BPFH
#<UNK>, let me bridge back to what <UNK> said.
<UNK> and the team have been analytically religious about client measurement and client profiling.
<UNK> mentioned that we believe there is about $600 million of AUM represented by high-quality clients who warrant tremendous retention attention.
What we can't give guidance on is how much of that $600 million ultimately retains versus departs.
What I can tell you is that we're swarming at $600 million.
<UNK> also made a key point about staff stability.
We have attained a high level of staff stability.
Staff departures are not triggering the remaining risk level around retention.
The one strategy <UNK> mentioned was not a fulcrum in anything that happened the first quarter.
I am not a believer in bad luck, but in the first quarter, frankly, I think we had bad luck.
Every one of the six clients who drove that bulge number are a bit of a story.
So, as I've said in previous public statements, I think the retention journey, unfortunately, is not a straight-line.
It's lumpy quarter-to-quarter.
We certainly had our hopes up in Q4 when Q4 departures looked a lot better than Q3.
Therefore, we're very disappointed in the Q1 number, but I am not at all believing this is a problematic trend.
I think we are trending with each passing quarter toward greater and greater client stability.
Again, looking at the normalized expenses, I think we have a lot of the investments in place.
We saw some of those expenses in the first quarter.
You look at the $66.7 million.
You take out the $2 million, or so, of FICA seasonality that we had and the restructuring, and I think you get into more of a $63 million, $63.5 million range for normalized.
That does have some elevated professional fees if we can get that down, we can take that down a few hundred thousand as well.
Good morning, Alex.
Sure.
That was about one-third of the inflows for the quarter.
Sure.
First, overall, the pipeline is twice as large today as it was this time last year.
I should add, by the way, an editorial comment in light of all of the change that has been going on, the transitions, some new management, the fact that that's twice as large given the focus has been in other parts of the business, I think that's pretty phenomenal.
I can't guarantee it will go to four times from here, but I'm pretty encouraged by that.
The pipeline is not, the growth from that is not all attributed to that group, although the majority of that group is from the West coast.
Frankly, I think that group has unlocked an incredible amount of opportunity from our West coast bankers that they've been starving for at least for the last 2-1/2 years while I've been here.
They are contributing to it, but it's all over, through our channel partners, it's through the East coast.
We've developed a dedicated effort calling on our internal bankers with our Boston Private Wealth personnel, treating them like a client, and making sure they are educated and understanding the new model.
I think the more the bankers here in Boston and California hear about that, the more and more they are opening their client books to us.
Clearly, if you breakdown those large clients, they were atypical besides we had ---+ and I would also classify them as less wealth management clients and even maybe more as investment management clients, which we're trying to get away from.
I should also point out, and I think Clay said it, that one of the client's depart is a result of a strategy change where we retired a strategy, and $50 million went out, but I think, strategically, it was the right decision.
So, is that a client outflow, due to personnel change, no.
Back your original question, I think, our average size relationship is $3.5 million.
The number of clients on that list of 600 is probably 50 to 60.
Yes, we haven't done it historically, Alex.
I'll look at that.
I don't want to blurt it out on this call and then trap us in new disclosure.
I will tell you this, though, I think the headwinds in active US equity management remain high.
Having said that, one ray of sunshine is in the first quarter, a lot of the drawdowns that I saw were not client terminations.
It was really reweighting and rebalancing.
Now, one quarter does not a story make, but I do have hope that our repositioning of both Anchor and Dalton Greiner, good value-added investment performance, good high quality marketing and distribution, a balanced focus, not only on the institutional space, but institutional plus platform channels and domestic partners, plus in the case of Dalton Greiner, international investors looking for US equity exposure, I do think we are taking a balanced approach.
If we get into a market environment with reduced uncertainty, I think a big part of the first quarter was just kind of the start to the year and just elevated uncertainty everywhere.
That always has a chilling effect on client allocation.
Again, we're just focused on the controllables for us.
Investment performance, value-added, marketing and sales.
I do take some heart, though, in the change in anatomy of the negative flows.
It was less terminations than historic, and more reweighting, rebalancing, et cetera.
And I'll take a look at, going forward, do we get into gross net and all of that.
But we have not.
It's a different business.
Again, you have to think about it.
Our clients are largely the large platforms.
Most of the assets sit on very large S&A UMA platforms, so we have the large institutional client.
The underlying high net worth clients that sit and drive the assets on that are not someone that we have direct relationships with.
It's a little bit of an apples-to-oranges comparison when you're talking about client relationships.
That's okay.
It was probably about half.
About half was related to the net recoveries.
And about, which we didn't have previously reserved for, and then half was related to the reduction in commercial loan balances.
It was Construction and C&I.
I don't have that right now.
We do track that, and we will look into, potentially, it's something we could disclose in the future.
Again, it's really hard, it's hard to use as a predictive tool, though.
No.
We do put that in the tables, I think, last year, we probably had about $2.5 million for the whole year, $2.3 million, something like that.
This was an elevated quarter, $1.1 million.
It can be lumpy.
Year-over-year, the first quarter of 2015, it was $1.7 million, then we had zero, then it was $300,000, $300,000, and then it was a million this quarter.
Again, it can be very lumpy related to some large credits that pay off.
<UNK>, it's an astute question.
The answer is, yes, but it's largely in place.
We spent a lot of time last year working on appropriate incentives and resets, and they're typically of several types.
We have some very appealing, and yet, high class.
What we don't want to create is some kind of mercenary culture, but we have a very appealing set of incentives for our client facing private bankers to introduce clients to our wealth management and trust businesses.
Our wealth management client advisors are very focused on client service and building the caliber of their client books of business, which, obviously, is both introduction as well as retention.
And then we have a number of salespeople covering channels, third-party centers of influence, and in our investment management businesses, selling in the institutional space and the like.
We spent a lot of time last year, in particular, scrubbing those arrangements, making sure they were appropriately centered, and I feel good about it.
No, we don't have any restraints or constraints on that.
Thanks.
Thank you all for your continued interest in us.
We're going to be very active in the coming several months with IR outreach.
We look forward to seeing you and seeing our investors.
