Archive for May, 2010
Using Influencers to Land New Trust Accounts
Posted by Scott Martin in Practice Management on May 30, 2010
Many trust companies have more success marketing their services to the professionals who already have the ear of wealthy clients. Lawyers, investment advisors, accountants, even art appraisers are all worth adding to your network.
Plenty of trust companies are gathering assets by targeting the professional advisors who steer high-net-worth clients toward trusts in the first place.
Accountants, lawyers and other advisors rarely have the power to decide where a client opens a trust account, but they do have an enormous influence on the choice, says analyst Robert Testa, who covers the private wealth management industry for Cerulli Associates.
“Especially for trust companies, we’ve found these reciprocal relationships with other professionals are the most effective way to gain clients,” he told me.
Think of these professionals as the Oprah Winfreys of the wealth management world. Oprah doesn’t actually sell books, but one plug from her helps millions of potential book buyers make up their minds.
The relationship between estate planner and client works a lot like this, Testa says. When a lawyer or financial planner realizes that it’s time to move assets into a trust, the client rarely has a strong opinion on which trust company to go with. Instead, what the planner usually hears is, “What do you suggest?”
Being the answer to that magic question has translated into new business for 68% of the bank trust departments that Testa’s team polled last year, and independent trust service providers would be well served to follow suit.
It’s all about relationships
Estate planners are an obvious fit because they are at ground zero whenever a wealthy family decides to set up a new trust or modify an old one.
However, if you want to get the real inside track on how potential clients’ financial situations are changing, get friendly with their accountants, Testa says.
“You would think people would be more honest with the trust officer or the asset manager, but the CPA knows everything,” he explains. “Once you get a close relationship with the CPA, you can gather the assets.”
Corporate entitities can wield influence too. Millennium Trust got a substantial profile boost this spring when Schwab Advisor Services pointed it out to its 6,000 advisors as a custodian for alternative assets that were no longer welcome on the Schwab platform.
“What we’re able to do is go after the advisor market,” Mary Hackbarth, who heads up Millennium’s marketing, told me. “In terms of business strategy, working with advisors as centers of influence has worked out.”
Even an influential brand goes a long way. When the Dow Jones news service wrote up trust consulting firm Advisors Institutional Services, its marketing team was quick to license reprints that paired the story with the venerable Wall Street Journal logo. While it isn’t an endorsement, the logo still has a positive influence on prospective clients.
Anyone in a position to weigh in on the decision-making process is a potential referral source. Real estate brokers and insurance agents are worth adding to your professional network because they’re often on the scene when people make pivotal life decisions or come into significant wealth.
Robert Testa also recommends cultivating more esoteric professionals on the off chance that they’ll have the right ear at the right time.
“We’ve even heard that the art valuation experts at UBS have referred their clients toward trust companies,” he tells me.
Double-edged sword
Naturally, financial planners and other registered investment advisors are a time-honored center of influence. Jocelyn Schwartz, who ran Fidelity’s estate planning business and is now a financial planner at Pillar Financial Advisors, is often in a position to direct new business to trust companies and the lawyers who write up trust agreements.
She’s also used her influence to move accounts from legacy providers.
“We do spend a lot of time reviewing existing trusts,” she told me. “Disrupting the apple cart is not our first goal, but sometimes we get a client who just isn’t happy no matter what the trustee does, and then that money has to move.”
While Schwartz is happy to work with trust companies that won’t let Pillar manage the underlying assets, other wealth managers are wary of referring their clients to a potential competitor.
“They’re afraid that giving a Wilmington or a Glenmede custody of the assets means the next call their clients get will be from a Wilmington or Glenmede investment advisor,” says Antony Joffe, whose new public trust company Sterling Trustees plans to aggressively market to lawyers and accountants as well as RIAs.
Some trust companies get around this potential conflict of interest by only working with directed trusts and other arrangements that kick the investment responsibilities (and fees) back to the referring advisor. Sterling doesn’t quite do this—Joffe reserves the fiduciary right to fire managers even if they brought in the account in the first place—but plenty of other direct-trust-only providers do.
“We don’t compete with the intermediaries,” Reggie Karas, who runs Millennium Trust’s alternative asset business, told me. “We’re a very plain vanilla service provider by design so we can better build our business in partnership with them,” she added.
In fact, a really successful influencing relationship is always going to be a two-way street, Robert Testa says. Trust companies get the accounts, while influencers get the opportunity to prove their value as a one-stop source for all their clients’ needs—and sometimes even get prospects of their own passed back along the chain.
