Brokers Reach for Trust Business
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Years ago, banks had the trust field to themselves. Now, brokers are setting up trust companies and actively working to turn clients’ investment accounts into wealth transfers. For generations, the only thing bank trust departments needed was patience. No matter where their clients invested their money while they were accumulating their wealth, eventually it was all going to come them, wrapped up in a neat package and complete with a revenue stream that could last for decades. That was then. Today, with the convergence of the financial services industry and the increased focus on the high-net-worth client, bank trust departments are being besieged from all sides. Mutual fund companies, the insurance industry and particularly the brokerage industry are targeting this lucrative piece of business and are beginning to take significant market share away from the banks. Brokers have been forming their own trust operations, most of them startups; the common strategy seems to start small and ramp up gradually. But that approach could be turned on its ear by the blockbuster announcement Jan. 13 that Charles Schwab & Co., the leading discount broker, plans to acquire U.S. Trust Co., the august New York-based trust bank. Putting together the two operations would create a powerhouse “positioned to serve the investment and wealth management needs of investors at every stage of their financial growth,” the companies noted in their announcement. “U.S. Trust represents a piece of the puzzle that had been missing in our offering to affluent investors,” said Charles Schwab, the company’s chief executive-a notion that has been echoed by other brokerage chiefs. “This (trust strategy) is defensive, not offensive,” says Raymond A. “Chip” Mason, chairman and CEO of Legg Mason Inc. in Baltimore. Mason, Schwab and the rest of the industry are watching their most coveted client-the baby boomer-turn 50. And as the temples gray Source : accessmylibrary.com |