WCM Stock in Focus | First Republic Bank: How Exceptional Client Service Can Grow an Economic Moat

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.

Transcript

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.

Copyright © 2021 Contango Asset Management Limited (ABN 56 080 277 998)

DISCLAIMER: Asset Management Limited (SAML) (ABN 26 123 611 978, AFSL 312247) is a wholly owned subsidiary of Contango Asset Management Limited, a financial services business listed on the ASX (CGA). CGA has prepared this material for general information purposes only for WCM Global Growth Limited, a listed investment company (ASX: WQG).

SAML is the responsible entity for WCM Quality Global Growth Fund (Quoted Managed Fund) (ARSN 625 955 240) (ASX: WCMQ) and WCM Quality Global Growth Fund (Managed Fund) (ARSN 630 062 047). SAML and CGA are authorised representatives of ST Funds Management Limited (AFSL 416778) to provide general advice.

Contango International Management Pty Limited (CIML) (ABN 33 617 319 123) is the investment manager for WQG and is an authorised representative of SAML. WCM Investment Management, LLC (WCM) is the underlying manager and applies its WCM Quality Global Growth Equity Strategy (the Strategy), excluding Australia, in managing each of WQG, WCMQ and WCM Quality Global Growth Fund (Managed Fund) (the Funds). WCM does not hold an AFSL. WQG and CIML are part of the Contango Group.

Even though the Strategy, excluding Australia, is applied to each of WQG, WCMQ and WCM Quality Global Growth Fund (Managed Fund) certain factors including, but not limited to, differences in cash flows, fees, expenses, performance calculation methods, portfolio sizes and composition may result in variances between the investment returns for each portfolio. The performance of the Strategy is not the performance of the portfolios and is not an indication of how WQG, WCMQ and WCM Quality Global Growth Fund (Managed Fund) would have performed in the past or will perform in the future.

The material should not be viewed as a solicitation or offer of advice or services by WCM, CGA or SAML. It does not contain investment recommendations nor provide investment advice. It does not take into account the objectives, financial situation or needs of any particular individual. Investors should, before acting on this material, consider the appropriateness of the material.
Neither SAML, CGA, their related bodies corporate, entities, directors or officers guarantees the performance of, or the timing or amount of repayment of capital or income invested in the Funds or that the Funds will achieve its investment objectives. Past performance is not indicative of future performance.

Any economic or market forecasts are not guaranteed. Any references to particular securities or sectors are for illustrative purposes only and are as at the date of publication of this material. This is not a recommendation in relation to any named securities or sectors and no warranty or guarantee is provided that the positions will remain within the portfolio of the Funds. The reader should not assume that an investment in the securities identified was or will be profitable.

Investors should seek professional investment, financial or other advice to assist the investor determine the individual tolerance to risk and needs to attain a particular return on investment. In no way should the investor rely on information contained in this material.

Investors should read the Product Disclosure Statement (PDS) of the Funds or any relevant offer document in full before making a decision to invest in these products.