Prudential Forays into Personal Trust Services

Prudential Securities Inc. is joining the ranks of brokerages expanding into personal trust services, once a stronghold for banks.

The New York-based securities firm, a subsidiary of Newark, N.J.-based Prudential Life Insurance Company of America, has recruited Michael F. Fernon, a trust executive from Merrill Lynch & Co., to be director of personal trust services.

It has also retained the private asset management division of Mellon Bank Corp., Pittsburgh, to act as administrator for Prudential trust clients.

Prudential Securities already manages $30 billion of personal trust assets for affluent clients who have appointed people, such as close relatives or friends, as their trustees.

Now Prudential wants to persuade those clients to appoint the firm as their trustee. Prudential obtained trust powers in 1994 through its Atlanta-based federal savings bank.

"That is the obvious first step of our marketing approach," said Mr. Fernon, a first vice president who started work at Prudential Securities this month.

Though clients chose not to use an institutional trustee in the past, they could be amenable to working with Prudential, he added.

"There may have been a historical dissatisfaction with the banks," he said. "There's certainly in every brokerage firm a big marketing opportunity to look at that existing client base and to work with them on a corporate trustee level."

That tactic combined with efforts by Mr. Fernon to get clients to name Prudential to oversee new trusts should prove viable, said Lawrence Hughes, a first vice president and manager of wholesale trust services at Mellon. The Pittsburgh banking company started working with Prudential Securities last year.

"He's got a good background. He's very focused to develop new business, which is key to success," Mr. Hughes said.

Mr. Fernon, a 36-year-old lawyer who once was a regional manager in the trust department of National Westminster Bank's U.S. retail operation, is working with Douglas Harding, a business development officer in New York.

They report to Robert J. Donnelly, first vice president responsible for cash management, retirement, and trust services marketing.

Mr. Donnelly said he also plans to hire a regional trust officer in South Florida, an area rich in retirees and other affluent Prudential clients that makes for "a prime marketing opportunity." The regional trust officer is to begin meeting with brokers and their clients by the end of the second quarter.

As a senior vice president for Merrill, Mr. Fernon played a similar role. He developed trust business with clients through referrals from the firm's financial consultants.

The thrift charter lets Prudential market itself as a trustee on a national basis, but its initial focus will be on converting clients' trusts in states that are "trust friendly," such as Florida and California, Mr. Fernon said.

Under its private-label trust administration arrangement with Mellon, Prudential can handle customer service immediately instead of having to create a traditional trust department internally.

That should keep costs down for Prudential and its clients, Mr. Donnelly said.

"The fees are probably more competitive because we are leveraging the efficiency of Mellon Bank to our clients," he said.

Other brokerages in the personal trust business have arrangements with third parties to administer accounts. For instance, New York-based PaineWebber Inc. has been expanding a strategic alliance with Comerica Inc., a Detroit banking company.

Comerica has trust representative offices for PaineWebber clients in Costa Mesa, Calif., Memphis, and New York.

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