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Behind the Scenes at Heritage

by Cathy McKinzie, Director of Operations

Since the beginning, one thing that’s always set Heritage Trust Company apart is the quality of our personalized service. We focus on building long-lasting relationships with our clients and take seriously our fiduciary role to put their needs first and foremost. Working with clients takes a special skill set — one that,
truthfully, I don’t have. I know my personality, and I know I wouldn’t be a good client-facing person. Working with numbers is what I enjoy— I like the structure of making things balance.

Over the past 20 years, I’ve realized that employees, like myself — who clients may never meet but who work equally hard behind the scenes — play our own vital
roles in Heritage’s success.

The common thread in my career, both at Heritage and before, is that I sometimes move into new job opportunities based on the strength of my working relationships with my colleagues. My respect for Ron Bowles, who later became a senior vice president at Heritage, led me to join him in 1987 at Liberty Bank in Oklahoma City, as a trust securities processing manager.

Many of Heritage’s initial employees came from Liberty, where I worked until shortly after it was bought in summer 1997 by a large national competitor. At the time, we were a tightly knit operation with strong, long running relationships with many of our clients.

There was no reason to start changing things; yet, over a period of several months, the new management gradually sectioned us off and began changing our internal structure.

In spring 1998, my job in Oklahoma City was eliminated and I was given the option of moving to branches in Columbus, Ohio, or Dallas, Texas. My daughter was in high school, so neither of those options were ideal.

One of my colleagues at Liberty, Mike Carroll, had already started exploring the idea of starting an independent trust company in collaboration with the
Payne family. They invited me to come aboard at what would become Heritage Trust Company. I liked and trusted Mike, so I knew even if this new business didn’t succeed, it would still be run with integrity. Saying yes was easy.

As with any startup company, we flew by the seats of our pants for the first several months. Each of us took ownership of several aspects of the business, even ones for which we weren’t normally suited. Because I have an accounting background, I handled payroll. I’m also an office supply nerd, so that was one of my jobs as well.

There were seven of us working together day in and day out. It sounds hectic, but it felt easy, because even when things got stressful, you knew you always had the
support and help that you needed.

Mike, former senior vice president Don Balaban and Ron Bowles were on the phone with clients every day, telling them what our vision was. Many of our clients
from Liberty Bank came over to Heritage based largely on knowing and trusting these gentlemen.

As Heritage has grown over the years, we’ve expanded into areas including oil and gas, mineral management, real estate management and institutional services. My job responsibilities have changed as well, and I’m now the head of a three-person operations department.

In operations, we take pride in knowing that the information we provide to clients is correct. We record their income, settle trades and provide them with accurate statements. We’re even picky about spelling errors.

I’m proud to say that I work for Heritage. Our clients have always been our core, so everything revolves around doing what’s best for them. When clients call, we don’t have to ask for things like account numbers because we know all our accounts by name.

As we look forward to the next 20 years, I feel confident our company identity and vision are as strong as ever, and we’re well equipped with the knowledge and
experience to keep delivering the level of service that our clients have come to expect.

Emerging Leaders Q & A

with David Luke & Brad Knowles

As part of our Heritage Trust 20th anniversary celebration, we recently asked two of our emerging leaders to share their thoughts about our company and its future. David Luke, president of Argent Mineral Management, and Brad Knowles, managing director of Heritage Institutional, discussed why they joined Heritage Trust and some of their personal milestones/achievements.

Q: What initially drew you to Heritage, and what skills or experience do you believe you brought to the company?

Luke: I joined Heritage for the opportunity to lead a group of oil and gas professionals. I brought hands-on oil and gas experience from the E&P (exploration and production) side, which is not typical in the mineral management world. I was also attracted to Heritage’s deep commitment to growing the minerals management business and the benefits of having access to the expertise of the different services at Argent Financial Group.

Knowles:
The main reason I joined Heritage was the opportunity to merge my company (RBK Capital, LLC) with Heritage to form Heritage Institutional. It was a merger of like-minded companies that allowed Heritage to take its fiduciary and investment philosophy and experience and apply it to a new market (retirement plan consulting). I was excited about the challenge of building and growing a new business within Heritage.

Q: What would you consider your career milestones or your most memorable experiences at Heritage?

Luke: I’m most proud about the work our team has done in combining Heritage Mineral Management with Argent Property Services and turning it into a thriving business that has seen substantial growth over the past several years. And we did it during a period when oil prices plunged.

Knowles: My first career milestone was when we doubled the assets and revenue of Heritage Institutional in the first 18 months. The enormous respect in the community for the Heritage brand and its people gave Heritage Institutional immediate credibility with decision makers, which allowed us to grow at a fast rate.

Q: What do you wish more people knew about the company?

