The BMT Multi-Cap Fund is available outside the bank’s wealth division and can be sold by financial intermediaries, or brokers, who select from many funds for 401(k) platforms. Nonbank customers also can buy the fund directly from Bryn Mawr Trust. Fund sales are available to all U.S. residents.
After one month of operation, the BMT Multi-Cap Fund has $115 million in assets. As of June 30, 2017, Bryn Mawr Trust’s Wealth Management Division had $12.05 billion in wealth assets under management, administration, supervision, and brokerage.
BMT Investment Advisers does not currently have plans to offer other investments besides the BMT Multi-Cap Fund. Wellman points out, however, that “the fund was formed as a series trust and that means it can add funds in time.” An expanded distribution will take place over the next year or two. Quasar Distributors, LLC, a wholly owned subsidiary of U.S. Bancorp, is serving as the distributor for the BMT Multi-Cap Fund.
Wellman also notes that the bank reserves the right to raise that minimum investment on all its accounts, including the BMT Multi-Cap Fund. He also says customers could ask for a waiver of those requirements. For instance, Wellman says a bank customer may want to open an account for a grandchild with an investment that is smaller than the minimum requirement. That grandparent could apply for a waiver.
Wellman also points out that the net expense ratio for the BMT Multi-Cap Fund is capped at 100 basis points, and no existing wealth division client is disadvantaged from a fee perspective by the initiatives.