Opportunity Out of Chaos

BOK Financial named Scott Grauer head of its multi-billion dollar Wealth Management Division just in time for him to watch the meltdown of the credit and equity markets.
Finding himself in a unique position to observe and react to the market turmoil, Grauer said his department is turning that potential catastrophe into an opportunity to grow the company and to demonstrate the value the company brings to its clients.
As executive vice president of its Wealth Management Division, Grauer is responsible for all of BOK Financial’s Wealth Management business lines, which include a full range of private financial services, including banking, fiduciary, and brokerage services. These business units serve clients throughout the nation and include broker-dealer BOSC, Inc., The Private Bank, Retirement and Institutional Trust Services (RITS), Corporate Trust, Cavanal Hill Investment Management, Inc. and Southwest Trust Co., N.A.
As of June 30, 2008, the division has more than $34 billion in assets under management, including nearly $13 billion in discretionary management. Wealth Management provides trustee and investment services to more than 500 retirement plans, serving more than 67,000 participants across the United States.
Grauer said the displacement of the equity and credit markets has opened doors for his division.
“Much as people think there are investment opportunities that are perhaps once in a decade or once in a lifetime, this is a very significant opportunistic point for BOKF Wealth Management Division,” Grauer said. “This is an opportunity for us to shine.”
He said the market displacement has accelerated the opportunity for growth because it will thin out competition.
“There is no question that, during times of uncertainty and times of market dislocation, competitors exit the business and the industry,” Grauer said. “Professionals exit the industry, and that is unfortunate because clients need them now more than ever, they don’t need them heading for the hills. I tell our people, our clients don’t expect us to always be right, but they expect us to have an opinion and they expect us to be honest. If we will do that and stay focused on proactively initiating communication as opposed to hiding under the rock, we will win.”
With the market disruption shaking out the industry and forcing some firms to close or re-evaluate their focus, he also sees advantage in BOKF’s concentration on service and regional strength.
“Those firms that are still in business today have had to make decisions about right sizing their time and attention and where they are going to focus their efforts and their capital,” Grauer said. “This part of the country is not their top priority; this is our priority. This is where we are. We are dependent upon this region to be successful. We live and work and come to the office every day in this region of the county.”
He said that, while BOKF has the sophistication to do a good job of managing people’s wealth needs, it tends to be more prudent than some others in the industry.
“I think that has served us well,” he said. “It has positioned us to be able to take advantage of this type of an opportunity to gain and expand our client base and our marketing efforts to let people know what we do as opposed to being forced into a restriction mode.”
During the market disruption and all the uncertainties that have been created in both the credit and equity markets, what has become “most paramount right now is that our clients need resources. They need advice, they need reassuring,” he said.
“The reality is, as we have opinions and as we have knowledge and expertise and the ability to help them get to where they want to go, most of the industry is contracting, they are pulling in their horns,” he said. “As odd as this is going to sound, I don’t think the timing can be any better.”
He also said the market turmoil has shocked both investors and advisers into refocusing on their goals.
“When equity and fixed income markets are clipping along at a record or predictable pace, both sides of the equation tend to break down,” he said. “The advisers were to be providing constant ideas, reassurance, warning, all the things that we are paid to do in the wealth management space, but the industry becomes sloppy. The client becomes overly confident and, in essence, neglectful of what they are doing and why they are doing it, and they take their eye off the ball. We all become complacent during good times.”
While changes in the economic landscape have created challenges for traders, they shouldn’t be completely changing investors’ goals and objectives, he said.
“People still need to increase income, reduce taxes and plan for events, whether it’s college, retirement, wealth transfer, whatever the case might be. All of those objectives that investors have are still very real,” he said.
However, what they need to do to get where they are going might have changed or been altered because of market performance, he said.
“I tell our people it is an opportunity for the accounts to returned to their rightful owners. Clients are going to do business where they are asked, and they are going to stay where they are well-served,” he said. “This is a great opportunity to demonstrate the value that we can bring to clients and be proactively involved with them on a regular basis. We need to keep them on track to doing the kinds of things that have gotten them to where they are now and get them to where they are wanting to go.”
The market displacement has provided a lesson in returning to the basics of diversification and sticking to an allocation strategy, he said.
“When the equity markets are performing fairly predictably and consistently, people want to double up their allocations and their bets, so to speak, on the hot markets,” Grauer said. “This has reiterated why that is not a sound strategy.”
“As simplistic and boring as it sounds, the age-old advice that you probably got from your parents still holds true – you don’t put all your eggs in one basket,” he said. “The need to diversify, although not exhilarating and not particularly academically stimulating to discuss, is important. It’s times like this and markets like this that bring us all back to re-exploring the importance of sticking with an allocation strategy and taking a longer-term approach as apposed to the expectation of quick profits and returns associated with a trading strategy.”
Grauer said the results of the market over the last several weeks has created both a necessity to re-evaluate one’s allocations and a great opportunity for investments.
“The hard, cold reality is to get back to where we already were is going to require a 30 to 40 percent return” in terms of the equity markets, he said. “Logic would tell you it is a better opportunity to invest to get back to where you have already been and be able to realize a 30 to 40 percent return as opposed to having to set new all-time highs in order to make any money.”
“The value proposition, we think, is very high right now in terms of the market dislocation that has occurred. And it’s not limited to the equity side obviously,” he said. “We believe there are great investment opportunities in the tax-exempt municipal bond market where municipal yields and returns are in some cases 120 to 130 percent of Treasury levels for comparable maturities.”
Grauer also does not think the “tremendous amount of stimulus” that has been pumped into the financial system has entirely taken hold.
“We think that there are disparities and market dislocation in the mortgage securities sectors, in the agency markets, and we think that creates opportunities for investors who have longer term investment horizons as well,” he said.
Grauer joined BOK Financial in 1991 as part of the company’s acquisition of an independent retail brokerage operation and was named manager of BOSC retail in 1996. In late 1999, he was named President and CEO of the firm and assumed responsibilities for retail, institutional, and investment banking activities when BOK Financial first combined these units under one organization.
He recognizes that his 17 years with BOKF gives him insight into its products and commitment to quality employees. He said the people factor uniquely positions BOKF in the wealth management space versus its competitors.
“A lot of entities talk about having full product and service capabilities, and, obviously, being able to deliver top-tier investment management and exceptional service is important,” he said. “We think the product and service capabilities are the price of admission. Where you have to win is by putting more seasoned, experienced, better people in front of the client. We have billions in assets under management, but our real assets that differentiate us and help us win are our people.”

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