A personal trust is designed to provide protection to wealthy and affluent investors to ensure their assets are eventually distributed according to the investor’s wishes, usually with the target of reducing disbursement conflicts and tax obligations.
Currently, the number of wealthy people in America is increasing, reaching a record 1.52 million Americans with a net worth of more than $5 million and including another record 172,000 with a net worth over $25 million by the end of 2017, according to Spectrem’s Markets Insights 2018.
And yet, the number of managed personal trusts continues to drop, according to Spectrem’s 2018 Comprehensive Bank Trust Update. In 2017, the number of personal bank trust accounts held in trust institutions dropped to 556,142, the seventh consecutive decrease and a loss of 122,000 accounts since 2011. The decrease in managed personal trust accounts was 12,000 to 504,792, and that number has fallen by 200,000 since 2008.
The total personal trust assets saw an increase over 2016 to $964 billion after two years of decreases. Among managed accounts, assets rose to $684 million after a decrease one year ago. The amount of assets in non-managed accounts also rose in 2017, to $280 million. Neither amount has reached the level it stood in 2014.
These numbers remain problematic for management in bank trust departments whose sole purpose is to serve as trustees for personal trust accounts. Factors negatively affecting growth in the bank trust industry include a change in estate taxes, creating fewer impacted investors, and the willingness of older investors to rely on others (family, friends) to serve as a trustee.
The 2018 Comprehensive Bank Trust Update includes other key information for banks and other advisors providing trust services, such as:
- Perceptions of top personal trust providers, including ratings for those who are trustworthy, provide innovative products and service, and talented advisors and staff.
- Bank share of common/collective funds by assets
- Retirement accounts by percentage owned and mean value.
Top Takeaways for Advisors
The question for the Bank Trust Industry is whether they can get Millennials to buy in. Studies show that Millennials do not move quickly off of their first advisor, who is often a bank officer, and the bank can create a greater sense of membership and loyalty by offering trust services to those Millennials (of which there are many) who have enough assets to consider creating a trust.
Trust organizations need to update their communication methods to meet modern standards but balance those methods with old-fashioned face-to-face meetings. Trust organizations must be able to communicate and provide information immediately via these channels, but they must continue to hold personal meetings to develop trust-based relationships.
©2018 Spectrem Group