It’s a well-known fact in business: simple ideas stick better than complicated ones. It’s a message First Republic Bank
seems to have taken to the heart of its operations - and is perhaps
what has allowed it to be consistently profitable for 26 years.

“We started 26 years ago and built a bank focused on delivering
extraordinary service in the private banking markets, in urban coastal
affluent markets,” Katherine August-deWilde, president and chief
operating officer, tells this publication in a rare
interview. “We built it based on what the high net worth market wants
and values – which is a highly-personalized service.

“We’re in concentrated markets and have a simple, focused model. We
have a growing client base in our markets, we have strong credit and
well-matched assets and liabilities ” she says.

It seems so simple – maybe banking doesn’t have to be complicated.
But every company must grow, and managing this while retaining its
boutique feel is one of the challenges for the senior management of
First Republic. Part of this, according to August-deWilde, is ensuring
employees understand the ethics of a company, and this view has to come
from the top.

A brief history

The bank was incorporated in 1985, when August-deWilde joined, and
started out with 10 employees and one office. It was listed on the
Nasdaq in 1986 with a common value of $23 million. It underwent a brief
period as part of Merrill Lynch, which acquired the bank in 2007.
However, after Merrill was merged into Bank of America in 2009 there was
a management-led buyout at First Republic, and last year it became a
listed company again with an IPO and valuation of $3.3 billion on the
New York Stock Exchange.

Its latest financials show: net income of $173.6 million for the
first half of the year; bank assets of $23.8 billion and total loans
outstanding of $20.3 billion, as of 30 June 2011.

The wealth business

First Republic really started developing its private wealth offering
around 10 years ago, by building a brokerage and making a few boutique
acquisitions, explains Bob Thornton, head of the firm's Private Wealth
Management business. Five years ago it went through the consolidation
process. “We looked at the different [wealth] brands and businesses and
we wanted simplicity for clients, and to provide integrated wealth
management.” At the same time, the bank moved towards an open
architecture approach and away from being a product provider on the
investment management side, he says.

That clients are much happier with an open architecture approach
directed by a portfolio is one of the most important things
August-deWilde says she has learned in her career at the bank.

The latest figures, at the end of the first half of 2011, show wealth
management assets of $19.6 billion – up by 17 per cent from the end of
2010.

The key to growth

“The most key way our business has grown is really referrals,” says
Thornton. First Republic does advertise through selected radio and print
channels (its aggregated advertising and marketing spend was $11.6
million for the second half of 2010), but mainly puts its growth as
through referrals, both within other areas of the bank and from
word-of-mouth recommendations from clients. Thornton also makes the
enviable claim that First Republic “rarely loses a wealth management
pitch.”

The two cornerstone client segments for the private wealth division
are for clients with $2-$10 million or $10-$100 million – segments where
the level of service is paramount.

As the firm grows, “our job is to maintain the culture,” says
Thornton. He says that while the firm has high growth expectations,
“specific targets could actually limit growth and affect the quality we
deliver to clients.” He adds that the bank will not take on all clients
or staff if it doesn’t feel the fit is right.

The firm is focused on the full-service, integrated approach. “There
are no compensation or structural barriers” to the client experience,
says Thornton.

Meanwhile, with difficult client queries you can reach the top-level management to get a resolution within a day, he says.

The idea is to capitalize on the firm’s entire platform, and when a
client comes through the door the first question to consider, according
to Thornton, is: what are his or her needs?

The stress on balancing assets and liabilities is evident in the
mandate the bank’s relationship managers in the wealth division are
given, which encompasses delivering banking, investment management,
trust, brokerage and real estate lending services.

As well as referrals and the development of an integrated service,
hiring has been an important driver of growth within the private wealth
division and the wider bank, as "this brings in clients and skills,”
says Thornton.

Future plans

Going forwards, the bank intends to do more of the same. Its
expansion plans concentrate on its core markets of San Francisco, Los
Angeles, New York, Boston, Portland and San Diego. It will be hiring
staff within the wealth management business but only when there is a
cultural fit, says Thornton, adding that the bank is “open to talking to
the right people.”

Meanwhile, Thornton thinks there’s a lot more mileage for the private
wealth side, saying: “While we are growing quite rapidly, there’s a lot
more visibility we can have in wealth management, and lots of clients
[of the bank] that still aren’t part of wealth management – so we just
want carefully managed growth.”

Watch this space.

(An earlier version of this item appeared in Family Wealth Report, sister publication of WealthBriefing).