“Reciprocity is crucial,” he told me. “A trust company with a preferred relationship with an estate planner can suggest that person when trust documents need to be modified,” he added.
“A lot of clients who are missing a piece of their own professional advice network are at a loss. A suggestion goes a long way to getting the best outcome for everyone.”
Scott Martin, contributing editor, The Trust Advisor Blog. Steven Maimes contributed to the research and the editing
Permalink: http://thetrustadvisor.com/news/influencers
WSJ Reports on Firm That Helps Wealth Advisors Start Trust Companies
MARSHFIELD, Mass., May 28 /PRNewswire/ — The Wall Street Journal recently profiled Advisors Institutional Services in the context of increased interest from wealth managers, investment advisors, broker-dealers and other financial institutions in creating and operating trust companies in South Dakota.
Helping Wealth Firms Start Trust Companies
As the WSJ story points out, South Dakota is becoming the top choice for trust providers. With ten new launches this year and a roster of 50 institutions currently conducting trust business in the wealth-friendly state, it’s easy to see why banks and advisors alike are flocking to South Dakota.
Advisors Institutional Services helps financial professionals, law firms, pension plan administrators and banks determine whether a South Dakota-based trust company would complement their current service offerings and, if so, assists them in applying for a trust company license in the state and lining up operational support.
Most recently, Advisors International helped Pittsburgh-based fund processor Mid Atlantic Capital Group apply for a South Dakota trust charter, said President Les Revzon.
“The aging of the baby boomers has created an enormous need for trust services,” Mr. Revzon said. “Our outstanding launch team has helped both boutique wealth managers and large institutions like Mid Atlantic Capital Group – which has $19 billion on its platform — compete in this increasingly important market.”
In fact, the WSJ story highlights a 2007 study by asset manager Franklin Templeton that concluded that some independent investment advisors could see 80% of the assets they manage move into trust accounts over the next decade as aging clients retire.
“A full 40% of today’s wealthiest Americans have no will or trust in place,” Mr. Revzon said. “The opportunities for those who provide such services are enormous.”
South Dakota offers would-be trust providers numerous operational advantages, including low capital requirements, no state taxes on corporations or individuals, the ability to support all major types of trust structures (including asset protection trusts and multi-generational or “dynastic” trusts), and a favorable view on out-of-state entities setting up trust representative offices elsewhere.
For more on the opportunity that operating a trust business in South Dakota represents for financial professionals around the country, Advisors Institutional Services has published a special report, “Launching a South Dakota Trust Company: Guide to Operating Nationwide.”
Dow Jones Weighs in on South Dakota Trusts
Dow Jones is not blind to either the burgeoning interest in South Dakota as a trust-friendly jurisdiction or state regulators’ desire to make sure trust companies that set up shop are well capitalized and high quality.
Here’s an excerpt from DJ reporter Arden Dale’s recent article:
South Dakota began making a push to attract trust business with a key statute it put on the books in 1995. It now ranks with Delaware, Nevada and Alaska as one of the most popular places to set up a trust company.
South Dakota historically has attracted an especially large number of private trust companies, which are run by family members. About five years ago, though, more public companies began coming in, according to Bret Afdahl, division counsel at the South Dakota Division of Banking.
The state updates its trust law annually, through a governor’s task force on trust administration …
Bickering Senators Delay Estate Tax Fix
Posted by Scott Martin in News on May 22, 2010
More chest-pounding tactics between lawmakers imperil speedy resolution for long-term estate tax repair. Senator Baucus’ office told us deal is far from complete.
With Democratic leadership and Republicans blaming each other, it looks like negotiations to roll back the currently repealed federal estate tax to 2009 levels when it kicks back in next year have been wrecked.
A staffer in Finance Committee chairman Max Baucus’ office told me that “Republican objections” had stalemated recent progress toward estate tax clarity.
Since the deal would have given Republicans just about everything they’ve asked for, including a $5 million exemption (rising with inflation) and a 35% maximum rate, those objections were more about Senate procedure than the tax code.
From the Republican camp, John Kyl of Arizona, Senate minority whip, threw the blame back across the aisle.
“We no longer have an agreement,” he told reporters, “because the Democratic side has decided that unless a matter has a guaranteed majority of Democratic votes going in, they’re not going to allow it on the floor.”
Reading between the lines
What Kyl means is that while Baucus and other leading Democrats been ready to deal, many rank-and-file party members would probably balk any serious estate tax overhaul until after the November elections.
