A. M. Publishing recently released its 2017 Trust Performance Report. The Trust Performance Report is based on an annual survey of financial institutions which offer trust administration services.
The aggregate data in the 2017 Trust Performance Report and its sister publication, Fiduciary Earnings and Expenses, reveals, in general, two conclusions: (1) the market rewards those trust service providers which have a tightly focused service offering and (2) the independent trust company model is more successful than the bank trust department model. The following data points back up the conclusion:
- The survey data demonstrates that the highest profit margin institutions limit operations, typically focusing on three or fewer service offerings. Of those that specialize, the overwhelming majority focus on a combination of personal trusts, employee benefits, and investment management services. Bank trust divisions continue to favor a full-service model. 92% of high profit margin independent trust companies specialize; only 57% of high profit margin bank trust departments specialize.
- The only institutions which are contemplating selling or outsourcing their trust operations were bank trust divisions. No independent trust company reported that they are contemplating selling its trust operations.
- Executives at independent trust companies consistently and by a wide margin report lower stress and concern than do bank trust division or national trust company executives, especially when it comes to meeting account, revenue, and net income targets.
Other interesting data points:
- P. I. E. assets (personal trust, investment management, and employee benefits assets) account for only 14% of industry assets but generate a whopping 50% of industry gross revenue.
- To generate $1 of revenue requires $753 of P. I. E. assets.
- Traditional P. I. E. assets grew overall by 7%.
- 15% of bank trust departments reported one or more fee increases in 2016.
- Growing new business is more important to bank trust executives than meeting revenue and net income targets (81% of executives surveyed responded that meeting new accounts was an important concern).