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Financial Services Firms Want Thrift Charters


Several of the largest financial services companies, including Fidelity Management & Research Corp. of Boston and Aetna of Hartford, Conn., have recently been granted federal thrift charters. The charters allow these firms to operate federal savings banks and expand product offerings to customers nationwide.

Other major financial services companies, including some well-known mutual fund managers and insurance companies, are seeking approval to establish their own thrift institutions. (see chart) Among these are Paine Webber Group of New York, Franklin Resources of San Mateo, Calif., SEI Investments of Oaks, Pa. and The Capital Group Companies of Brea, Calif., parent company to Capital Research & Management of Los Angeles, the adviser to the American Funds. American Express of New York also plans to offer personal trust services through a new Minneapolis-based thrift institution.

Thrifts can offer mortgage, auto, consumer, small business and even education loans. Thrift charters also allow companies to offer checking accounts, credit cards, debit cards, and certificates of deposits, said William Fulwider, spokesperson for the Office of Thrift Supervision, the regulatory arm charged with supervising federally- and state-chartered savings and loans.

Thrifts also can offer personal trust services that cater to the growing population of high net worth individuals. By establishing personal trusts, affluent individuals can have their assets managed by someone else according to their instructions while realizing a variety of benefits including minimizing estate and gift taxes and avoiding a costly probate.

There are now 1,115 thrift institutions operating nationwide, according to the Office of Thrift Supervision. Some applicants have chosen to limit themselves to offering trust services, said Fulwider.

Currently, a firm that engages in securities brokerage must operate that securities business separately from a savings bank.

Financial services firms are eyeing emerging affluent investors who may soon be in the market for personal trust services. There were nearly 17 million households with incomes greater than $100,000 or with total net worth of $500,000 or more in 1998, according to the Spectrem Group, a research and consulting firm in San Francisco, Calif. The anticipated transfer of wealth to the baby boomer generation is likely to push that number even higher.

Fidelity Management, which won approval last month to establish the Fidelity Personal Trust Company, will launch its trust services in all 50 states. Fidelity now owns two state-chartered thrifts, one in Massachusetts and one in California, with a combined $1.1 billion in assets. The Fidelity Personal Trust Company will be Fidelity's first federally-chartered bank.

"The lack of uniformity among state requirements makes it difficult to offer uniform trust services nationwide," said a Fidelity spokesperson. Trust services will include investment management, administration, trustee services, principal and income accounting and custody.

"We want to help our investors accumulate, preserve and transfer wealth as part of a total financial management package," said John Sandberg, spokesperson for Phoenix Home Life Mutual Insurance Company of Hartford, Conn Late last month, Phoenix closed on its acquisition of the trust services division of New London Trust of New London, N.H., originally part of a bank subsidiary of Sun Life of Canada. Phoenix already had two other state-chartered trust companies with a combined $2 billion under management.

"A federal thrift charter provides the broadest array of permissible financial services activities under any single banking charter," said a spokesperson for Franklin Templeton. Franklin applied for a federal thrift charter earlier this year. That application is pending.

Not all financial services firms however are chasing the personal trust business. In July, T. Rowe Price of Baltimore, Md. was granted a thrift charter it applied for earlier in the year. The impetus for the application was an appeal from T. Rowe's shareholders for deposit products, said Ed Giltenan, a spokesperson for T. Rowe Price. T. Rowe will expand its investment offerings to include certificates of deposits through the T. Rowe Price Savings Bank, said Giltenan.

More than 20 insurance firms have sought thrift approval in the past couple of years, according to the Office of Thrift Supervision. Aetna won approval for its new thrift company Aetna Trust Company, late last month. Aetna already operates a state-chartered trust company, the Aeltus Trust in Hartford, Conn., which will operate independently of the newly chartered company. The new company will only offer trust services.

Other insurers awaiting approval of trust charters include AIG of New York, Marsh & McLennan of New York, parent to Putnam Investments of Boston, Mennonite Mutual Aid Association of Goshen, Ind., The Hartford Group of Simsbury, Conn., New York Life Insurance Company of New York, Massachusetts Mutual Life Insurance Company of Springfield, Mass., and Green Tree Financial of St. Paul, Minn. which has filed for approval of a thrift that would bear its parent's name, Conseco Bank.

Charles Schwab of San Francisco and State Street Bank of Boston are among those companies already offering personal trust services.