Luke: I wish more people knew that a good portion of our team is made up of experienced oil and gas people who are affiliated with a great variety of specialists at Argent Financial Group. That’s rare in the mineral management industry.

Knowles: The people and their expertise. The depth and breadth of services Heritage provides and the caliber of the people delivering our services is amazing.

Q: Why is the work you do important?

Luke: Mineral ownership is intimidating, complicated and confusing to those outside our industry — and at times even to those in the business. The work we do here provides peace of mind, financial success and security for our clients.

Knowles:
At Heritage Institutional, we work directly with companies in a consulting capacity to help their employees save for retirement. It’s very rewarding to
partner with a client to create an efficient plan that’s easy for them to manage, is transparent and provides their employees with options they didn’t have before.

Q: What are your thoughts on the future of the company?

Luke: The future is bright. The energy market in this part of the country still has a long, healthy future, even with the gradual emergence of renewable energy
sources. The company is staffed with experienced, intelligent people who are located throughout the heart of America’s energy belt, and that’s a very big
plus for our company.

Knowles:
The sky’s the limit for Heritage. We could easily double the assets under advisement (for retirement plans) at Heritage Institutional during the next three years. We’re really gaining traction and it’s due to the expertise and proven track record of the Heritage team and the efficiencies of our processes and systems.

Blaze a Trail

by Aaron Jack, Chief Development Officer

There is a large reservoir near my home that has hills of varied size. Perfect for sledding in the rare instance of snow in Oklahoma City, the hills also represent a great workout opportunity.

There are several options, but historically I’ve settled on one that balances distance and the challenge of a steep slope. An admitted creature of habit, I always return to the same starting point.

Soon after incorporating the hill into my workouts, I noticed a path was beginning to appear from my steps. Whether the grass is overgrown from the summer rain or brown from a recent freeze, I can always find my path.

I take pride in the fact that my hard work has blazed a trail.

Twenty years ago, a group of people in Oklahoma City decided to carve out a new path. Concerned about the consolidation of the banking industry, the Payne family and a group of professionals from Liberty Bank started Heritage Trust out of the trunk of a car in 1998.

Fast-forward 20 years, and today, we are the largest trust-based wealth management firm in the South. I’m honored to have had the chance to play a small part
in this success story. Our team at Heritage has blazed quite a trail.

Walking home from a recent workout, I reflected on the Heritage Trust journey. While the story is far from finished, our 20th anniversary represents a time to
reflect on lessons learned, celebrate success and look to the future. Here are three quick leadership/legacy thoughts that come to mind:

WIN THE DAY. There is no shortcut. Success comes one step at a time. I personally grow tired of trite corporate sayings. However, “it’s a marathon, not a sprint” is one that stands the test of time. The trail on the hill began with a single step, followed by thousands more. Our success at Heritage came by serving our clients for a single day, followed by over 7,300 more. The best chance each of us has to influence the future is the opportunity of today. Take the first step.

TREAT PEOPLE WELL. This sounds simple, but sometimes it’s the most difficult principle of all. One of my favorite sayings is this: “People remember 7 percent of what you say, but they always remember how you made them feel.” It’s a concept our founders never let us forget. So many in our field focus on pushing product sand forget why they’re in business in the first place — the people. Our fiduciary duty sits at the core of our decision making, but I’m always most impressed with how our professionals strive to truly know our clients, their situations and why they are sitting across the table from us. We take great pride in the relationship part of our business. 

HUMBLE CONFIDENCE. In a recent blog, Argent CEO, Kyle McDonald, wrote the following: “Being a fiduciary means you are in the service business, and to serve someone you must place your needs behind the needs of the other — i.e., be humble — but you also must have confidence in your abilities, or your service will be of little value.” For 20 years, we’ve aimed to keep the client at the center of everything we do. Our responsibility as a fiduciary is not to sell a product, but to learn what is in the client’s best interest and do all we can to see that those interests are met. Since 1998, we’ve taken this approach to serve Oklahoma families and institutions. I’m excited about many more anniversaries to come. 2017 Heritage Grand Opening at The Heritage

Twenty Years in the People Business

by Mike Carroll, CEO

It’s hard to believe that I’ve now spent two decades as CEO of Heritage Trust Company. As I reflect upon the reasons for our continued success over the past 20 years, I remember a phrase that the political strategist James Carville used during his time as campaign manager for the Bill Clinton campaign in 1992. Everyone assumed George Bush, Sr. would win a second term because of the recent Iraq war. “It’s about the economy, stupid” was James’ response. 

When I mentor current Heritage employees about our business, I like to use my own version of Carville’s phrase: “It’s about the people, stupid.” We are in the people business. We’re on the same side of the table as our clients and are true partners. We have their best interests at heart, because our interests are aligned. As fiduciaries, we’re legally bound to always act in the best interests of our clients, and I think our dedication to that responsibility has distinguished Heritage Trust Company from our competitors from the very start. More than that, it’s our reason for existing.

