Trust Market Dwindling
The total number of personal trust accounts has been on a steady decline for 12 years, according to Spectrem Group’s “Comprehensive Bank Trust Update”, with only 432,902 personal trust accounts in 2020. Bank personal trust assets have increased however over the past few years, ending 2020 at an estimated $1.14 trillion. This asset level remains below the high achieved in 2007 of $1.15 trillion.
While the number of managed and non-managed personal trust accounts has declined over the past several years, the asset levels have seen significant increases. This is not surprising however, given how the stock market has performed over the past few years. When considering various types of services an investor can receive from their advisor, estate planning, wealth transfer guidance, and tax planning are all vital services for investors with a net worth, not including their primary residence, of $25 million or more.
The number of managed and non-managed personal trust accounts can be caused for a variety of reasons but over the past six years, trust asset management has largely moved away from banks to RIAs and other types of asset managers. Banks have most commonly not chosen to act as custodian only, thus resulting in the loss of assets and related accounts.
It is very revealing that over a quarter of investors with over $25 million in net worth do not receive any of those services but would like to receive the services. Fifty one percent of $25 million plus investors receive tax planning guidance from their advisor, 57 percent receive wealth transfer advice, and 60 percent receive estate planning advice from their financial advisor. While the majority of investors are receiving these important services, a significant gap exists among those investors who would like to receive those services from their advisor, but they are not receiving them. Investors who are not receiving these services need to communicate with their financial professional so the advisor can begin addressing the desires of their clients.
The dwindling trust market does not mean that wealthy investors should avoid developing a trust or trusts if that is suitable as a portion of their financial or estate planning. Investors just need to ensure that the provider that they place their trust assets with is able to meet all of their various needs and has the desired investing and management options required for their needs. Trust creation can be for a multitude of reasons so seeking the guidance of financial professionals to determine if a trust is necessary, is a worthwhile conversation.