It is a fact that more people have more money than they did one year ago. Spectrem’s Market Insights 2019 showed that there are 18.2 million people with at least $500,000 in net worth, not including the value of their primary residence, and there are 11.8 million people with at least $1 million in net worth.
Both of those numbers are higher than the year before, and are record highs for American households.
An economy which has more people with more money should be good for financial institutions which handle large sums of money, and for the most part, that is true. But it is not true for the personal trust industry.
Spectrem’s newly released 2019 Personal Trust Update shows that for the ninth year in a row, the total number of personal trust accounts in the United States has fallen from the previous year. From the 789,950 trusts owned in the U.S. in 2009, there are now just 536,963, a 32 percent drop in a 10-year period.
Also, for the third time in the last four years, there was a decrease in the total personal assets held in trusts. An estimated total of $931 billion is held in personal trusts in the U.S., a decrease of $33 billion from one year before. Assets held in trusts reached a record of $1.149 trillion in 2007 but that number has been in a general decline since the Great Recession of 2008.
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.
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 laws, creating fewer impacted investors, and the willingness of older investors to rely on others (family, friends) to serve as a trustee.
The 2019 Personal Trust Update includes other key information for banks and other advisors providing trust services, including the definition of wealth management according to wealthy investors, and investor perceptions of top trust providers.
There is hope for the bank trust industry and it lies with Millennials. Even though that generation has now reached the stage where its oldest members are almost 40 years old, they have a propensity to use their personal bank for financial services for a longer time than previous generations did. Banks can use those relationships to create a sense of membership and loyalty among their young investors so that those Millennials reach a stage of greater wealth, they will consider a bank officer for trust services.
©2019 Spectrem Group
Keywords: trust, banks, investors, advisors, Spectrem, personal trust