U.S. banks face serious challenges in the personal trust business, which they have dominated for years, as their trust assets and accounts decline, according to a research report released Wednesday.
Spectrem Group, a Chicago consulting firm that specializes in the affluent and retirement markets, said personal trust assets held by U.S. banks fell 10%, to $986.2 billion, in 2005 from their peak of $1.1 trillion in 1999. And the number of personal trust accounts at U.S. banks declined 23%, to 719,658 in 2005, from 929,036 in 1999. The drop was 24% from the peak year for such accounts, 2002.
The rise of nonbank trust services, a trend toward self-trusteeing (family members acting as trustees), and the fact that old-fashioned trust services are losing their appeal to younger generations have driven the erosion of the business, Spectrem Group said. Of particular concern is that this is happening as more people are reaching the age at which they would typically need personal trust services, it said.
"Everything from providing up-to-date online tools to making sure trust department staffers are skilled enough to be perceived as wealth managers" is crucial to remaining in the personal trust business, Catherine S. McBreen, a managing director of Spectrem, said in a press release. "Banks are typically viewed as more trustworthy and objective than other types of providers, so there's every reason to believe they can be competitive in this area with the proper service offerings."
