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| Building Your Family's 100 Year Plan: The Series |
100 Year Plan Part II: An Industry in Flux
Dwight Cass
01/01/2004
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The following article is an excerpt from The 100 Year Plan series from the December, January, February and March editions of Robb Report Worth. To subscribe or to order back issues, please call (800) 777-1851 or order online now.
Your Family's Institutional Relationships
When Robert Morris, perhaps best known as a major financier of the Revolutionary War, opened the Bank of North America on Philadelphia’s Chestnut Street in 1782, he established a model for U.S. private banks that has endured for the better part of two
centuries. The private banks of the late 20th century provided many of the same types of services that the Bank of North America did for its Colonial-era clients, in an atmosphere of conservatism and discretion. U.S. financial deregulation and the collapse of  the Bretton Woods postwar international monetary system in the 1970s further widened the fissures in the foundation of the private banking industry, already suffering from past financial upheavals and the industry’s rigidity. As we sought to protect our assets from that twin-headed economic monster, stagflation, we chafed at the paucity of existing investment options and began to
demand more imaginative solutions. This clamor fueled the growth of alternative asset classes, offshore accounts and structured products markets, which would come to fruition in the 1980s and 1990s. It also spurred the transfer of trillions of dollars in assets from the banking industry to asset managers, accounting for the rapid growth of the mutual fund industry and further reinforcing the trend toward self-directed investing that would reach its apogee in the dot-com era. Still, the private banking industry retained the façade of calm, timeless competence of which Robert Morris would no doubt have approved.
Much of this has now changed. What Nobel laureate Robert Merton calls "the spiral of financial innovation" since the 1970s has yielded a host of new tools and financial options. The heady growth of wealth in the closing years of the 1990s, and its painful destruction at the dawn of this century, have taught us the true value of a trustworthy advisor, and caused many of us to take firmer control of our financial lives.
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