Back in the summer of 1997, I was senior vice president at Liberty Bank in Oklahoma City, responsible for trust administration in the Oklahoma City market. I had been there since 1982 and had previously, from 1974 until then, been with the old 1st National of OKC. Liberty Bank was purchased by one of the big national banks in 1997, and it was soon evident to us that our way of doing business was about to change. The focus was becoming more about selling products than taking care of people. I and many of our longtime employees were concerned about the changes and that they were not in our clients’ best interest.

Among our customers at the bank was the William T. (Bill) Payne family. I had a strong relationship with Nancy Payne Ellis, the family matriarch, and felt comfortable discussing the situation with her in a straightforward way. She was concerned, supportive and wanted to be part of the solution. Although we did not start with the independent trust company idea, it became increasingly plausible the more we explored our options. We next found banking partners in Ken Ferguson and the late Randy Royse of NBC Bank, and with their guidance and support were able to open Heritage Trust Company’s first office in December 1997 with a staff of just six people. Nancy’s son, Bond Payne and I worked together early in the process, long before we had “an office.” Bond later became Chairman of the Board. Nancy was our initial chairman, but also took on an active role in promoting our company to potential clients.

We were fueled by the belief that many of our existing clients had the same concerns that we did about “the big bank way” of doing things. As time went on,
we became increasingly confident that our instincts were correct. Because of the strength of our existing relationships, we were able to hit the ground running,
with many former bank clients moving over to Heritage. Much credit is due to the hard work and reputation of the initial six employees. It would have not been
possible without them. We had between $200 million and $300 million in assets within three years, which I credit to our reputation in the community and for
taking care of our customers.

Although we achieved profitability rather quickly, I take the most pride in the fact that we did what my banker friends said we couldn’t do. We created
35 good jobs that pay well and over the past two decades have been a positive force in our community and our state. Many of my relationships today are in
their third generation, and I enjoy being able to tell stories to the new generation about their family. I’m a CPA — I understand the numbers, but the numbers
are a pure commodity. If you think you can succeed on the numbers only, think again. In every relationship, you need to be bringing value.

People in our business sometimes make it too complicated. Ultimately, clients just want to know that somebody cares about them and is in their corner.
That’s what we’ve always done at Heritage Trust Company, and that’s what we’ll continue to do.

An Independent and Sustainable Future

“The best time to plant a tree was 20 years ago. The second best time is now.” -Chinese Proverb

Twenty years ago, a group of trust customers and trust professionals came together to form an independent trust company to serve the Oklahoma City community. Our core belief was that fiduciary services are best provided locally by local decision makers who enjoy personal relationships with their clients. They named the company Heritage Trust and adopted the tag line “Money does grow on trees…family trees.” Today, Heritage manages more than $2 billion for Oklahoma families, as part of Argent Financial Group’s $18 billion wealth management platform.

My step-father, Bob Ellis, was the first person to tell me about the Chinese proverb about planting trees, and it stuck with me. And my favorite children’s book is “The Giving Tree” by Shel Silverstein, where a tree gives everything it has to serve the boy he loves, from childhood to maturity. So you can imagine my dismay when, in 1998, a local banker, who learned of our plans to start a trust company, told me he was “too old to plant small trees.”

For the past fifteen years, I have been writing letters to our clients as part of our TRUST publication. In preparation for our 20th anniversary, I looked back at prior letters to see what I had written, fearing that my old words might come back to haunt me. Instead, I was struck by how relevant those words are, even today, and how they provide accountability and serve as a moral compass for Heritage into the future.

As Heritage continues to grow and serve the next generation, we are focused on building a company that is independent and sustainable, serving its clients with humble confidence. And while we do not know what the next 20 years will look like, we trust that our clients, employees and shareholders will continue to be well served by the values that have guided us for the past twenty years. 

Thank you for your continued loyalty and support.

Bond Payne

Co-Founder and Chairman

 

Executive Q & A with Mike Carroll: Trust company head enjoys serving people, families

by Paula Burkes
Published: Sun, July 22, 2018

Mike Carroll, with Heritage Trust, for Executive Q&A Photo by Jim Beckel, The Oklahoman

“It’s about the people, stupid.”

Mike Carroll, CEO of Heritage Trust Co., said the variation of a phrase coined by political consultant James Carville perfectly sums up his business philosophy.

“People want a relationship with someone in their corner,” Carroll said. “They want to know who the decision maker is and want to look them in the eyes and touch them.”

With the backing of Nancy Payne Ellis, Carroll, a former senior vice president with Liberty National Bank, and his trusts team there started Heritage in September 1997, after Liberty was acquired by Bank One.

