Are You Selling Trust Short?

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"I see a stampede of banks out of the trust business, and a stampede of nonbanks into the trust business," says attorney, Roy Adams, who is concerned by what he sees.

This stampede is part of the charge of banks onto what was once the turf of others -- brokers, mutual funds, and money managers -- as the nonbanks encroach on what was formerly bank turf. Deregulation facilitated this activity, but what's causing the traffic is the question, Is Trust part of asset management or is asset management part of Trust?

Traditional trust advocates, like Jayne Lipe, executive vice-president of Fort Worth-based Overton Bank & Trust, say that asset management has always been part of Trust, though subsumed by its fiduciary aspect.

Experience of Trust, better relationship management and, often, "ownership" of the customers others covet are among the banks' advantages in the marketing battle for the wealthy, sources say.

Lipe, who is also chairman of ABA's Trust and Investment Management Committee, emphasized banks, expertise in the labyrinthine business of trust as their major advantage. For instance, trust assets can be beyond the ken of most brokers, she says.

"In my part of the country -- in Texas -- a lot of trust assets are in oil and gas," Lipe explained.

Fiduciaries also can offer clients financial agreements that will survive the incapacitating disability or the death of the investor, whereas "agency arrangements [simple asset managementl do not."

The new school, on the other hand, says the market for asset management -- which has no estate planning implications and which requires far fewer investable assets -- is far bigger than the trust market and relatively more lucrative.

Although there is some disagreement with the new school, most see it taking hold, starting in the late eighties, and lately assuming critical mass.

Unprecedented …