The Institutions Holding Trust Assets
The number of managed personal trusts continues to drop in America, but the concentration of those accounts remains constant and highly gathered among the top 10 holding companies.
Spectrem’s 2017 Comprehensive Bank Trust Update explains that the number of financial institutions with trust assets remaining steady, with almost 1,200 banks or holding companies operating a trust department (a number that dropped slightly from 2016). But the top 10 firms control 58 percent of all personal trust assets, with $33 billion and above held in each of those accounts.
Bank of America remains the firm with the most trust assets, with over $100 billion in trust accounts.
The concentration becomes even more obvious when looking at the top 25 institutions holding trust assets. More than 75 percent of all trust assets are hold by the top 25 institutions in the United States, including institutions holding $5.3 billion to those holding $28 billion.
The names of the largest personal trust organizations are fairly well known within the industry. They include the Northern Trust, Bank of America, JP Morgan Chase, Wells Fargo, Citibank, PNC and BMO Harris.
However, despite the fact that there are more wealthy people in America than ever before, the number of managed personal trusts continues to drop, according to the 2017 Personal Trust Update. In 2016, the number of personal bank trust accounts held in trust institutions dropped to 571,044, the seventh consecutive decrease and the largest by number since 2011. At the same time, the total personal trust assets fell for the second year in a row to $892 billion, the lowest level since 2012.
The total personal trust assets is slightly above the low mark of the century; in 2009, there were $853 billion in total personal trust assets. But in terms of number of accounts, the new total of 571,044 is more than 200,000 below the total of 7890,950 in 2009, just before the stock market crash took effect on the long-term personal holdings of investors.
These numbers remain problematic for management in bank trust departments whose sole purpose is to serve as trustees for personal trust accounts.
But it is possible for advisors to address this situation when they have a close relationship with their clients.
The topic of setting up a trust is a precautionary one. Trusts do protect the assets of investors for a designated period of time. Those assets can be managed to create more assets or can be allowed to sit protected against tax charges until disbursed.
But, according to Spectrem’s qualitative report Choosing a Trustee, a huge percentage of investors who set up trusts decide to self-trustee rather than use a corporate trustee, and one of the reasons they make that decision is that the big banks change their staff so frequently that it is difficult to maintain a one-on-one relationship with any bank officer over a long period of time. Any change in staff creates a different relationship and grantors simply don’t want to have to get to know someone new when it involves protecting their assets long-term.
An advisor or provider with a solid relationship who can truthfully state an intention to be around for a long time can use that situation to create the confidence necessary to get an investor to set up a trust with them. Advisors working with firms not among the top 10 in trust holdings can argue against the big banks and their employee turnover and can present a vaiable argument that their service will be more personal, in an area that is one of the most personal financial decisions an investor can make.
©2017 Spectrem Group