PIERRE, SD., Nov 27 – PenChecks, Inc. a Southern California-based retirement plan servicing firm was granted a trust charter on November 9th in South Dakota, according to a report recently released by the South Dakota Division of Banking.
PenChecks, Inc., according to its website, is the nation’s largest qualified plan benefit distribution processing organization. It offers “a state-of-the-art, technology-based, affordable, professional and convenient solutions for plan sponsors, institutions and third-party administrators.”
Catherine Macleod, a qualified plan industry specialist told The Trust Advisor Blog, that PenChecks is one of the most recognized names in the retirement plan industry. Most firms such as third party administrators (TPAs) and qualified plan sponsors, like mutual fund companies, use PenChecks for benefit check processing and tax return preparation–similar to the way payroll processing companies work in the payroll industry like ADP and others.
Macleod added, most of their clients either use bank trustees or self-trustee. It makes perfect sense that PenChecks would start its own trust company because many of its clients cannot afford the cost increases that bank’s third-party trustees are charging for serving as trustee for qualified plans. As risks go up in the qualified plan, so do trustee fees, to compensate for the potential losses and claims.
She added, PenChecks will probably find a market for its trust company in two places. The first place would be mutual fund companies that do not want to serve as their own trustee and do not wish to pay the high fees requested by banks.
Its second market would likely be companies that have been serving as their own trustee for their plans who are likely to grow and do not want or feel comfortable serving as trustee themselves. In this case they would likely go to a PenChecks Trust Company for a lower cost all‑in‑one solution.
PenChecks is another example of an integrated growth strategy by a wealth management provider or service organization that believes it can do a better job, and charge less to serve its own client base, rather than outsourcing trustee work to a bank or independent trust company.
PenChecks Trust Company of America is the sixth public trust company to be opened this year in South Dakota; others include First Lawyers Trust Company which was recently approved and Dominion Trust Company which became licensed and operational in July.
As more firms recognize that clients perform an all‑in‑one solution for financial needs more diversified financial and wealth management organizations will be launching their own trust companies in coming months.
Jerry Cooper, senior editor, The Trust Advisor Blog.
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