The bright spot may come through operations outsourcing, which has several advantages according to the report. By working with an outside firm, a credit union or bank may have scale in handling a greater number of transactions and assets at a lower marginal cost, experienced trust operations personnel and management, better ability to recruit and train operations personnel, more experienced IT support for the trust system. While still relatively new to credit unions, trust services are typically outsourced to cut down on startup costs.

Ellis said Celent "boldly predicts that sooner or later, bank and parent company executives will realize that a share of a profitable organization is better than a 100% share of an unprofitable one, and the consolidation will begin."

With all of the positives that could potentially come through outsourcing, Celent said the cons must be considered including the inability or difficulty to return to the self-service model once a trust company has removed or redeployed their operations staff. There is also the fear of loss of control over operations.

"In the opinion of many trust experts, this is more of an emotional or psychological concern than a true problem with outsourcing trust operations, but it is frequently cited as a reason not to move forward with outsourcing," Ellis said.

Credit unions and banks may also have a fear of a decrease in levels of customer satisfaction. However, Ellis said experience shows that while disbursements may take longer in an outsourcing model if checks are not cut locally, statements tend to be more accurate and delivered in a timelier manner after month's end.

Another con could be that the incremental levels of complexity can increase the possibility of errors if the outsourced provider does not staff appropriately in terms of skills sets or scale. The initial conversion from the in-house system to the outsource vendor is also "fraught with opportunities for errors and problems," Ellis said. Less control on future costs as outsource providers may raise fees above the growth rate of costs if operations had remained in-house, he added.

"Client satisfaction remains of prime importance, and trust personnel must be assured that clients will be served with the same or better level of service they have been received previously," Ellis explained.

The biggest factor in cost savings from operations outsourcing is the personnel-related expenses, Ellis said. While operations staffs may be significantly reduced, they can never be eliminated, he emphasized. A trust company will still need at least one operations staff person to handle a variety of tasks at the trust company and communicate with the operations outsourcer.

Outsourcing savings may also come through retention, recruitment and training costs as well as benefit savings, fixed costs associated with personnel and savings in management responsibilities. In addition to cost savings, there may be additional revenue from some outsourcing relationships where the outsourcer has proprietary funds. Ellis said this is especially true with sweep cash accounts, where the revenue from the incremental assets is shared with the outsourcing firm.

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