Kaycee Krysty and Rich Simmonds co-founded Seattle-based wealth management firm Tyee Asset Strategies in 1995, and the firm grew rapidly over the ensuing five years. Clients valued the personal service they received, but they became concerned about the firm's succession plan and its ability to continue serving their families for the long term. So Krysty and Simmonds "did some real soul-searching" about the best way to build a firm that would be there for future generations of clients. That process led to the recognition that they needed a strategic partner. "Many advisors may be in the situation Rich and I were in," says Krysty. "It wasn't just about a liquidity event or a business growth strategy. We began by considering what was best for clients, and what we needed to take our business to the next level." The surprising answer was a trust company.
The Laird Norton Trust Company, also based in Seattle, was founded in 1967 to manage the wealth of two affluent Pacific Northwest families--the Lairds and the Nortons. In 1979, the company began serving external clients to broaden its asset base and strengthen the business. Laird Norton Trust had built a solid reputation, and the potential to fit with Tyee looked promising. "We had been looking first and foremost for business continuity, multi-generational expertise, and access to more solutions through critical mass," says Krysty. "We also wanted the fiduciary side. Laird Norton Trust wanted open architecture, more of a growth orientation, and the asset allocation and investment modeling capability that we had. In focusing on bringing those things together, we were able to create a better solution for the client than either of us could have created on our own."
Merging Cultures and Operations
Informal discussions led to formal negotiations, and in July 2001, Laird Norton Trust Co. acquired a majority share of Tyee. The original plan was for Tyee Asset Strategies to continue operations as a stand-alone business that represented the trust company's open-architecture wealth management offering. After several years of working together, however, the managers of both firms realized that merging the businesses could generate synergy.
Trust companies have an often well deserved reputation as slow-moving institutions, and the cultural and structural differences between the two companies could have been obstacles. To reduce the risk of an unsuccessful merger, the firms spent a year planning the transition. Krysty interviewed employees at all levels in both organizations inquiring what they thought worked and didn't work within the businesses. Lynne Langseth, Tyee's chief operating officer, focused on operations by defining the consistent experience they wanted all clients to have, and worked backwards from that point. Management believed it was critical to create a team-based, single-firm culture. To accomplish that, they took a closer look at the structure of each client service team and made a decision to add more depth to the teams.
"We broadened the traditional trust company model so several individuals on a team would support the client," Langseth says. "We also expanded the size of the teams, so there were multiple advisors on a team, not necessarily serving the individual client, but all collaborating and sharing their knowledge. We reviewed the tools they were using to determine what those teams could accomplish and be platform-neutral. That, coupled with going to open architecture, required an overhaul of most of the tools that were in place so there would be a consistent experience for client service team members and clients." Integrating the two firms' systems, CRM software and custodial data to develop one view required a significant investment of time and energy. They also redesigned and unified their performance reporting, so that all clients received similar reports.
Krysty assumed the soon-to-be-combined firms' CEO role in April 2003, and the new entity emerged in March 2004 as Laird Norton Tyee (LNTyee). The new firm had approximately $3 billion of assets under advisement and continued to be privately held by employees and members of the Laird Norton family. Growth has continued at a rapid pace, reaching $3.7 billion AUM at year-end 2005 and $4.6 billion by year-end 2006. The firm has more than 80 employees and serves over 400 clients whose net worth ranges from several million dollars to hundreds of millions. Many of LNTyee's clients are business owners in the Pacific Northwest, and approximately one-third of the firm's assets are held in trust accounts.
Size matters
As management had hoped, LNTyee's large size created synergies. From a product perspective, critical mass expands product access and generates buying power that allows the firm to negotiate for its clients. Krysty stresses that the benefits go far beyond products, however. She points to a recent hire as an example of how the firm's size enhances its ability to attract talent. In December, LNTyee hired a senior partner from a local CPA firm who is both an attorney and a CPA. Her position is completely focused on identifying the latest solutions for clients. "Very few organizations can devote that level of expertise to just working in that area for their clients," says Krysty. "You have to have critical mass to do that."
