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In a year when registered investment advisors have faced impossible challenges to stay ahead, one wealth management firm in Texas found opportunity and success. 

Westwood Holdings Group, Inc. (NYSE:  WHG) through its trust company unit Westwood Trust, helped forge gains by landing large new accounts while other firms waited, worried, and sat on the sidelines.  

Last summer my research team noticed a blip on our radar screen when looking for firms that stood out during the meltdown.  These are firms that increased managed assets for the year September 30, 2008 to September 30, 2009. 

The firm that stood out was Westwood Holdings Group, company with little press attention, listed on the New York Stock Exchange, and a top performing wealth manager.  

Last month I had an opportunity to chat with Brian Casey, President  and CEO of Westwood, to discuss how his firm managed to bring in $2 billion in new assets during the toughest year in recent financial memory.  Reviewing SEC reports, I looked at money managers that weathered the meltdown and it was not hard to understand how Westwood was able to mark this achievement. 

The Secret 

Although Westwood has been in business since 1983,  its  strategies were illuminated when  it became public in 2002. But, the true story of Westwood Trust began  in 1998. 

Westwood Trust’s mission is to provide high quality products and services to its high net worth clients.  Casey calls it “offering a competent investment professional to assist them with structuring a portfolio, and meeting the objectives whatever they may be trying to accomplish.”  

Westwood is not a financial planning trust company that provides directed trusts, dynasty trusts or self-settled trusts.  It is basically an eloquent investment store for a catered high end investment business segment. 

In the past five years Westwood’s managed assets have grown from $4.5 billion to $9.5 billion.

The reason for this growth was due largely to the way the firm had been structured. Many channels of diversification contributed and provided a continuous and steady growth.  

Casey, a native Texan for 40 years, describes Westwood as a diversified wealth management organization with three different business lines.  The first, Westwood Management Corp., began its investment business in 1983 as an institutional money manager.  Next, its trust company, Westwood Trust, a fully licensed and chartered trust company based in Texas that has been up and running for 12 years.  Third, its mutual fund business called WHG Funds, which has been in business for four years. 

The story of success is credited, in part,  to Westwood Trust.  Casey noted while other firms sat on the sidelines Westwood got its sales team out and prospected for new accounts.  

The result of course is recorded history.  Offsetting Westwood’s market losses experienced by most firms in the industry, Westwood was able to show net asset gains of $2 billion going from $7.5 billion at 9/30/08 to $9.5 billion at 9/30/09. 

Casey attributes this influx of new accounts to one concept: “high quality.”  Westwood knew it would have to rely on its high net worth business in order to sustain its asset levels, so it used its trust company as a main vehicle to reach new investors. 

The notion of providing an institutional quality product to its institutional clients, and having access to that through its trust company, created a unique combination of delivering quality to the marketplace to high net-worth clientele. 

I asked Casey whether he described the business at Westwood Trust as “retail.”  He did not feel comfortable with that word and said that his customers would not like to consider themselves retail customers.  He prefers to call them  private wealth investors—meaning the average account size for Westwood Trust is $2 million. 

How Did They Do It? 

Casey says that they’re constantly on the lookout for new customers in a way that’s different for most RIAs.  They primarily work through referrals and referral sources but have no wholesalers.  Casey adds “If you’re looking for the client that has $2 million or more you’re not going to find him answering an ad.  He’s going to have to come through a referral or direct call.” 

He adds that clients are doctors, professionals and entrepreneurs that have accumulated wealth over a lifetime but who see Westwood Trust as a shop that puts value and income first. 

Of particular importance is the fact that Westwood Trust offers common trust funds or commingled trust funds.  These are funds that act and behave like mutual funds and what Casey calls the precursor to mutual funds. “They are a tremendously efficient way of delivering institutional-quality investment products to clients.” 

He adds, “Commingled or common trust funds is a tool that allows us to deliver a well-diversified  institutional-quality product at a more reasonable fee than by trying to cobble together some outside mutual funds along with a separate account.” 

About Westwood 

When looking at Westwood it’s best to view Westwood in comparison to its peers.  The quick take snap shot provided by Morningstar gives Westwood stellar financial grades.  There are only three firms in the group which include Franklin Resources and T. Rowe Price that have “A” financial health ratings.  

Westwood’s market cap is only $268 million while the market cap of T. Rowe Price is $14 billion and Franklin’s is $25 billion.  So for a small company being managed efficiently they have done quite well in comparison to their peers.  Westwood is also accorded a “B” rating in profitability from the Morningstar analysis. 

All this being said, Westwood is an interesting story to follow both from the point of being a stellar asset manager, and owner of a trust company, and using that trust company in a way that allowed it to bring in important new accounts and new assets at a volatile time. 

 Next week more about Westwood, its operations, and an acquisition.

Jerry Cooper, senior editor, The Trust Advisor Blog. 

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