A small Denver financial services company that recently bought three firms - an insurance group, a trust company, and a registered investment adviser - in Fort Collins, Colo., says it wants to develop a private bank in the Mountain West.
First Western Investment Management bought Poudre River Valley Trust Co., the investment adviser James Sprout & Associates Inc., and Westcor Insurance Group on Jan. 30. Scott Wylie, chairman of First Western, said the purchases not only added to his company's product depth but also broadened its footprint in Colorado.
Mr. Wylie, a former Northern Trust executive, said First Western is a privately held investment manager with $30 million of assets under management. His company is converting into a bank holding company that will open this month, he said, and once it does, First Western will be able to offer trust services. The ultimate goal is to be a respected private bank, he said.
"We think there is an interesting opportunity for a regional, western-based private bank and trust company," he said. "If you look at the private banking and trust business, it is very East Coast-oriented. If you look at the Rocky Mountain West region, there are no local players here."
Mr. Wylie said there is a lot of opportunity in Colorado because it is unique by comparison with New York or Los Angeles. "This is a younger economy where there are more wealth creators than wealth preservers, compared to what the traditional bank and trust companies focus on," he said.
First Western will focus its attention on households with $1 million of assets, and Mr. Wylie said it would also emphasize business owners.
"The traditional private bank and trust company does a great job in developing relationships with clients, but the concern that I have is that I don't feel that they provide a sophisticated, well-rounded approach to wealth management," he said.
Mr. Wylie said that for a private bank to compete in Denver it must offer trust services in addition to products designed for building wealth. First Western made the Fort Collins purchases with this in mind, he said.
It will offer investment products including variable annuities, life insurance, mutual funds, and fee-based products like managed accounts. "If we can combine a strong adviser relationship with a sophisticated approach to wealth management, we could have something unique to meet an unmet need in the market," he said.
Analysts said, however, that "fledgling" wealth managers would have a difficult time developing business with high-net-worth investors.
"The largest banks and wire houses have entire units that are focused solely on this market," said Jason Ward, an analyst in Chicago. "Developing market share in an overcrowded market requires technology, resources, and size. This is a tough space to crack into with a start-up company."
Mr. Wylie disagreed. Ten to 15 years ago, he said, a small private bank and trust company would have had a difficult time challenging in this market because of the technology required, but the situation is inverted today. Large companies have a hard time keeping their technology current, he said.
And First Western will differentiate itself from larger competitors by shifting its attention down-market.
"It is pretty well-known that $1 million households have the same needs as $10 million households," Mr. Wylie said. "They need bill payment services, bookkeeping, asset allocation, and asset planning. They need private banking services such as personal trust, investment management, and family office services."
The three Fort Collins companies will operate as a separate First Western office, with James Sprout as its chairman. The companies will continue to serve their existing clients. All employees will be retained; existing services will continue to be provided and new services added over time.
Mr. Wylie said Fort Collins, which is 60 miles north of Denver, offers First Western an interesting opportunity.
"Ten years from now we believe that Fort Collins will be a big market," he said. "We are positioned to have a strong place there. We hope to have a regional focus in the West, with a number of markets like Denver. We want to be a regional presence, with secondary markets in cities in Texas, Arizona, California, or Washington State. First, we have to get to critical mass in Colorado."