“My employees were concerned that the banking industry was becoming all about the numbers and selling products,” he said, “and that we were leaving behind the people with whom we’d worked for so many years and to whom we felt a duty.”

Today, Heritage manages $1.2 billion in assets, Carroll said. But what’s most important, he said, is the people: its 35 employees and 700 relationships. Bond Payne, Ellis’ son, chairs the company.

From his offices in the Journal Record building downtown, Carroll, 66, sat down with The Oklahoman on Monday to talk about his life and career. This is an edited transcript:

Q: Tell us about your roots.

A: My great-grandfather and Kansas native Lewis Carroll participated in the Oklahoma Land Run. His wagon, diary and revolver are on display at the Oklahoma Historical Society. I don’t know if I should be proud to say that he was a Sooner. He’d already staked a homestead in Kay County when he came to Guthrie to file the claim. My mom was from Pauls Valley where I was born. When I was 2 months old, my parents moved to Williston, South Carolina, where they both worked in the Savannah River Plant nuclear facility. My younger brother and sister still live in South Carolina. I also had an older brother who’s deceased.

Q: What was your thing growing up?

A: Williston is a small town; the population then was around 6,000. The closest big city is Augusta, Georgia, about 40 miles away. We were an hour and half from the coast, where I often went offshore fishing with my father. Growing up, I was involved in sports (basketball and baseball), church and scouting. I especially loved the Boy Scouts, including the camping and leadership skills I learned. With the help of several friends’ parents, I stayed with it and became an Eagle Scout. When I raised my own boys, I was a scout leader, including leading a 70-mile adventure in northern New Mexico in 2000. All three sons are Eagle Scouts too. Today, my oldest works in technology in Boulder; my middle son is a doctor at St. Francis Hospital in Tulsa; and youngest, an executive with Sonic Corp.

Q: What brought you to Oklahoma?

A: I won a scholarship to Oklahoma Christian University, where I chose to major in accounting. In high school, I’d already taken calculus, trig and geometry, so I was pushed two years ahead. My last two years at Oklahoma Christian, I worked nights for First National Bank, balancing the bank and processing checks. On good days, I’d go in at 4 p.m. or 5 p.m. and be out at 10:30 p.m. But at the end of the month, we could be there ‘til 3 a.m. When I graduated college in 1975, First National invited me to take a job opening on the day shift. When I started, I only knew about balancing banks and nothing about trusts. But I learned on the job, and advanced to vice president/head of operations.

Q: What did you learn in a theater class at Oklahoma Christian that helps you in business?

A: That it’s about your motivation; anybody can memorize lines. In other words, it’s not what you’re saying, but why you’re saying it that’s important. Funny. I just took theater because my college girlfriend did. But I learned that if I really listened to somebody, including clients, and understood a problem, I might be able to put a deal together.

Q: You said you’ve been lucky. How so?

A: When I left First National in February 1982, I asked if I could keep my stock. But since I was going to Liberty National Bank, a competitor, they told me “No way; you have to cash out.” Then Penn Square Bank collapsed that July, so the cash-out price I’d been given was the maximum stock price anybody got. Meanwhile, I had to work one year before I could buy stock at Liberty, so I came out ahead on that side, too. I tell people I’ve lived a charmed life.

Q: Who’s been your biggest mentor?

A: The late Don Balaban, who hired me at Liberty, was my boss for several years and, at age 65, came with me, Dick Kerrick, Ron Bowles and Cathy McKinzie (who’s still with us) to Heritage. He was honest and really cared about people. But we didn’t think alike at all. I was more liberal and he was more conservative. His pat answer was “No,” and mine was, “We can figure it out.” But I loved the man so much. He gave me what I needed, because he could find what was wrong with a deal. Together we were very formidable. Since his death, I frequently ask myself, “If Don were here, what would he be saying?”

Q: To what do you attribute Heritage’s success?

A: It’s always about the people and holding true to principles. We don’t sell any products, and we don’t take any commissions, sales incentives or administrative fees. We have no vested interest in anything, but the best interests for our clients. Most competitors can’t say that.

Heritage, AmeriTrust Merge

The Heritage located at 621 N Robinson Ave in Oklahoma City, OK.

By: Brian Bus, Journal Record, June 29, 2018

OKLAHOMA CITY – The merger of AmeriTrust Corp. of Tulsa into Oklahoma City-based Heritage Trust Co. and its parent company Argent Financial Group closed Friday, officials said.

The state Banking Department approved the deal in May, allowing the companies to continue to operate separately in their respective markets under one Oklahoma charter while both benefit from access to Argent’s $19 billion in assets.

