High-Touch Means High-Tech in Trust Banking

During his career in bank technology, Michael Davis has handled projects involving transaction accounts, loans, and the general ledger, among other key back-office tasks.

But the Crestar Bank vice president recalls his surprise when he moved into the Richmond-based bank's trust operations nearly a decade ago.

"I was quite amazed by what I learned," said Mr. Davis. "I would suggest to you that trust systems are the most complicated of all bank systems," with the possible exception of check proof of deposit.

Personal trust, the consummate high-touch business, has long relied on complex accounting systems. But in the 1990s, trust bankers say, technology has become more important than ever before.

Spending on trust systems reached $2.5 billion last year and is expected to grow 15% annually, according to the Tower Group, a consulting firm in Newton, Mass. That's more than twice the rate of growth for all bank technology investment.

New and upgraded systems to track contact with customers are improving service. Asset allocation and multicurrency accounting tools are aiding portfolio managers in boosting performance. And the explosion of interest in the Internet and accessing accounts through personal computers includes a growing number of trust clients.

"In order to maintain margins, in order to maintain efficiency, and ultimately to maintain personal service, you have to have the most up-to- date technology available," said John C. Hover, executive vice president of U.S. Trust in New York.

Donald J. Herrema, chief operating officer at Bessemer Trust Co. in New York, said, "There are some individuals who think there is a contradiction" between high-touch and high-tech for trust banking. "But there is not."

Mr. Herrema explained, for example, how storing digitized images of documents can lead to improved customer service.

"Our clients now can call us up if they want to talk to a relationship officer about something that's in their will on page 6," he said. With image technology, "our officers pull that up on their screen and refer to it, versus having to obtain that from a central file room."

Banks are also pouring resources into systems the better to track their customer relationships.

Two years ago, Crestar began to build a client management system that would provide swifter, more efficient service, said Mr. Davis.

All too often in the past, he said, the complete range of client relationships was followed on an ad hoc basis - note cards, folders with papers, or in the minds of relationship officers.

Crestar first considered buying an off-the-shelf system to manage customer relationships. But Mr. Davis said the bank decided the available systems were too focused on sales.

"The type of information and the relationships of that information can be very complex," said Mr. Davis. The system must track multiple accounts, different ownership arrangements, co-fiduciaries, and beneficiaries, and it must be sensitive to varying demands for confidentiality.

"We could not find anything in the marketplace to do this," he said.

The bank wanted a tool that put greater emphasis on service and one that could be effectively integrated with its accounting systems. It is a customer of SEI Corp., the Wayne, Pa., supplier of trust software and processing services.

Crestar, which began to deploy the system 18 months ago, is now using a fourth version of the client-server technology. A team of four employees is charged with supporting and enhancing it. About 300 bankers now use the system.

But while the client management tool now tracks all trust-related matters, it is not integrated with systems for nontrust products.

Crestar wants that to change. "Our customers expect us to work with them and support them with their checking accounts, savings accounts, and loans," said Mr. Davis.

While relationship officers are able to deliver that information, it requires looking at multiple systems. Crestar plans to roll out technology next year that will offer a comprehensive look at customer account relationships on a single platform.

Crestar's system - like many in trust banking - relies on sophisticated technological support but aims to keep that hidden from the customer.

"We find that in the very upscale end of the market the customers are most interested in service," Mr. Davis said. "They want to be able to call somebody, and they want an answer now."

But bankers say there is a growing interest among customers in using personal computers to view accounts, send electronic mail messages, or transact business.

"Is it the majority of our clients? No," said Mr. Herrema of Bessemer Trust. "But an increasing number of them, yes."

About 2% of all customers bank by PC. But there is evidence that middle-class and affluent investors like the convenience of PCs. At Charles Schwab & Co., for example, more than one-fifth of the trades for its 3.8 million active accounts are initiated by personal computer.

But experts agree that interest in remote access will grow more slowly in trust banking - both because of the nature of the accounts and of customer preferences.

"An awful lot of the wealth is controlled by people who are not brought up with the computer," observed one banker, "and therefore, a lot of the wealth over 45 years old has no idea how to turn on a computer. So electronic transmission is not important to them."

Other trust bankers note that many clients, concerned about privacy, don't yet trust remote channels.

But Octavio Marenzi, a Tower Group consultant, said PC access will likely grow very fast. Trust clients are affluent, tend to have access to PCs, and will increasingly be interested in tracking their portfolios' performance, he said.

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