Bankers Invest In Trust Services

Trust & Agency Accounts
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Steve Jackson, regional trust manager for Regions Morgan Keegan Trust F.S.B., said the Birmingham, Ala., financial services firm is expanding its trust operations to include offices in Benton and Washington counties.

The firm recently hired Geren Baker, former senior vice president at Arvest Asset Management.

Jackson said Regions chose to put trust personnel in Northwest Arkansas because of the market potential.

“Obviously, with Northwest Arkansas being the fourth-fastest growing section of the country, Regions Bank is growing rapidly,” Jackson said. “We wanted to be sure we have the best talent possible to support our existing clients and to serve the community.”

Jackson said he expects Regions’ new local trust department to turn a profit within three years and to hire a total of six to 10 people.

Regions Morgan Keegan trust activity in Arkansas accounts for $3.5 to $4 billion in managed and non-managed assets, Jackson said.

Baker, who spent nearly 11 years with Arvest, said a Regions portfolio is managed in a trust for customers, which is different from a brokerage.

“A brokerage will make recommendations for what you should buy,” Baker said. “The assets in the trust are monitored by the trust department.”

Other than making medical decisions, a bank trustee can perform functions for clients such as pay medical bills, get cars licensed etc., Baker said.

Trends

Jackson said Northwest Arkansas is seeing a concentration of wealth in the area because Fortune 500 company executives have moved here from other places, and because of land sales resulting from real estate development.

“There is a lot of wealth being created for the individuals who are selling the old family farm,” Jackson said. “And those are the people we can help the most.”

Bob O’Neal, senior vice president of Arvest Asset Management, said the Arvest Bank investment arm manages $1.5 billion in trust assets and about $5 billion in total assets.

He said real estate has grown area trust opportunities.

“As a percentage of people’s wealth in Northwest Arkansas, the chances are real estate values have grown significantly more in recent times than their other assets,” O’Neal said.

O’Neal said Arvest can help clients implement trust planning techniques to avoid an income tax hit when selling real estate.

Setting up a Charitable Remainder Trust, which is irrevocable, could prevent paying capital gains tax in the event of a highly-appreciated asset sale. As much as 15 to 20 percent capital gains tax could be avoided with the use of the charitable remainder trust, O’Neal said.

A trustee would manage the money post-sale and provide income to the two sets of beneficiaries. Assuming the seller is the first beneficiary, the charity receives the remainder of the trust assets after death.

O’Neal saw 40 to 50 charitable remainder trusts set up in 2004.

Customers are also using IRA funds to buy real estate.

O’Neal said he sees the IRA opportunity for customers several times per week, although he warned there are many restrictions associated with that kind of purchase.

“If a customer desires to purchase real estate with their IRA balances, then that purchase needs to take place within that IRA,” O’Neal said. “People need to get the right professionals involved to help guide them through the maze of regulatory issues. That same thing is true with charitable remainder trusts.”

Net Worth

Mark Lungaro, senior vice president with The Private Bank of Bank of America in Rogers, said his firm is seeing recreational property gain popularity.

The Private Bank takes only clients with a minimum of $3 million in “investable” assets, which excludes primary residences.

“Their estate plans are more complicated due to the need for asset protection,” Lungaro said. “There are second and third marriage situations that need an independent objective third party to make decisions.”

“It’s business interests, farmland, vacation properties,” Lungaro said. “It’s the whole gamut.”

Lungaro said his firm has a wealth strategist who meets with the bank and trust clients weekly.

The Private Bank firm offers “open architecture” investments, meaning it can offer proprietary and non-proprietary investments.

The Private Bank also offers specialized credits, financial advice and investment management.

The Private Bank at Bank of America has $138.7 billion in assets under management nationwide and 150 offices in 39 states.

Arkansas-specific figures for The Private Bank were not available.