In another sign of the converging financial services industry, a New Yorkbased life insurance company has won approval to provide trust services to its customers nationwide through a unitary thrift.

However, a banking industry lawyer said that in approving the application by Guardian Life Insurance Co., the Office of Thrift Supervision (OTS) has imposed new, "intrusive" restrictions on non-banks using unitary thrift charters to conduct parts of their financial services businesses. Institutions planning to apply for this type of thrift charter should be aware that the agency is now imposing new restrictions between broker/dealers and trust companies operated out of thrifts.

In its application, Guardian Life said a number of insurance, securities and investment companies, which operate mutual funds, are finding that the thrift charter is the ideal vehicle to provide nationwide trust services to customers. The new institution will be known as Guardian Trust Co. FSB, and will employ eight to 10 trust professionals.

The president of the newly-chartered institution, Francis Quinn, said Guardian, a $26-billion-asset life insurance and reinsurance firm, will likely launch its new service in June, after meeting several preconditions imposed by the OTS when it approved the new charter March 26.

Guardian will use its new unitary thrift to provide such nationwide services as trusts and individual retirement accounts through Guardian’s existing 5,000 employees and 3,000 agents, Quinn said. Most agents work through general insurance agencies; Guardian, a mutual institution, and its officials have said that it plans to remain one.

Guardian will feature multiple money managers, tax-sensitive investing and superior reporting capabilities to its trust customers, Quinn said. "Our options include separate account management, directed portfolios and mutual fund asset allocation services," he said. "We will not offer annuities as a product of the trust company. But, if an annuity is in the portfolio, we can manage it at the trust company.

"We see our role as providing sophisticated services our field associates can offer to their clients," Quinn said. "We don’t see ourselves as competing with the banks. There is a whole industry of nontraditional providers of trust services," he said. They are affiliated with securities firms, insurance companies and investment management firms, which include mutual funds companies.

However, a lawyer in Washington said the OTS’s approval "is unusually intrusive both as to what has to be done immediately and what must be done going forward, particularly as to the relationship between the trust and the securities dealing activities of Guardian."

The lawyer said the approval "imposes certain restrictions and arrangements we haven’t seen in the past. That seems to suggest that the agency is still grappling with issues as to the level of regulation that is appropriate and the level of freedom that should be enjoyed by trust operations in a diversified financial institution structure."

He said that one of the provisions that concerns him is language designed to "ensure that neither the broker nor the holding company dominates the federal savings bank to the extent that one is treated as a mere department of the other." The agency is clearly "seeking to ensure that there is adequate corporate independence so that the thrift is not just a department of the insurance company operations." The agency appears especially concerned with the independence of the thrift from Guardian’s securities brokerage unit, Guardian Investors Services, a registered broker/dealer.

Certain disclosures regarding trust operations, particularly in conjunction with securities brokerage, that must be made by Guardian Trust are new, the lawyer said.

But Quinn said Guardian is "comfortable with the terms of the order the OTS has issued. We were able to meet all the requirements that we understood were presented to us."