“AmeriTrust and Heritage both have common roots coming out of big-bank trust departments,” Heritage Chairman Bond Payne said. “Both of us were pioneers in the independent trust space in the 1990s, and we’ve each spent the last 20 years building sustainable, independent, wealth management firms.”

“They’ve got a successful practice, and the last thing we want to do is disturb their relationships with their clients,” Payne said. “We just want to build on what they’ve got, and hopefully they can help us do the same.”

AmeriTrust Chief Executive Harvie Roe, who founded the company 21 years ago, will continue to manage the Tulsa operation. Fellow owner and AmeriTrust director Jerry Hudson will join the board of the merged company. Payne said no further leadership changes are expected.

Roe said the merger was initiated by his company when board Chairman Robert Biolchini died in 2017 and the ownership family decided it was time to divest – management succession was disrupted at the board level rather than the daily executive level, he said. The companies’ management teams have known each other for many years, so the merger was a natural fit.

Argent is domiciled in Louisiana and offers trust administration, retirement plans, estate planning and charitable organization administration. In addition to the company’s billion-dollar asset base, it is also responsible for managing 2 million mineral acres for families, institutions and business clients.

Aside from financial planning and trust administration, Heritage also offers management services in oil and gas and real estate. The company was founded in 1998 and now has offices in Ponca City and Southlake, Texas. It merged with Argent in 2015.

AmeriTrust, formed in 1997, provides similar trust management and administration services. The company on its own is responsible for more than $600 million in client assets.

How to approach legacy assets in your estate planning

Legacy assets may not always be worth much, but it’s still important to handle them in the right way: by communicating with your family members about your wishes.

By Mark Hartnett, president, Argent Family Wealth Services

After a loved one passes away, surviving family members frequently find themselves squabbling not over money, but over personal items left behind.

In many cases, the value of these so-called “legacy” assets is more sentimental than monetary — a great-grandfather’s shotgun, for instance, or a mother’s engagement ring.

These assets may not be worth much, but it’s still important to handle them in the right way — by clearly specifying in your will who gets what. The key is to remain intentional with your planning.

The first and most important step is to communicate with your family members about your wishes. Ask for their feedback and collaborate as a group to ensure everyone is on the same page regarding the fate of your ‘67 Chevy. No matter how small the legacy asset, list it in your estate. Doing this now will go a long way to keep the peace and avoid potential sibling quarrels.

You may determine it best for some assets to be sold, such as those with high monetary value. But many legacy items are likely to be sentimental, which could make them worthwhile to pass along as keepsakes to a special niece or grandson. Have a plan for either avenue by mentioning everything (and everyone) by name. Consider the following checklist:

What percentage of value does it represent of your estate? The item may have great value to you both monetarily and personally, but it could be sold to benefit all surviving family members equally upon your death.

Are there future storage or maintenance costs to consider? It’s not uncommon to forget these details. If you own a classic car, for example, you should consider the cost of storing the vehicle, needed maintenance or regular specialty washes to protect its appearance. These add up over time.

Is there a rate of depreciation to consider, or is it increasing in value? Weigh the item’s past, present and future value. Everything is evaluated differently. Some items might be best to sell immediately or within a few years. Others may be worth significantly more if they’re kept in good shape for a couple of decades. Research these values and seek proper appraisal.

These are just a few things to consider. There are many other angles to keep in mind when it comes to different legacy assets, which is why you should consult with a wealth management advisor. Most importantly, be sure to keep everyone apprised of your plans and wishes for these treasured possessions so that your gifts remain gifts — not a potential burden or kindling for a dispute.

 

Humble Confidence

By Kyle McDonald, chief executive officer

 

About five years ago, I figured out what sets our company apart.

It was November 2013 and I was reading a blog post by TV sportscaster Samantha Ponder in which she talked about growing up, and what has changed and what has stayed the same throughout her life. As a young woman, Samantha said, she didn’t feel particularly pretty and was kind of an outcast. Today, things are just the opposite. She is a telegenic, highly successful professional.

What has stayed the same throughout her life, she said, is the way she grounds herself in good times and bad by working to maintain an attitude of humble confidence – being sure of herself, her beliefs and her skills without letting it go to her head.

That idea of “humble confidence” struck a chord with me. It gave words to how I’d been thinking about Argent Financial Group for some time. It describes how we are with each other and with our clients. In fact, I think it’s the definition of a fiduciary, which has been fundamental to our company since we began.

The client is at the center of Argent’s organizational model.

Being a fiduciary means you are in the service business, and to serve someone you must place your needs behind the needs of the other – i.e., be humble – but you also must have confidence in your abilities, or your service will be of little value.

I think it also means that you are not “salesy.” Our responsibility as a fiduciary is not to sell a product, but to learn what is in the client’s best interest and do all we can to see that those interests are met. Because of this, our primary focus is on building relationships built on trust and respect, because you can’t really understand what a client needs until you have formed a relationship with him or her.

