Trust Updates Archive

20070508--TRN, BofA Bank Trust Departments Undercharging for Services

November 6, 2007--Chicago, IL)--Most bank trust departments are undercharging for their services, according to the Fiduciary Income Report analysis of stand-alone trust companies.

The report is a study of trust companies' income and expenses, examining both profit margin and return on assets.

According to the report's authors, trust companies that focus or limit their services to one or two account categories (such as, personal trusts, employee benefit, investment management agencies, or custody accounts) report significantly higher profit margins.

Trust companies on average netted 23 cents for every dollar of gross revenue, significantly higher than average net earnings reported by bank trust companies.

The report also provides return on assets data by account category -- both by gross revenue and net income.

"Return on assets is not an indicator of profit," says Christine Thompson, a Fiduciary Income Report analyst, "but it serves as a useful benchmark for evaluating an institution's fee or pricing structure."

For employee benefit trusts, investment management agencies, and custody accounts, stand-alone trust companies charged significantly higher fees than bank trust companies. Fees were also higher for personal trusts. The only category in which banks trust departments reported higher fees was in "other fiduciary accounts," which for the purpose of the report includes corporate trust and agencies.

Thompson notes, "A surprising finding was that stand-alone trust companies are able to generate 4 times more revenue from their custody accounts, than are most bank trust departments." She adds, "the only bank trust departments that generate similarly high custody fees are generally those that provide only custody services."

Regarding expenses, salaries and benefits remain most trust companies' largest expense item, while surprising little is devoted to marketing.

The Fiduciary Income Report, a sister publication of TRN and Trust Performance Report, provides annual updates on fiduciary income and expenses. Annual subscription rate for the 24-page report is $395. For more information, e-mail

For more on this topic, see the current issue of the Fiduciary Income Report.

No statement in this issue is offered as or should be
construed as legal opinion or advice,
nor is any
statement or data intended as or should be construed
as an indicator of future performance.

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