If the Senate does nothing, the tax resets on January 1 with an exemption of $1 million and a maximum rate of 60%. Senator Bob Casey of Pennsylvania estimates that maybe 80% of his fellow Democrats are willing to let this happen because, in his words, tax relief for wealthy families looks “offensive” given massive federal revenue deficits.
As the Baucus aide told me, it boils down to not enough votes even if all Republicans are on board. “He understands the political realities of what can pass the Senate,” she says.
Estate planners are disappointed, but not surprised.
“It can be almost impossible to cut through the Washington chatter, but it’s basically shenanigans as usual,” says New York attorney Martin Shenkman. “The underlying mood is that tax rates across the board are rising, and estate tax is part of that conversation,” he added.
Shenkman wouldn’t be stunned to see the Senate run out the clock and let the exemption reset at $1 million, even though that would expose about seven times as many families to estate tax liabilities.
Of course, that would keep Shenkman and his peers busy. Wider estate tax concerns naturally feed interest in trusts and other estate planning vehicles designed to reduce the size of a taxable estate, minimizing the eventual IRS bill or eliminating it altogether.
Paying the death tax in advance
Early gossip around the now-stalled deal focused on whether it would give people the option of paying estate tax while they’re still alive.
On the surface, the idea of transferring property into what Kyl calls a “prepayment trust” is interesting, not to mention a potential growth business for trust companies.
But in practice, there doesn’t seem to be a compelling argument for wealthy families to assign their assets to one of these vehicles and pay their estate tax in installments when they can simply go with an old-fashioned irrevocable trust instead.
While Kyl will probably keep pushing the idea in future negotiations, it’s probably not going to go anywhere.
Likewise, talk of restoring the estate tax in 2010 and making it retroactive to the beginning of the year seems to have fizzled out. Every day the Senate drags out the process makes any retroactive tax a bigger headache for executors. If we don’t get any action before November, the odds drop to near zero.
Nobody expected things to drag on as far as they have. “It’s incredible that Congress had nine years to fix this and not only waited until the deadline, but went past the deadline,” says Jonathan Siegel, a law professor at George Washington University.
“They’re like college students who waited until something was due and then pulled an all-nighter,” he added. “That’s too crazy, even for Congress.”
Scott Martin, contributing editor, The Trust Advisor Blog.
Permalink: http://thetrustadvisor.com/news/estatefix
Nevada Lawyer Offers Teleconference to Promote Asset Protection Trusts
Advisors who want to learn more about the differences between asset protection trust states should get a good running start from an upcoming teleconference.
Estate planner Steve Oshins of Las Vegas firm Oshins & Associates will be on hand on Thursday, June 10, to explain the inner workings of asset protection trusts and the differences between how different states handle these vehicles, which are designed to shield wealth from litigation.
The event is $99 and according to the promotional material there will be a Q&A at the end of the hour-long seminar.
For more details and registration information, take a look at http://www.ultimateestateplanner.com/DAPT.html.
South Dakota Sets Record for New Trust Companies
Posted by Scott Martin in News on May 15, 2010
South Dakota is becoming the top choice for trust providers. With ten new launches this year and a roster of 50 institutions shortly, it’s easy to see why banks and advisors alike are flocking to the wealth-friendly state. But despite the welcome mat, screening for new players “isn’t easy.”
This week, the South Dakota Division of Banking announced that Pittsburgh-based Mid Atlantic Capital Group, a $19 billion wealth manager and trust technology provider, applied to receive a charter. Approval is expected before July 1.
Mid Atlantic’s not the only Pennsylvania trust operation to set up shop in South Dakota. Earlier this year, Consohocken, PA-based multi-family office Sterling Trustees decided too that South Dakota’s compelling trust benefits made it better than the other no-tax dynasty trust states.
Sterling’s president Antony Joffe told me, “We picked South Dakota because we wanted the best trust law environment and thought they had what we needed.”
They just received official approval this week and are now ramping up ambitious plans to offer trust services to registered investment advisors, as well as more effectively run the roughly $500 million in high-net-worth trust accounts they already have.
Sterling is one of seven public trust company going through South Dakota’s approval process this year. Denver-based United Western Bancorp’s UW Trust Company, with $2.6 billion in assets, received its approval at the end of March.
Counting Mid Atlantic, three other applications in the pipeline, and private trust companies, and a record 10 companies have entered the South Dakota system so far this year.
