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Welcome to our Website

by William H. Smith, CFP®

Welcome to our newly-launched website!  For our first post, we’d like to share a brief history of Trust Company of the South.

First, we would like to thank our loyal clients and dedicated team that have contributed to our success over the past twenty-five years!

In 1992, our first generation founders pictured below, Maurice and Ernest Koury, and J. Harold Smith, along with an investor group of high net worth families from Burlington, NC purchased the charter for Trust Company.

Elon Award

The original charter dated back to 1981, making it the first independent trust company organized in our state.  Mr. Smith and the Kourys, all successful textile entrepreneurs, believed a boutique firm dedicated to building lasting relationships that placed its clients’ interests first could thrive amid the consolidation taking place in the commercial bank trust departments, now commonly referred to as Private Wealth.  These gentlemen, known for their integrity, tireless work ethic and prudent financial stewardship, served as the perfect role models for our firm, a corporate fiduciary.

Over the following twenty-five years, Trust Company has held true to that original vision and those values, delivering comprehensive planning solutions for our clients that provide peace of mind about their financial futures.

Our clients are often multi-generational families who prefer to work with an independent, entrepreneurial firm.  Many have started and continue to operate a family business.  Other clients we serve include corporate executives or nonprofit entities.

Our advisors are decision makers and owners of the firm – partners whose professional conduct is held to the fiduciary standard.  As an independent firm, our interests are 100% aligned with our clients’.

Today, our firm works with clients across the state and southeast from our three offices in Greensboro, Raleigh and Charlotte.

We thank you for your interest in our company, and hope you’ll enjoy browsing our site.

Bill serves as President and Chief Executive Officer of the firm as well as Chairman of the Board. Based in the Greensboro office, he oversees client relationships, assists in new business development efforts, and works directly with many of Trust Company’s not-for-profit clients. A CERTIFIED FINANCIAL PLANNER™ professional, he has over twenty-five years’ experience in the financial services and wealth management industry.

Protecting Your Identity

by W. Michael Bridgeman, CFIRS™, CFP

Identity theft.  We hear about it almost daily.  A retailer is hacked and your personal information may be exposed.  A social media site collects your personal information and then shares it without your permission.  A credit bureau is breached and your personal information is at risk.  Then we all have to wonder: how much of our personal information is at risk? Is it on the dark web?  Is there any way to protect ourselves?

You’ll be relieved to know that the answer is yes, you can protect yourself from identity thieves and others who try to steal your personal, financial and even health information.  Although there are many malicious individuals out there trying to do you harm, you can take action to defend yourself from their malevolent malware.

Follow these guidelines to build your “personal identity defenses”:

  1. Take responsibility.  With all the conveniences we enjoy by having our lives on Facebook, Instagram, LinkedIn, and having our financial information readily available on our smartphones – we must think before we share our information.  Identity thieves may call, sometimes posing as bank or government agency officials. Do not give out personal information over the phone unless you initiated the call.
  2. Create better passwords. Use passwords that use a mix of letters, numbers, and special characters.  Do not use your birthday, anniversary, or children’s names as passwords!
  3. Encrypt your smartphone and computer.  Using passwords to lock your phone and computer encrypts the data on the device itself.  A thief cannot unlock these devices without the password, and they cannot circumvent the password to view your data.  Imagine that when you encrypt data you take a piece of paper with your personal information and shred it to pieces.  If someone breaks in to your device without a password, all they see are the shredded pieces of paper. But, when you log in with your password, the data is unencrypted, and the little pieces of paper are magically put back together so you can see it in original form.
  4. Invest in a shredder.  Shred your receipts, credit card offers, bank statements, returned checks, and any other sensitive information before throwing it away.
  5. Avoid public Wi-Fi.  Public Wi-Fi is fraught with dangers.  Hackers know individuals using public Wi-Fi are easy targets for stealing information. This includes airports, hotels, and coffee shops.  They may be convenient, but they are not secure.
  6. Update your software.  Keep your phone’s operating system and apps up-to-date.  Software updates can contain fixes to security flaws!
  7. Sign up for account activity notifications from your bank to notify you of transactions.
  8. Make yourself phishing-proof – do not reply to unsolicited emails asking you to verify personal information, and avoid clicking on suspicious links.
  9. Be on alert for phone calls that could be phishing scams.
  10. Order your free credit report.  You are entitled to one free credit report from each of the three credit bureaus each year.  Order from each individually, or go to www.annualcreditreport.com to receive a consolidated report.  Review the report for inaccuracies and possible identity theft.

