A former leader in retirement plan recordkeeping and custodial services, personal trust services, and more recently custody services for registered investment advisers, Security Trust Co. fell prey to the SEC's microscope when it was charged in November with late-trading mutual fund abuses. The firm was the first to have criminal charges against then-CEO Grant Seeger and was the first to temporarily close its doors.
But now, the firm is back with a vengeance. With a new name, AST Trust Co., a division of New York-based American Stock Transfer & Trust Co., and a new management team, it's hoping to put a tainted brand in the past and move forward by banking on its technology and customer service offerings to lead it through the changes.
In early January, American Stock Transfer & Trust acquired Security Trust's $11.5 billion in assets. Although specific buyout terms were undisclosed, AST Trust will remain based in Phoenix along with 135 lower-ranking employees. The new division has gotten rid of all the old senior management.
Recently, just a few weeks ago, the firm hired a new CEO, John Winterholler, who comes from Goldman Sachs, where he was vice president of the firm's private wealth management division. Also joining is Greg Tschider, as president. Tschider was formerly an associate attorney for Gray Cary Ware & Freidenrich in Seattle. The firm's new chief financial officer is now Robert Schwartz, a certified public accountant who at one time worked for Peat, Marwick, Mitchell and Co., Chase Manhattan Bank and Prudential Insurance Co. The new chief information officer is Howard Stern, whose most recent position was CIO for Worldco LLC. The new COO, Nancy Worth, is a 20-year veteran of American Express.
In addition to these new hires, the firm has formalized its policies and procedures. "We've always had a very advanced technology platform, but in these last five months, [we've added] more enhancements and more controls to our processing," said Nancy Murphy, vice president of business development for AST Trust and a former Security Trust employee.
From Security Trust's standpoint, the acquisition hopefully gives credibility back to the firm. "We bought the assets of the business. We didn't buy the liability [or] the baggage that came with the institution," said Michael Karfunkel, president of American Stock Transfer & Trust Co., adding that communicating that message to the third-party administrators that work with American Stock Transfer & Trust made the acquisition that much easier.
When the scandal erupted last fall, a number of retirement plans were put on hold. "We had a number of [retirement] plans that were in transition when the bad news broke and had to yank the plug on all of them. In most cases, we just put everything on hold. It wasn't as if there was a safe harbor anywhere," said Randy Cloud, of Cloud, Neff Management LLC in Tulsa, Okla., a pension consultant who has since recommended AST as a custodian for his clients' retirement plan assets. "Things are definitely being run more formally, which is to be expected. The professionalism of the department heads seems to be very good. They seem to have regained good footing with a vast majority of their fund families."
Other AST clients echo Cloud's positive sentiment. "We didn't have one single client lost through this whole episode," said William Pihl, whose RIA firm, PGR Solutions, uses AST's master custody program. "They are our recordkeeper, so they are far below the surface in the eyes of our clients. We were just not as impacted nearly as much as the TPA (third-party administration) community." Pihl's firm, based in Campbell, Calif., has $55 million in custody with AST Trust.
"The innovative software allows us to continuously improve service, delivery speed and lower the cost, and that seems to be going in the right direction. They have the kind of technology that we just can't get anyplace else. Little did we know there were other activities going on, but that was on another side of the business," Pihl said. "We just hope the new owners continue to work innovatively." For example, like a mutual fund, Security Trust created a synthetic daily NAV calculation for Pihl's clients.
Other clients are more cautious about changes at the firm. Chris Thixton, a plan consultant with Pension Consultants of Springfield, Mo., is still recommending AST as a corporate trustee and custodian for retirement plans. However, he continues to take a wait-and-see attitude by doing proper due diligence on the new management team and how they safeguard pension assets. Thixton said he is watching the firm "like a hawk, gathering information and doing research to act in the best interests of our clients." If there is any reason to pull clients' money, Thixton said, he will.