The merger also assured clients who had worked previously with Tyee Asset Strategies that the combined entity would continue to serve future generations. "You can't overstate the value of having your clients know that you have a business continuity plan," Krysty says. "The Laird Norton Trust Co. had a 40-year history, but the Laird Norton family has a 152-year history of operating high quality enterprises. That matters to our clients, as does our privately held status."
Growing People
Despite its unusual status, LNTyee doesn't lack competition: Its clientele occupies the sweet spot that numerous other firms are pursuing. Local wealth, generated by firms like Amazon.com, Microsoft and Starbucks has brought an influx of asset management firms--including national and global institutions-- to Seattle. These firms are not just competing for clients, however; they also need top-quality staff to service the high-net-worth market. Krysty recognizes the challenges, but she believes her firm can continue to prosper on both fronts. "We compete successfully with those firms right now," she says. "We're not the right solution for everybody, but we're clearly differentiated from their service offerings. The high-level expertise that those clients seek sits here in this office in Seattle; we don't fly it in from New York or Dallas to meet with the client. Our senior folks can go toe-to-toe with anybody they can parachute in. Clients like that; they want to know that they have the expertise here."
LNTyee refrains from using a dedicated sales staff because of its belief that sophisticated clients do not want to be "sold to by a salesperson." Consequently, it is senior management and advisors who meet with prospective clients. The firm does not use traditional advertising, either. Instead, it creates name recognition by demonstrating "thought leadership" through staff-written articles and by speaking at meetings. Krysty says this means the firm's representatives are active in the community demonstrating their expertise. "It's about being out in the community and being generous with your knowledge capital because people sit back and go, 'Wow, these really are smart people, and they care,' " she says.
Once clients retain the firm, they gain access to the Thought Forum, an educational network designed to address wealthy investors' needs. Krysty says the forum, which she describes as master classes for clients, brings clients together with speakers such as Claire Gaudiani on philanthropy, Jay Hughes on family issues, and Bob Sternberg from Yale University to discuss children's intelligence.
"We encapsulated a tagline, 'Growing wealth and growing people,'" Krysty says. "There are many firms that will help you grow wealth; the differentiator is that we also grow people. We're focused on our clients' growth: Their different life stages and what it is they want to do next in life is a big part of our practice. We believe that if you grow wealth and don't grow the people, the wealth ultimately fades away. It is only by growing the people that you can have the opportunity to regenerate your wealth over time."
That philosophy also applies to staff. LNTyee typically hires young people and grows them through its system. The management team works actively to coach and mentor the younger staff, and a manager's mentoring performance influences his or her job rating. The business pays for staff enrollment in the CFP or CFA programs and in continuing education sessions. During the firm's annual Fall Symposium, staff--including junior members--attends presentations by industry experts. One employee who is trained as a coach spends part of her time focusing on staff development. "The energy we have spent on growing our advisors has been critical to our success," Krysty says. "There are a lot of folks who have been successful at building firms. But they can never get beyond building that firm because they were unable to grow new leaders from the people beneath them. The absolute key to our success has been our ability to grow the employees at all levels."
A generous compensation package promotes staff longevity; Krysty believes that the firm's incentive program is one of the industry's richest. LNTyee sets aside 25 percent of its pre-incentive EBITDA each year to make short-term incentives available, and the payout structure encourages specific goals. "The awards are more heavily weighted toward team success, not individual success," she says.
Maintaining the Pace
LNTyee's growth demonstrates that the firm has found a winning formula in an increasingly crowded market. The management team is hardly relaxing, though. To avoid complacency, they constantly seek ways to improve the operation. "Our clients expect us to have thought of the question and found the answer before they even know they should have asked the question," Krysty says. "So we must push outside our walls to maintain our leadership position. An example of that is a study we did last year where we interviewed approximately 20 of the top minds in the investment world and asked them challenging questions about wealth management." At the rate LNTyee is growing, it's likely those same experts soon will be asking Krysty and company for their insights.
Ed McCarthy, CFP, is a freelance writer in Pascoag, R.I.