If you do become a victim of identity theft, report it to the Federal Trade Commission at www.identitytheft.gov.  You will find useful information on the website to develop a recovery plan and put it into action.  You also should consider placing a freeze on your credit file to prevent thieves from trying to open new accounts in your name.

One last consideration is identity theft insurance. There are many providers that offer to monitor your credit, Social Security number, credit and debit card numbers, etc.  Several companies offer restoration services and expense reimbursement.  You can purchase the insurance online through the provider, or check with your agent and ask if you can add it through your homeowner’s policy.

Unfortunately, we will continue to hear about more, not fewer data breaches.  We know they are going to happen, which is why we must be more vigilant than ever to protect ourselves.  Stay alert, stay cautious, and stay safe!

Michael is the Compliance Officer for Trust Company, and is based in the Raleigh office. He is responsible for assuring compliance with North Carolina banking rules and regulations, federal BSA/AML laws and regulations, and sound fiduciary practices. Michael is a Certified Fiduciary and Investment Risk Specialist™ and a CERTIFIED FINANCIAL PLANNER™. He has over twenty years of experience in the financial and wealth management industry.

Are My Assets Safe?

In light of past high-profile securities fraud cases and investment scams such as the Bernie Madoff scandal, the Stanford Financial Group, and continuous Ponzi schemes, we think it is important for our clients to know how their assets are secure with our organization.

As authorities investigated these schemes, especially Bernie Madoff, it became clear that neither investors nor institutions performed even cursory due diligence on Madoff, his operation, or the underlying investments (if there ever were any investments) before handing over their or their clients’ money.  In short, there was a lot of “trust” – with no verification.  Those potential investors and advisors who did try to obtain answers to basic due diligence questions quickly became suspicious and moved on.

In the case of Stanford, it appears suspiciously high yields were offered to clients investing in certificates of deposit in a related offshore bank.

Summarized below are some of the key factors ensuring the safety of our clients’ assets, the majority of which did not exist with other fraudulent security cases.

  •  Our clients’ assets are held and safeguarded by independent third-party custodians: (US Bank, Depository Trust Company (DTC), Matrix).
  • Our investment offerings are transparent and diversified – our investment offerings are widely known and owned – and easily vetted by our clients.
  • We use an independent third-party trust accounting system for the detailed record-keeping of client accounts as well as separate third-party performance reporting.
  • As a fiduciary trust company, we are examined each year by the North Carolina Office of the Commissioner of Banks.
  • Our operations and internal controls are reviewed annually by an outside public accounting firm.
  • We serve as the “back office” operations support for several bank clients.  These banks performed their own due diligence of our organization and operations before engaging us.  They require a separate audit of our activities specific to this operational support.
  • Our firm is owned by shareholders who, with the exception of Bill Smith and his brother Jim Smith, are unrelated by birth or marriage.   In addition, none of our employees are related by birth or marriage.

Most of the above factors are discussed in more detail below.

First, and most importantly, we use independent third-party custodians to hold and maintain all our clients’ assets.  US Bank serves as the custodian for all DTC-eligible client assets (stocks and bonds).  Our clients’ mutual fund assets (including money market funds) are held at the respective fund company and cleared through Matrix Settlement and Clearing Services, a broker-dealer which serves over 300 financial institutions and processes over $200 billion in customer assets on their platform.  The fact that Mr. Madoff did not use independent custodians is one of the linchpins that allowed him to pull off his scheme.  This fact also caused many potential investors to quickly turn away.

Assets maintained in custodial accounts by custodial institutions are segregated from the assets and liabilities of the institution and are not subject to the institution’s creditors. The custodian’s role is to hold the assets for safekeeping, to collect dividends and interest and provide other similar services.  Account ownership in the assets remains vested in the entities for whose benefit the institution is acting as custodian and the assets are not subject to the claims of creditors.  In contrast, assets held in deposit accounts of a bank become liabilities of the bank. As such, deposits create a debtor-creditor relationship between the bank and the depositor. Similarly, if investors hold assets with an investment advisor, who does not provide separate custody, these investors become general creditors of the investment advisors.