One of them, Kingsbridge Trust Company, was launched by Kingsbridge Private Wealth Management of Las Vegas to complete its suite of family office services. CEO David Dunn told the Trust Advisor Blog that the process “isn’t easy,” with hours of meeting with regulators and answering tough questions. “It required a great deal of background work just to file the application,” he says.
“We’re okay with startups”
What’s driving the flood? Five months ago, Les Revzon, president of trust consulting firm Advisors Institutional, who assisted Mid Atlantic with its trust charter application, attended a meeting in Pittsburgh with Mid Atlantic VIP’s to lay out the case for why South Dakota might be the best place to host its new trust company operations.
It didn’t take more than 10 minutes for the honchos at the table to overwhelmingly agree that South Dakota would be their new home. With the benefits adding up—no taxes, dynasty trusts, asset protection trusts, directed trusts, low capital requirements and affordable on-the-ground services—they were sold. All of that sounded a lot better than posting $1 million in regulatory capital in Nevada or Delaware, big staffing costs and waiting over a year for a trust charter.
The interest in the state’s trust environment isn’t too surprising, says Bret Afdahl, counsel for the South Dakota Division of Banking.
“We’re business-friendly, which means that we want our trust companies to succeed,” he told me. “Profit is not a swear word in our state.”
Afdahl likes to discuss the advantages of his state’s trust jurisdiction, and with good reason: According to state statistics, the Division of Banking booked a record $262,651 in trust-oriented revenue last year in the form of examination and supervision fees.
To attract new institutions that measure up, capital requirements are low. A trust company needs to post $200,000 to set up shop in the state. Other centers of the trust industry like Delaware and Nevada require $1 million or more to obtain a trust charter.
New legislation kicks in July 1 to tighten the capital requirements at regulators’ discretion, but this is aimed at established institutions that might run into trouble, Afdahl told me. “We’ll keep it low on the front end to allow for startups,” he says.
Although the new rules also mandate additional background checks for principals and key employees, the South Dakota approval process is streamlined compared to other jurisdictions.
Antony Joffe got the green light in about five weeks, compared to an estimated year to move an application through the Delaware system or up to two years of dealing with the FDIC for a federal trust charter.
Nevada’s quest for modernization
By sheer number of operating trust companies, South Dakota has leapt ahead of Nevada and even Delaware.
Nevada’s lack of appeal for new trust institutions seems odd when you consider that the state went through a great show of modernizing its trust statutes late last year in order to attract new business.
State regulators wouldn’t comment on success or failure. However, a source familiar with local politics says “updating” the rules was less about making the state friendlier to public trust companies and more about setting up barriers to entry.
“You can probably read behind the lines and see that the number of public trust companies in the state hasn’t budged this year,” my source told me. “The new capital requirements make it more difficult for public companies to be formed.”
We were unable to interview officials from Delaware, but according to Bret Afdahl, the issue for that state’s regulators is “quality,” or at least exclusivity. Delaware is legendary for enforcing extremely stringent audit and residence standards that can be too expensive for smaller players to consider.
“Delaware’s rules only really allow for big companies,” he told me. “You need X square feet and Y full-time employees, of whom Z must be trust officers. It doesn’t disallow startups, but you need to be pretty big to cover the initial expenses.”
When it comes to operating on the ground in South Dakota, Sterling Trustees’ Antony Joffe is excited. He plans to set up an office and move all his existing fiduciary activities there.
“We’ll still manage some trusts here in Philadelphia on an individual basis, but we’re going to try to run as much as we can out of South Dakota,” he told me.
Scott Martin, contributing editor, The Trust Advisor Blog. Steven Maimes and senior editor Jerry Cooper contributed.
Permalink: http://thetrustadvisor.com/news/sd-record
Feds Order Trust Firms to “Unbundle” Fees
Posted by Scott Martin in News on May 8, 2010
Trust clients expecting to deduct bundled fees to the limit of the law may need to find providers who can break down fees as the IRS requires.
Two years ago, the US Supreme Court in Knight v. Commissioner held to be eligible to deduct investment management fees in a trust, they cannot be grouped together or bundled with trustee fees in one bill. As a result of this famous case, trust firms in the US are now getting ready to comply with an IRS directive requiring trustee and IM fees to be billed separately for a taxpayer to gain a deduction.
A decade ago, Michael Knight was under the impression that investment management fees for trusts were fully deductible. After all, hiring the best possible advice was part of his fiduciary duty as trustee for a $2.8 million Pepperidge Farm family trust.
