Merrill Lynch Using Thrift Charter to Build Its Personal Trust Business

By Fraser, Katharine | American Banker, August 10, 1998 | Go to article overview

Merrill Lynch Using Thrift Charter to Build Its Personal Trust Business


Fraser, Katharine, American Banker


Merrill Lynch & Co. is steadily boosting its trust business through its federally chartered thrift, Merrill Lynch Trust Co. FSB.

To take advantage of its 15-month-old thrift charter, Merrill Lynch added trust officers to seven offices this summer, bringing the number to 24 in 14 states and the District of Columbia. The thrift registered in June with the Securities and Exchange Commission as an investment adviser.

"The outlook for us has never been brighter," John Sabino, president of the thrift, said in an interview.

Merrill Lynch, which introduced its trust business in 1987 in New Jersey, has $7 billion of personal trust assets under management. It has charters to accept and service accounts in seven other states: California, Michigan, Florida, Illinois, North Carolina, Texas, and New York.

Since chartering the thrift, Merrill Lynch has expanded into Arizona, Colorado, Connecticut, Georgia, Missouri, Massachusetts, and the District of Columbia.

The thrift manages just $40 million of Merrill Lynch's $7 billion total, but is ready to accelerate its growth, Mr. Sabino said. It is gaining most of its new business in Louisiana, Hawaii, and South Carolina, he said.

"One of the frustrations in the past was the inability to offer trust services to all Merrill clients," he added. "With the federal savings bank we can do that, so we're seeing a lot of demand from states where we couldn't do business."

Merrill Lynch's marketing and sales track record may concern competitors, but so far bankers are taking its moves in stride.

"We've got time to get our act in order before they drive by us," said William M. Hunter 2d, executive vice president and director of trust management at Citizens Financial Group, Providence, R.I.

The way Mr. Hunter sees it, Merrill Lynch still must prove it has the cooperation of its biggest source of referrals: brokers.

The giant financial services company's 14,400 brokers, who are being educated on trusts, are accustomed to being paid commissions for transactions, Mr. Sabino said. But trusts pay annual management fees.

Banks and independent trust companies historically were the only professionals acting as personal trustees. However, in recent years, more law firms, brokerages, mutual fund companies, and other institutions are receiving trust charters and breaking into the business. …

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