Our custodians employ comprehensive safeguards and controls over asset trading and transactions in their daily operations.  Each year the custodial operations of both Matrix and US Bank endure a SSAE 18 examination.  Officially known as a “Reporting on Controls at a Service Organization,” SSAE 18 audits provide independent third-party verification by a licensed CPA firm as to whether control activities described by a service organization were suitably designed to meet specified control objectives and were in place and operating effectively over a specified period of time.  Trust Company primarily requests a specific type of SSAE 18 audit called a System & Organization Controls (SOC 2) report.  A SOC 2 report evaluates a provider’s security, availability, processing integrity, confidentiality, and privacy controls.

We have a great deal of daily interaction with our contacts at both Matrix and US Bank. We monitor our custodians’ service and capabilities and have a very high level of confidence in them to safeguard our clients’ assets.  If we ever have concerns about a custodian’s service, we are free to, and will, move our clients’ assets to the care of another reputable and capable custodian.

As mentioned above, our investment offerings are very transparent and diversified.  We utilize mutual funds that are easily verified and vetted – and are tracked and reported in a wide range of mediums.  We do not recommend that our clients invest in “black boxes” or exotic schemes that cannot be easily explained or supported.  It has been reported that Stanford Financial Group invested in certificates of deposit issued by a related offshore bank. All Trust Company of the South investments are “arm’s length” transactions with independent mutual fund companies or investment managers.  We do not engage in related party transactions.

Unlike Bernie Madoff and other fraudsters, we report to our clients on how their assets are invested through our use of an independent trust accounting system to maintain individual client accounts and transactions.  We also use an independent third-party for client performance reporting.  In addition, clients can easily verify how any one of their investments is performing by looking in the business section of most newspapers or a host of other sources.

We use InnoTrust, the trust accounting and reporting system designed and maintained by SS&C Innovest.   It serves trust companies, trust and custody departments of banks, wealth management firms, and private banks.  Innovest Systems, LLC was founded in 1974 and is based in New York.  Innovest merged with SS&C Technologies Holdings, Inc. in 2020.  We have representatives on the users group that provides ongoing feedback and suggestions for further enhancements to the InnoTrust system.  This system has its own comprehensive internal controls and reconciliations that are performed with the range of activities and operations allowed by the system.  In addition, an annual SOC 2 audit is performed on the system and we receive and review the results of this audit.  The SOC 2 report also addresses the security of the data.

Beyond the daily back-up of our data on the InnoTrust system, the data also resides with the system provider, SS&C Innovest, so there is an independent source for detailed client account information should a catastrophe strike our facilities or people.

Client accounts are reconciled daily with the custodial accounts of Trust Company of the South at US Bank and Matrix.  These reconciliations are monitored daily by our internal operations team.  Any exceptions, though rare, are investigated and addressed promptly.

In addition to the controls and processes used by independent custodians and trust accounting system, Trust Company of the South employs rigorous internal controls and separation of duties in managing client transactions and accounts.  These controls minimize both employee errors and potential fraud.  At least two people are involved with each client transaction – the person who enters the transaction and a second person who reviews the transaction entered into the system against the supporting documentation from the client.  Once adequately reviewed, the transaction is authorized/approved by the reviewer.  Also note that the trust accounting system will not allow the same person to both enter and approve a transaction.  Beyond the separate entry and authorization of each client transaction, all transactions (disbursements, deposits, trades, etc.) are reviewed daily by our principal in charge of client services.

Our internal controls, processes and reporting related to maintenance of client accounts are reviewed each year as part of our required annual examination by the Office of Commissioner of Banks for the State of North Carolina.

Note we also have separate audits of our internal processes and procedures by an independent accounting firm, Elliott Davis.  The Elliott Davis auditors responsible for performing our audits specialize in reviewing and testing internal controls for financial institutions.  In addition, we serve as the “back office” for several banks who to date have chosen to outsource their operations.  These banks performed their own due diligence of our capabilities in their decision to engage our firm and require a separate audit of the specific functions we provide to them.

An independent audit of the financial statements of Trust Company of the South is performed each year by a public accounting firm. The auditors review and confirm our records of client accounts with the accounts of the custodians of our clients’ assets.

We also have a chief compliance officer who performs periodic reviews of client accounts, evaluates internal controls, and conducts random audits to ensure assets held with our custodians matches what it held in our client accounts.  These findings are reported to the Audit Committee of the Board of Directors of Trust Company of the South, who also oversee all risk compliance controls and meet on a regular basis throughout the year.

We realize that this is a lot of information to digest but we wanted to communicate some of the important safeguards and controls in place to protect our clients’ assets.  You have placed your trust and your money with us.   It is our job to ensure that you continue with that trust.

Please contact us with any questions or if you would like to discuss further areas outlined above or any other concerns.