NEW YORK -- While still a relatively new area for credit unions, trust services continue to command a profitable niche for other financial institutions.
The top 25 financial institutions in the country hold 92% of trust assets and earn 75% of the industry's $27.6 billion in revenue, according to Trust Companies: Firms, Products, Clients, and Technologies, a new report from Celent, LLC. Currently, there are less than 2,000 community banks, regional and super-regional banks, private trust organizations, and top tier global providers offering trust services in the United States.
It is generally acknowledged that a stand-alone trust department cannot be profitable on less than about $250 million in client assets under management, the report noted. Smaller accounts traditionally are charged higher fee rates, while stand-by and insurance trusts have to be charged at a per-unit rate, due to their inactivity, which is usually $100 to $1,000 per account, according to the report.
Technologies are guiding trust organizations to the correct solutions for long-term viability including open architecture, financial planning, and customer relationship management are now meeting the requirements of modern wealth management, the data showed. The end point is the convergence of wealth management with the financial advisor assuming both an advisory and fiduciary role.
The report points out to be successful, trust companies "must blow up the investment management model and redeploy investment officers into a part of the sales and service advisory team. The sales cycle should also be shortened by making sure the business is selling unique investment management--not just trusts."