When the asset manager Neuberger Berman Group LLC was sold to Lehman Brothers Holdings in 2003, the leaders of Neuberger's trust unit figured they could reap a lot of new business from wealthy Lehman clients.
And they did just that, said Robert Laughlin, the trust unit's chairman and president. But they also made a point of staying closely connected to the rest of Neuberger, he said.
"We definitely did not think, 'We do not need Neuberger Berman anymore, we're part of a big investment bank,' " Laughlin said in a recent interview. Neuberger's money management operation was "going to be an important growth engine in the future."
Ultimately it would be the only growth engine in the trust unit's future. In December, after Lehman collapsed, Neuberger's managers bought back the money management piece.
Then, on July 23, six years to the day Lehman bought Neuberger for $2.6 billion, the newly independent Neuberger announced it was reacquiring the rest of its old family — the trust business it started in 1994.
Neuberger, which has $158 billion of assets under management for individuals and institutions, has technically agreed to acquire Lehman Brothers Trust Co. and Lehman Brothers Trust Co. of Delaware.
Laughlin, currently the president of Lehman Brothers Trust, would lead the renamed Neuberger Berman Trust Corp. when the deal closes later this year.
The acquisition would add trust, estate and investment services capabilities for high-net-worth individuals as well as small and midsize institutional clients, according to Neuberger.
When Lehman bought Neuberger, the latter's trust business "did lose some" clients, "but we kept a good core book of clients as a result of the strong relationships we have built with them over the years," Laughlin said.
Neuberger, which has roughly 25 trust and estate professionals, was seen as one of the units that made it through the Lehman meltdown in good shape.
It should not have much of an image problem from its association with Lehman, said Burton Greenwald of BJ Greenwald Associates in Philadelphia.
"Neuberger's biggest challenge is rebuilding and renewing its distribution contacts as it seeks to grow assets under management," Greenwald said.
Neuberger said the professional services firm managing Lehman's assets, Alvarez & Marsal, considered a number of options and buyers for the trust unit. Laughlin said the fact that the business is reuniting with its parent means its integration will be smooth.
An integration planning meeting with Neuberger in late July was a snap, he said. "If we'd been lifted out to a different firm, it would have been a much less comfortable meeting."
For practical purposes, the trust business was left out of the deal in which Neuberger's executives bought out the money management business. The executives had entered a last-minute offer so "putting trust in there too at that point could have complicated their bid," Laughlin said. "They wanted to get that deal done and have us join later."
Laughlin said that he and his team are rejoining Neuberger at an opportune time. As the financial crisis plays out, many investors are dissatisfied with the advice they have received and skeptical of its independence and objectivity, he said.
At the same time, lawmakers are calling for higher fiduciary standards.
"To me that's an opportunity, because we're already at that level," Laughlin said.
The trust company's professionals, meanwhile, are dealing with clients who have become far less risk-tolerant. For example, a long-term dynasty trust that was once typically 80% to 90% equities might be 50% or 60% equities in some cases, he said.
Though Neuberger manages most of the trust assets, the trust business is known for objective decision making and advice, Laughlin said.
Since 2001 the trust business has been using outside managers for portions of its clients' portfolios, he said.
The "complementary architecture" uses Neuberger asset management to handle the core of portfolios, which can then be filled in with outside separate account managers, mutual funds and exchange-traded funds, Laughlin said.
Examples of investments that the business might import for certain clients are international separate accounts and commodities ETFs, he said.