He was surprised when the IRS bounced most of the deduction back, leaving the trust with a $4,000 tax bill and gnawing questions about how to account for pure trust expenses (which are fully deductible) versus investment expenses going forward. He took the case all the way to the Supreme Court, only to lose in 2008.
The Supreme Court ordered trustees to split or “unbundle” pure trust expenses from everything else if they want to make sure their accounts get all the deductions they deserve. Two years later, Knight and everyone else in the trust business is still trying to figure out how to obey that order as the IRS delays issuing firm guidance on more than a year-to-year basis.
“You know they just extended the review process again a few weeks ago,” Knight told me. “That means they’ve deferred yet again on making a decision on unbundling. At this point, I wonder if I lost the battle only to win the war,” he added.
“A real pain”
If and when the IRS makes up its mind, trust companies that currently don’t break out their expenses are looking at headaches ahead.
“The Supreme Court ruled in their favor, but I agree that if that’s what’s going to happen, it’s going to be a real pain,” Douglas Blattmachr of Alaska Trust told me.
Other trust companies are steeled for what they see as inevitable. Reno-based Dunham Trust has the accounting systems in place to unbundle its fees as soon as the government tells it to push the button, Tommy Tucker, the company’s president, told me.
“When I checked into it, my operational people said we’re ready to go,” he says.
In fact, there are software fixes out there, says Les Revzon, president of Advisors Institutional, a firm that helps trust companies form in South Dakota and provides back office support for about a dozen trust company clients.
“Most trust accounting systems like SEI, Sungard, Infovisa and HWA can easily break fees down any way the trust company wants,” he says.
While the technology may not be a hurdle, figuring out where to assign every basis point of a previously unified fee may cause some consternation. Firms like Alaska Trust simply charge one all-in fee based on assets and service level, and so, Blattmachr tells me, they’re still working on what an itemized fee breakdown would look like.
Even asking trust companies to do this is pointless, as far as Texas lawyer Carol Cantrell, who argued Knight’s case against the IRS, is concerned.
“I am not sure it can even be done,” she told me. “It would be like asking a real estate broker to unbundle his real estate commission among the various duties he performed,” she added, noting the complexity of all the unique variables involved.
“No two trusts are alike”
Cantrell points to another serious issue: What happens when trust companies disagree in how they split up the basis points, even as far as trusts administered by the same company are concerned?
On the one hand, every trust and every trust company is different, but ultimately the line-item approach will force fee allocations to converge throughout the industry, Cantrell says. That could lead to a competitive race to the bottom, but it’s not likely to happen any time soon.
As things currently stand, there’s no need to unbundle unless the IRS mandates it. The Supreme Court’s issue was not so much with fee transparency but with whether bundled fees are fully deductible. Theoretically, any trust officer could simply charge a wrap fee and accept potentially less favorable tax treatment.
In the meantime, Dunham Trust, for example, is still treating all of its fees—trust and investment management alike—as deductible. However, Tommy Tucker has talked to colleagues who are being told to unbundle and not write off a cent of their investment fees.
Michael Knight originally argued that making sure his accounts were invested in the best possible way was part of his fiduciary duty, and so investment management necessarily qualifies as a fiducuary expense. It’s a great point, and there are efforts in Congress to change the law to accommodate it.
Whether that happens this year is anybody’s guess, given Washington’s distracted and fractious mood. Nobody I talked to expects anything to shake out before the November elections, and even when it does, there could probably be a long wait before new rules go into effect.
As for Knight, he told me he’s really just scratching his head when it comes to the Supreme Court decision.
“The lack of focus on the fiduciary relationship was disconcerting to me,” he says. “Some of these judges have been in private practice. I guess they didn’t do a lot of trustee work.”
Scott Martin, contributing editor, The Trust Advisor Blog. Steven Maimes contributed to the research.
Permalink: http://thetrustadvisor.com/news/unbundling
Trust Firms’ Profits Stay Positive in First Quarter
Posted by Scott Martin in News on May 1, 2010
Full-service banks are still fighting headwinds, but business is booming in their trust departments. More specialized trust companies are making a lot of money.
It was another bumpy season for the big banks, but when you drill down into the numbers, the trust business is ramping up in terms of both activity and profits.
Most of the publicly held names in the trust industry booked a solid first-quarter profit as trust fee income expanded by about 20% to 25%. Northern Trust, Washington Trust and Westwood Trust all improved their bottom line.
The best performers attribute the improvement to a mix of tactical business development and old-fashioned organic growth. For example, Westwood Holdings, the parent of Dallas-based Westwood Trust, boosted its trust income 24% to $3 million in the quarter.
