TRUST ASSETS DROP BY $225 BILLION AND TRUST PROVIDERS DECREASE BY 200
How has the economic crisis impacted trust asset levels and trust providers? How has it impacted trust clients? Industry consolidation has changed the trust industry dramatically. Yet will the traditional trust providers have an edge over non-bank trust providers in the future? How will investors use trust services in the future?
In California alone, a 77% drop in registered fiduciaries occurred between 2008 and 2009. Effective January 1, 2009, California is the first and only state in the US presently to require non-exempt trustees to become licensed, or face civil and/or criminal penalties. Hence, in California, there is a critical need for qualified fiduciaries to serve the growing elder and ultra-affluent constituencies.
The size of the trust industry in terms of assets, accounts, and providers is divided between the largest institutions, or corporate trustees, such as banks and securities brokerage firms–and smaller institutions–trust companies and private trustees that hold trust assets–and reflects the recent M & A activity that has consolidated the industry. Importantly, the trend from managed assets to custodial assets will ultimately affect the client; as custodial, investment management, and product/transaction fees are re-engineered to preserve revenue/fee flow for the largest players in the industry.
What does this mean for trust clients?
During the last several decades, banks have worked to increase profitability for their shareholders. This has led to:
- Higher fees
- New product lines and services aggressively promoted through bank trust departments
- Mergers at an unprecedented rate with the disruptions of service they cause
- Insensitivity to personal needs
- Voluminous and difficult to understand statements/reports
- Unsatisfactory investment performance
- Push toward the use of proprietary investment products
- Personnel turnover.