A key focus of the WCM Quality Global Growth portfolio is to find quality global companies with durable, strengthening economic moats and corporate cultures aligned to this growth. An example of a company that demonstrates these characteristics is First Republic Bank (First Republic).
First Republic focusses on high net worth and ultra-high net worth consumers – one of the fastest-growing and least penetrated segments of the market. The firm was founded in 1985 on the belief that a culture devoted to exceptional client service would result in a successful banking business. WCM Investment Management (WCM) believes First Republic’s customer-centric culture sets the business apart and enables the business to grow and mature with its customers, providing financial services every step of the way.
Tom Hickey (TH): Hello, welcome to this Stock in Focus update with WCM Investment Management. Today, I’m talking with Brian Huerta from WCM. How are you Brian?
Brian Huerta (BH): Doing well Tom, how are you?
TH: Very well, thank you. Today we’re talking about a company called First Republic Bank. Can you give us an overview of that company please Brian?
BH: Sure, I’m happy to. First Republic Bank is one of the leading private banks in North America. It’s focused on the high-net-worth and ultra-high-net-worth consumer, which is growing the fastest and is among the lowest-penetrated segment of the market. It’s on the coast in the most affluent areas in Boston, New York, Florida, San Francisco, and Los Angeles. It’s really well-known and what they have a reputation for is providing high-touch customer service.
TH: What kind of culture do you need to thrive in that space?
BH: There’s a couple of things that I think that signify its culture, demonstrating the strength of its culture is one, it’s a very teams-based approach, which makes perfect sense. A lot of its business is built on referrals. This is a group of consumers in its target market that is very upwardly mobile, and their financials often change, highly educated, tend to buy a home and then maybe a second home. So, referrals become a big part of the organisation and that is encouraged.
One thing that is discouraged and is really an emblematic of the culture at First Republic is taking on risky loans. It has clawbacks that they put on its loan officers, that if they do write lower-quality loans that go into default or become non-performing, there’s a clawback provision so that disincentivises certain behaviours. The culture at First Republic is very focused on customer service, growing responsibly, not damaging the balance sheet and focusing on the segment of the market that they believe is the most lucrative.
TH: I’m sure it is a competitive space. What are some of its competitive advantages?
BH: Yeah. Well, among many is just this customer-centricity. This focus around high-touch customer service. You’ll be greeted by someone in a bank when you go into a bank. There’s a relationship that starts and they really want to go after the younger professional because they really view that as a lifetime relationship. What sets them apart really is the relationship building that it has with its consumers that enables them to take advantage of the growth in its consumers, as they mature and grow, and need more financial services over time.
TH: Brian, thanks for your time.
BH: Thanks Tom.
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