Humble confidence also means that the client is at the center of Argent Financial Group, and the closer you are to the client, the more vital you are to the health of our company. This means the higher up you are in our company’s internal structure, the more people you serve here. This is illustrated in the infographic of our “Client Relationship Model” that accompanies this blog, which shows how everyone in the company serves the relationship managers who directly serve our clients. This is an example of how humble confidence pervades our entire organization.

Because we foster a culture of humble confidence here, we naturally attract people who feel the way we do about serving others. In fact, our commitment to having a strong, supportive company culture is a result of our discovery several years ago that an attitude of humble confidence is what makes Argent the kind of company it is. And “discover” is the right word. The foundation of humble confidence goes back to the beginning of our company. It is a concept we have held true to all along; we just didn’t have a name for it. It’s kind of like an onion: As we peel back the layers, we find what was there all along.

It’s the same with culture. I now know that we had been thinking about culture since the beginning. That is, we have always known that we wanted to have a company where people were treated with care and respect, and we have always acted on those beliefs. As the company continues to grow, we learn more and more about ourselves, and the more we learn, the better our company becomes for both employees and clients.

Stay Humble; Be Confident.

What Every Investor Needs to Know About the Fiduciary Standard

There’s a lot of jargon in the financial service industry. And much of it probably flies right over the heads of most investors.

But if there’s one word that every investor should know and understand, it’s “fiduciary.”

The fiduciary standard is a set of regulations requiring advisers to always act in the best interest of their clients, to disclose any potential conflicts of interest, and to be transparent about how they’re being compensated.

“Being a fiduciary is the highest legal duty of one party to another. It has a legal, moral and ethical component,” said John Allen, Market President of Argent Trust’s Greenville office.

At Argent, all of our trust advisers and registered investment advisers follow the fiduciary standard. But throughout the financial services industry as a whole, this standard is far from universal.

According to a 2015 report from the White House Council of Economic Advisers, Americans lose about $17 billion a year in investment returns due to advisers and brokers steering them toward securities that aren’t in their best interest and may include higher fees and lower returns than similar products.

The SEC has recently announced plans to expand the fiduciary standard to some advisers who currently aren’t required to follow it. And while that could be good news for investors, there may be unintended consequences.

To help understand what all of this means, let’s tackle a few big questions regarding the fiduciary standard.

Who has to follow the fiduciary standard?

To answer that question, it helps to understand the overall makeup of the financial services industry. Financial advisers are broken down into three client-facing groups: trust advisers, registered investment advisers (RIAs) and broker/dealers. Trust advisers and RIAs have been legally required to follow the fiduciary standard since 1940. Most broker/dealers are currently exempted from the requirement, though some voluntarily choose to follow it.

At Argent, providing this level of service is baked into our company culture.

“We’ve worked under the investment fiduciary standard for decades,” said Timothy Barrett, Senior Vice President and Wealth Adviser in Argent Trust’s Louisville office. “Our attitude is different. We don’t sell on performance. With many stockbrokers, they’re constantly trying to beat benchmarks, sometimes at the expense of long term goals. We sell on services and on our fiduciary responsibilities. We take good care of our client’s money and do what’s in the best interest of families.”

Why is the fiduciary standard important?

When you invest your money, you want to feel secure that your financial adviser is putting your needs before their own. Without the fiduciary standard, an adviser only has to make sure that an investment is suitable for their clients — even if similar ones might be a better fit. This is known as the “suitability standard.”

“It doesn’t have to be the best product or the cheapest product, it just has to be appropriate,” Allen says.

Some proprietary products have a variety of hidden fees attached to them that non-fiduciary advisers aren’t required to disclose to clients. They also aren’t required to disclose conflicts of interest, which could include receiving a bonus to promote a particular investment.

“A front-end loaded fund might pay the broker 6 percent up front, for example, with a small management fee going forward. Securities with a rear-end load would charge a fee when you get out,” Allen says.

Does that mean I shouldn’t invest with brokers?

Brokers have an important purpose in the financial services world, says Byron Moore, an Argent Advisor in Ruston, Louisiana. They’re often the only resource available to investors who don’t have a large amount of money, and because they don’t have the additional fiduciary requirements, their services tend to be less expensive as a whole.

“It’s a basic rule of economics. If you impose a higher cost, through increased regulation, on an industry, it’s going to show up somewhere. It could show up in reduced supply or trimmed back services,” Moore said. “There has always been a need for people to just execute transactions. Using a broker involves a lower cost, and if you’re capable of looking out for your own interest, that may be all you need.”

What do the proposed fiduciary rule changes mean for me?

