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Courting Wachovia – $10B managed

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By Todd Cohen

WINSTON-SALEM, N.C. — In an increasingly crowded market with no dominant player, a merger with First Union or SunTrust Banks would significantly boost the rapidly expanding charitable funds business at Wachovia.

Charitable assets managed by Wachovia total $10 billion, up from $800 million in 1982, and have been growing at an annual rate of 20 percent in recent years, says David Taylor, senior vice president for charitable funds management.

Taylor declines to talk about the possible impact of a merger either with Charlotte-based First Union or Atlanta-based SunTrust, both of which operate charitable funds units. First Union’s charitable business totals $8 billion, while SunTrust’s totals $15 billion.

But Taylor says Wachovia had positioned itself to grow quickly in a highly competitive and sophisticated market.

Financial services firms, mutual funds and charities are targeting an estimated $6 trillion to $25 trillion in charitable funds that researchers at Boston College expect will move between generations over the next 50 years.

The charitable unit at Wachovia, for example, fields a staff of 62 people who serve more than 1,200 charitable clients, mainly on the East Coast.

Managing assets is the core of those services, which also include administrative, technical and consulting support for foundations and nonprofits.

The bank, for example, provides tax assistance for 290 private foundations with roughly $2 billion in assets. It also provides administrative support for small family foundations, and tax and distribution support for community foundations, including the Raleigh-based North Carolina Community Foundation and the Community Foundation of Western North Carolina in Asheville.

Wachovia also works with nonprofits to help donors structure big gifts — such as appreciated securities, real estate and art –- as part of their overall estate planning.

Wachovia is among a handful of big charitable players ranging from banks and community foundations to mutual funds such as Fidelity, Vanguard and Schwab and investment firms such as Merrill Lynch.

Yet a study more than a year ago found the industry was not dominated by a single institution, says Taylor. Merrill Lynch, for example, which managed $4.7 billion at the end of 2000, accounted for no more than 6 percent of the market, he says.

“There’s not been consolidation in this industry, and nobody has really staked out ownership of the market,” he says.

The market’s rapid expansion — fueled by the 1990s stock boom, Baby Boomers’ growing affluence and the transfer of wealth between generations — has spurred greater sophistication and professionalism among gift planners and charitable funds professionals, Taylor said.

“Professionalism in the industry helps the donors and potential donors achieve their goals in a more sophisticated way,” he says. “And it helps charities grow much more rapidly through large gifts that come in through gift planning.”

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