The trust industry has been bombarded with threats from nonbank competitors for a number of years now, but never so brutally as during the past year.

All through the '90s, and even before that, there has been an urgent plea to rethink the way the industry approaches it's market. One way has been to expand beyond trust in the literal sense, to offer a broader range of asset management services.

Some institutions have eliminated the word "trust" from their department title. While this is an admirable step intellectually, many of these departments have yet to change their views of the customer, or the most effective means to deliver services.

During the past year mutual fund companies and brokerage houses have sharpened their focus and devoted more advertising resources toward generating life-stage asset management relationships.

These products and services take on many different appearances, from asset allocation to life-cycle investment management programs, to living trust relationships. Estate planning services are provided by many of the large Wall Street firms.

All these services are aimed at accomplishing two objectives:

* Improving client retention rates at a time when their clients may otherwise choose to take their business to a bank trust department;

* Capturing more of the clients' assets.

Many in the trust industry have been concerned with this encroachment for several years, but the recent inroads aggressive nonbanks have made on the individual account front in terms of wrap and allocation accounts and trust services are even more bothersome.

The Wall Street community is concerned that the mutual fund companies will capture the better clients, and this threat has translated into an aggressive marketing battle from both camps. If trust bankers are to have any chance of benefiting from the phenomenal opportunities brought on by the aging population, their view of and focus on the market, services, and service delivery must change dramatically.

There are many key tactics to implement this strategy, such as product focus, new product development, and enhancing the marketing and sales efforts. One such key tactic of this strategic process is to attract clients at a younger age -- before competitors nab them.

One way for trust departments to succeed at this strategy is to shift their approach to one of true asset or investment management. Investment alternatives must include a variety of mutual fund and investment pool vehicles which are put together in an allocation approach based on the client's age, income, tax profile, and retirement needs.

Dramatic changes must come in marketing and sales, as well as service delivery. The sales aspect requires a far greater need for broader marketing and promotional resources. Bank cross-selling and referral programs must operate at a level unheard of today.

Banks need to develop the ability to profitably service a lower-balance account. This requires major improvements in efficiency and productivity, and new applications of technology. Account administration will likewise change.

While many of these changes seem dramatic, the markets and the rules of the game have changed. Making the necessary adjustments will assure the trust industry of being a major provider to our aging population.

The key is to position ourselves at a much earlier stage of the client's life, when he is entering into the savings years, instead of waiting for that client to reach retirement age.

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