If you’re a client of Argent, any changes being proposed won’t affect you at all. The current debate strictly involves the world of broker/dealers. Currently, only broker/dealers who oversee retirement plans are required to follow the fiduciary standard. The Securities and Exchange Commission wants to expand that requirement to all broker/dealers, a change that could come as early as this fall.

“I think that the regulation is well intentioned, like a lot of things, but by the time the sausage is made, it causes as many problems as it solves,” Moore says. “It helps to some degree, but a lot of it is about how things appear instead of substantively changing the playing field.”

However, any increased level of transparency is ultimately a good thing for investors, Barrett says.

“I don’t want to buy a refrigerator that’s simply marked up and could be purchased cheaper elsewhere. I don’t want that at Best Buy; why would I want that with my broker?” he says.

How can I feel secure that my adviser is looking out for my best interest?

Ask your financial adviser if they are serving you in a fiduciary capacity. If they’re not, take that fact into account as you weigh the pros and cons of investments that they suggest to you.

If you’re looking for an adviser and you don’t know where to start, your best option may be asking people you know.

“Talk to friends and neighbors you trust. Ask who they use, if they’re good, if they communicate with clients the way they want to be communicated with. I always suggest interviewing at least three candidates before deciding to work with any kind of financial adviser,” Moore says.

Ultimately, Barrett says, the reputation of an adviser or a company carries as much value as any legal standard.

“From a purely competitive side, the reputation of being ethically minded is what keeps you in business,” he says.

How Argent is driving employee engagement to transform company culture

By Brooks Campany
Director of Recruiting, Engagement and Culture

At Argent, client satisfaction is a big measure of our success. But it’s not the only one.

We know that having happy employees makes for a more motivated and — let’s be honest — pleasant workplace. So, we’re in the midst of a conscious push to nurture our culture and engage each of our 240 employees spread across 25 offices and 12 Southern states. Although we’re not all in the same place physically, we want each employee to feel that they’re part of a wider workplace community.

The results of our recent annual Gallup survey are evidence that we’re making progress. The responses we gathered from the survey showed an actively engaged workplace culture with a high level of satisfaction. And that’s a great thing to see.

The survey, given at the end of 2017, included 12 questions that produced their own scores in addition to two composite pieces of data: an Engagement Index and an Overall Satisfaction Score. Taken as a whole, these 14 data points/measurements allow us to measure our progress year over year, and also provide a picture at how we compare against other companies.

The results

Here’s what we found:

  • The Engagement Index, with approximately 90 percent participation, increased 4.6 points from 3.94 in 2016 (on a five-point scale) to 4.12 in 2017. Although that may seem like a small point increase, last year our Engagement Index placed us in the 59th percentile of the Gallup database. This year, we’ve leapt up to the 82nd percentile.
  • Our 2017 ratio of engaged employees versus actively disengaged ones dramatically increased to 256 percent of our 2016 ratio. In 2016, the ratio was 4.8 to 1 — that is, one actively disengaged employee for every 4.8 engaged employees. In 2017, that ratio was 12.5 to one.
  • Our Overall Satisfaction Score also significantly increased, from 4.24 to 4.42 on a five-point scale. This score places us in the 96th percentile of the Gallup database — a significant ranking!

Digging a bit deeper into specific questions, we were encouraged to see that employees responded positively to the statement “My supervisor cares about me.” The overall score of 4.48 out of 5 ranked in the 93rd percentile among companies in the Gallup database.

How we compare

In 2016, employees gave average scores below four to half of the 12 questions. In comparison, in 2017, we only had two questions receive average scores below four:

  • Our lowest score related to employee recognition. Although it increased from 3.32 to 3.58 year-over-year, a gain of 7.8 percent, we still only ranked in the 62nd percentile. This is an area that we acknowledge needs additional work.
  • Although responses to the statement “I have a best friend at work” also received low scores, we think the wording of the question may not have accurately expressed the goal of quality workplace relationships that we hope Argent employees’ experience.

Looking forward

As a whole, we think there’s a lot to be proud of. But there’s also room for improvement. So where do we go from here?

In 2018, we’ll place a greater focus on improving recognition of our employees. We think a key aspect of this will be in strengthening the relationships between managers and their direct reports. To accomplish that, we’ll provide training to our managers to give them the tools for leading their Management by Objectives (MBO) process. In addition, we’ll resume our TINYpulse employee surveys, with an emphasis on questions that give us data to better structure our manager training efforts.

We know our company is only as strong as its employees, so we intend to keep up our efforts to maintain a healthy internal culture at Argent in 2018 and beyond.

 

Tax reform is here. What does it mean for high-net-worth individuals?

As we enter tax season, the real-world effects of the recently enacted Tax Cuts and Jobs Act of 2017 are becoming clearer for many taxpayers. Although there remains a great deal of detail to be understood, from what we know today, there are plenty of changes for high-net-worth individuals to be excited about.