“We’ve hired a new trust officer and are hoping he will help us grow,” William Hardcastle, the company’s chief financial officer, told me.
“But about 3/4 of our new cash flows are from referrals or new assets from existing clients,” he added. “Clients are not quite as afraid as they were. That’s very welcome.”
Northern Trust reported a 25% increase in trust and other fees. Washington Trust bumped up its wealth management revenue by 16%.
|
Selected Trust Institutions: |
|||||||
|
|
Fiduciary |
Fiduciary Revenue |
|||||
|
Institution |
12/31/09 |
Change from 12/31/08 |
12/31/09 |
Change from 12/31/08 |
|||
|
Northern Trust (IL) |
$3.9 trillion |
20% |
$2.2 billion |
-4% |
|||
|
Wilmington Trust (DE) |
$185 billion |
10% |
$288 million |
96% |
|||
|
Bessemer Trust (NY) |
$47 billion |
4% |
$284 million |
18% |
|||
|
Wellington Trust (MA) |
$31 billion |
25% |
$188 million |
-4% |
|||
|
Glenmede Trust (PA) |
$18 billion |
10% |
$80 million |
25% |
|||
|
Boston Trust (MA) |
$4 billion |
14% |
$20 million |
26% |
|||
|
Lehman Bros. Trust (NY) |
$3 billion |
9% |
$18 million |
-29% |
|||
|
Haverford Trust (PA) |
$3 billion |
13% |
$13 million |
7% |
|||
|
Washington Trust (RI) |
$2 billion |
15% |
$1 million |
19% |
|||
|
Westwood Trust (TX) |
$2 billion |
29% |
$10.3 million |
-6% |
|||
|
Legacy Trust (MA) |
$1.7 billion |
38% |
$8.5 million |
23% |
|||
|
Trust Co. of Toledo (OH) |
$1.7 billion |
21% |
$4 million |
22% |
|||
|
Unified Trust (KY) |
$1.6 billion |
30% |
$13.5 million |
26% |
|||
|
Philadelphia Trust (PA) |
$1.3 billion |
18% |
$6 million |
19% |
|||
|
Source: Trust Performance Report, A.M. Publishing, Chicago, IL. and SEC website. Representative sample only; not a comprehensive list. |
|||||||
Drilling down
That’s nice for the big institutions, but most trust companies aren’t publicly traded and don’t announce their results. To get the score on smaller trust operations, we got in touch with the expert number-trackers at Trust Updates in Chicago.
First-quarter numbers are just trickling in now, but Bernard Garbo, publisher of the company’s Trust Performance Report, told me that if early indications are any guide, the rising tide is still lifting all the boats.
“Larger institutions seem to be doing fairly well, but the rest are reporting that assets are up as well,” he says.
Garbo sees the best growth potential in institutional markets like employee benefits programs and other corporate trust services. However, the biggest trend he’s noticed is that the trust companies that can squeeze the most profits out of their assets tend to be specialists.
“Institutions that tend to specialize in fewer account categories are often the most profitable,” he told me.
“That’s not to say that some full-service operations aren’t making money, but especially among the independent trust companies, it seems difficult to be all things to all clients,” he added.
Trust works when lending fails
If specialists are reaping big rewards, the reverse also seems to be true. Full-service banks where trust is only a slice of a larger service platform don’t seem to be doing so well.
Among the big integrated trust banks, Wilmington Trust lost $29 million and Marshall & Ilsley lost $140 million. Both confessed that problems in their loan portfolios dragged their results down, but it wasn’t the trust departments’ fault. In fact, both banks singled out their wealth management operations as a bright spot.
Bank analyst Richard Bove at Rochdale Securities told me this is a natural part of the business cycle.
“The trust business is all about regular fee income and incremental growth,” he says.
“Because of this, it rarely suffers when the market does poorly, and in fact can provide a buffer when the environment turns against an institution’s riskier activities.”
Wilmington has tweaked its business to take advantage of the trend. The bank saw its core trust revenue climb 11% in the first quarter and its assets under administration surge 22%, thanks in part to an aggressive new sales campaign.
“Our reputation as a superior fiduciary and service provider continues to serve us well,” Mark Graham, executive vice president of Wilmington’s wealth advisory services unit, told me, adding that new account activity is up 34% over last year.
Scott Martin, contributing editor, The Trust Advisor Blog. Steven Maimes contributed to the research.
Permalink: http://thetrustadvisor.com/news/earnings
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