Trust Company of the South helps wealthy families manage change

 In July 2017

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Trust Company CEO Bill Smith

By David Dykes

Trust companies conjure images of grim-faced bankers and mahogany offices where tense relatives await a reading of dear Grandma’s intentions for the estate. It’s actually a lot more involved, with Trust Company of the South and several others in North Carolina staying relevant in a fast-changing money-management industry. The Greensboro-based company, acquired in 1992 by an investor group that included Bill Smith and his father, has grown into a $1.3 billion asset manager with 24 employees and three offices.

Banks once dominated the trust business, and many still offer the service. But independent companies emerged when wealthy families concluded that relentless banking consolidation would erode customer service. Turnover caused by bank mergers makes it more likely that a family’s veteran adviser will depart. Also, many wealth managers can earn more money outside banks.

Trust Company of the South is one of only nine independent trust companies in the state, reflecting high barriers to entry: The state requires initial capital of $2 million, firms undergo rigorous regulatory exams, and it takes time to build a staff knowledgeable in investments, estate planning and insurance.

Trust companies don’t take deposits, make loans or act as broker-dealers. Assets are controlled by beneficiaries, often wealthy families such as the Richardsons — the Vicks VapoRub ointment folks — who started Greensboro’s Piedmont Trust Co. in 1928.

Trust Company targets families with assets of $5 million or more. An example project was advising a couple in their 70s who sold their distribution business for $32 million in cash and stock. (Smith declines to share the family’s name.) Working with three generations, the firm created a charitable trust to reduce their taxable estate, fund philanthropies and pass assets to grandchildren. The trust company developed an investment strategy to diversify the family’s portfolio, provide income and minimize taxes.

Trust Company traces its roots to 1981 when the Wall family of Conway, S.C., started Canal Trust Co., an affiliate of their timber and real-estate business. The name was changed to Trust Company of the South in 1983, and J. Harold Smith and Maurice Koury bought the charter nine years later. Initially based in Burlington, the company now has offices in Charlotte, Greensboro and Raleigh.

Koury and his brother, Ernest, started Carolina Hosiery in Burlington in the 1940s. The sock maker still employs more than 300 people in Alamance County. A real-estate and bank investor, Maurice was best known as a major booster of UNC Chapel Hill athletics. He died in 2016.

Before tackling Trust Company, Smith ran a Liberty-based hosiery company, pioneering the development of pantyhose. He later started commercial finance and import businesses. He died in 2009.

His son, Bill, became a manager in 1995 and CEO in 2010. A majority of the company’s stock is employee-owned. Six of the company’s 11 principals are certified public accountants. About $500 million of the $1.3 billion that Trust Company oversees for clients is invested through Dimensional Fund Advisors, an Austin, Texas-based company that manages nearly $500 billion.

Trust Company’s assets under management have grown at more than 12% annually over the last five years, reflecting both new customers and investment gains, Smith says.

Three generations of the John Sprunt Hill family have been Trust Company clients, says Dave Beischer, a Durham real-estate developer who is a Hill family member and a Trust Company director. John Sprunt Hill was a Durham civic leader in the first half of the 20th century who helped organize what eventually became Central Carolina Bank and Trust, now owned by SunTrust Banks.

Many clients want “an entity that would serve as a trustee for a family trust long after they’re gone,” Beischer says. “Other clients just prefer to work with a boutique [firm] that provides comprehensive financial planning, investment advice.”

Among the most important services of trust companies is encouraging long-term plans, Smith says. “It’s interesting how much time you spend over your life accumulating your estate, and how little time you’re willing to give to decide how to transfer it.”

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