Estate taxes

A significant change in the new legislation is an increase in the estate and gift tax exemption to roughly $11.2 million ($22.4 million for married couples). This doubles the former exemption of $5.6 million for individuals and $11.2 million for couples. Only a small percentage of households paid the tax at the old levels, and even fewer will pay it now.

Tax reform

The real effects of the recently enacted Tax Cuts and Jobs Act of 2017 are becoming clearer for many taxpayers.

For high-net-worth households who might have been affected before but are now safely under the line, this change could make a difference in the way they approach their financial future.

“The new tax laws may change their planning,” said Timothy Barrett, senior vice president and wealth advisor based in Argent’s Louisville office. “They may have created trusts to capture and preserve a $5- to $6-million estate tax exemption, or double that for a couple. With the exemption amounts now doubled, couples with estates currently smaller than $10 million may be able to simplify their planning tremendously or switch their focus to income tax planning. But be aware that most of the personal tax changes revert back to 2017 law after 2025, which complicates permanent solutions.”

“Depending on how much you have and what age you are, 2018 ought to be a year to review and decide what is right for you and your individual financial situation,” said Howard Safer, CEO of Argent’s Nashville office.

Tax bracket changes

Marginal tax rates under the new tax bill will be lower for many taxpayers starting in 2018 and running through 2025. The top rate has been reduced from 39.5 percent to 37 percent, and will now apply to individuals with over $500,000 in income and couples with over $600,000.

Previously, the top tax rate had applied to individuals making $426,700 or more and couples making $480,050 or more.

A couple filing as “married/joint” with combined income between $237,000 and $351,000, for instance, will see their marginal tax rate fall from 33 percent to 24 percent. Assuming there are no changes in other deductions, this could result in a tax savings of around $10,000.

“Lowered brackets are one piece of much more complex tax change. It all depends on your mix of state and local taxes, mortgage interest and other itemized deductions and whether it makes sense to use the new higher standard deduction. Some people will end up keeping more of their income, and the rate changes are meaningful for all tax brackets. But there are too many moving parts at this point to make a definite call on how much someone will save,” said John McCollum, senior vice president – investments in Argent’s Atlanta office.

“Even though many details are yet to be worked out, the change does benefit high earners who aren’t independently wealthy, because you don’t jump to that top rate so fast now, ” Barrett says.

Pass-through income

A new deduction for pass-through businesses could benefit many high income earners who have an ownership stake in a business. Sole proprietors, LLCs, partnerships and S corporations may be able to deduct 20 percent of qualified business income, albeit with some limitations. This may create an opportunity for certain taxpayers to form limited liability companies that would be eligible for the deduction.

“People will be trying to take advantage of pass-through entities,” Barrett says. “Any high-earner who can work on a non-employee basis will want to explore using a limited liability company.”

Fewer itemized deductions

Some taxpayers may see a benefit from the near-doubling of the standard deduction, which has been raised to $12,000 for individuals and $24,000 for couples in 2018, up from $6,350 and $12,700, respectively, in 2017.

However, new rules regarding itemized deductions — affecting state and local taxes, medical expenses and mortgage and home equity loan interest, among other areas — will play out differently for every taxpayer depending on their individual financial situation. Some may opt for the standard deduction when they may not have before.

“One approach that may be useful for many taxpayers is bunching, in which deductions such as charitable donations are pooled every other year to maximize tax savings through itemization, with taxpayers taking the standard deduction on alternating years,” Safer says.

Boost to the economy

The tax bill’s benefits to corporations are also likely to benefit individual high-net-worth investors. In addition to receiving a permanent cut in the corporate tax rate, from 35 percent to 21 percent, companies will benefit from a sharp drop in the tax rate for repatriation of foreign earnings. This change will allow companies with large amounts of overseas income to bring it back to the U.S., paying 15.5 percent instead of the old rate of 35 percent.

“Many companies had accumulated large amounts of cash earned overseas, and the vast majority was just sitting there. By reducing their tax burden, it eliminates barriers, real and perceived. Companies are going to increase dividends and pay more to employees — you can find hundreds of those stories. More importantly, that cash is going to get invested,” McCollum says.

There is a great deal of detail about these changes that won’t be fully understood until the IRS releases its regulations on how to put these new tax changes into effect.

“The last major tax reform was in 1986, and it took years to fully understand and make that come together,” Safer says. “These laws will evolve in their interpretation.”

“The effects on individuals and pass-through businesses will be more complicated, but the benefit will be real for sure. It just remains to be seen how these various pieces will end up working together to change behavior,” McCollum says. “The bottom line of the tax change is that it’s putting more money in the hands of businesses and consumers to spend and invest instead of sending to the government, and I think that’s why the market has reacted so strongly.”