Unlocking Real Value Blog

AK Quoted: Private Bank Retools Leadership, Investing Model

Published on February 14, 2011 – FundFire – An Information Service of Money-Media, a Financial Times Company – written by Tom Stabile

Key Private Bank has ushered in new leadership as it continues an effort to open its investment platform and build out its staffing to pursue more new clients within its existing 13-state footprint. The changes include a greater reliance on outside managers by the private bank, which oversees about $22 billion for high-net-worth clients, apart from its separate brokerage and Victory Capital Management institutional asset manager business lines.

Tim Swanson stepped up last month from his role as CIO of Key Private Bank to now head the entire operation, a move in tandem with the elevation of his predecessor, Tim Lathe, to a newly created post as executive v.p. and sales executive for Key Community Bank. Swanson – who took on the CIO post in 2009, coming over from a similar role at crosstown rival National City’s private client arm – now plans to hire his successor as CIO through an ongoing search that includes internal and external candidates.

Since his arrival, Swanson has contributed to an overhaul of the Key private banking model that has expanded a largely proprietary investing approach involving stock-picking by its own portfolio management teams to add more external managers and offer more of an open architecture platform.

“I have been part of the group that has put Key Private Bank on the path that we’re on, and that we’re continuing on,” he says. “Our view is that our clients deserve our best answer, and at times we believe we are the best answer, but we’re not so arrogant to think we have all of the answers.”

The push has included adding more external separately managed accounts, mutual funds, exchange-traded funds and alternative investments to its menu, while tapping into the due diligence consulting and product access support of Prima Capital for traditional investments and Fortigent for alternative investing strategies. It had hired Prima several years ago and added Fortigent last year.

Swanson says Prima and Fortigent provide a first level of research to identify strategies that meet Key’s investment criteria. An internal due diligence team adds another layer of review to apply the private bank’s own view to zero in on products that are the best fit for its clients. He says the private bank also has internal research processes – investment strategists, research specialists and portfolio managers – covering equity securities, fixed income and derivatives.

Numerous private banks have opted to mix open architecture with their legacy proprietary approach in recent years, acknowledging an evolution of client demands and the axiom that “you can’t be all things to all people,” says Andrew Klausner, principal of AK Advisory Partners, a consulting firm. “Typically, a trust department or private bank will be good at one style, but can’t offer you the diversification with [internal resources]. If they can show they supplement what they do with [outside managers], it’s not as profitable, but clients today appreciate that.”

Klausner adds that using Fortigent and Prima shows the marketplace that Key is “serious” about its open architecture effort. He says private banks that put their own strategies under the same review as external managers probably can respond to most client questions about whether their proprietary investing options are free of conflicts.

Swanson says the private bank has made a “meaningful investment” to upgrade its platform over the past few years. On the staffing side, the push to expand resources will largely focus on adding staff to its existing private bank locations in the Midwest, Northwest, Northeast and Southeast, with outposts stretching from Anchorage, Alaska east to Portland, Maine and south to Fort Myers, Fla.

The private bank has about 120 lead client relationship managers and more than 700 trust, tax or other wealth management planning specialists overall. The private bank staffers tend to work in standalone locations, though sometimes are based in Key retail bank branches.

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