Trust Updates Archive

American Bankers Association Training National Trust School Graduate Audits Fiduciary Earnings Expenses AARP A.M. Publishing Bernard Garbo Training—Spending Declining, As Brain Drain Looms

(Aug. 4, 2014 --Chicago, IL) -- Since the financial crisis, more employees are delaying retirement giving businesses extra time to address the "talent drain," wave of baby boomers retiring. While this would suggest increased investment in training, trust institutions are spending progressively less on training than in prior years, according to preliminary findings by Fiduciary Earnings & Expenses, TRN's sister publication. Smaller trust institutions, however, are devoting a larger portion of their total expense budgets to training, than in the last two years.

As baby boomers retire, say industry sources, businesses lose the institutional knowledge they take with them, as many organizations lack sufficient knowledge transfer programs to stem the loss. This, say industry experts, makes spending on training essential to maintaining the quality of their service.

The American Bankers Association, which has been offering trust schools since 1960, including its National Trust and Graduate Trust Schools , says that, while banks recognize the need to manage talent, they often commit inadequate resources for it.

A recent study by the AARP and the Society of Human Resources Management found that 72 percent of human resources managers see the impending loss of talent as a problem. Various estimates suggest, however, only a third of companies have prepared for this loss of talent.

According to preliminary findings in Fiduciary Earnings& Expenses' upcoming report, average spending on training in 2013 was down across all peer groups. Among larger institutions, those over $1 billion, it was down 30 percent, while for smaller institutions it down 50 percent. This follows increases in the prior two years.

When viewed as percentage of the total expense budget, large institutions reported a decline, but small institutions reported an increase in the allocation to training. This would suggest that overall expense budgets for smaller institutions have been notably shrinking.

FEE found that on average most trust institutions consistently spend more on entertainment than they do on training. The exception is independent trust companies, which spend on average nearly twice as much on training than do bank-owned trust divisions. Independents also generally report higher profit margins and return on assets than do bank-owned trust divisions.

Increased Productivity

Training has the dual impact of educating staff and boosting morale, which generally leads to increased productivity, according to numerous studies.

A Towers Watson study found that companies that engaged employees through training financially outperformed those that did not by a factor of four.

Effective training programs enable learners to "try, practice, and apply," according training experts. An element of this is case studies.

The American Bankers Association's National Trust School and Graduate School increasingly focused on case studies. The week-long schools, held September 14 - 19, provide a mix of case study work combined with classroom teaching.

The National Trust School is designed for trust executives with less than 10 years experience. The Graduate school is geared toward trust executives who have completed the National Trust School or have 10 or more years experience in the field. Students must be nominated by their bank in order to attend.

While training can be expensive, both bankers and industry consultants, say institutions can leverage their spending by having officers who have attended off-site training give presentations to staff.

According to one banker, while his institution was hiring more staff as business volume was expanding, they were less experienced than senior officers who were retiring. In the wake of this retirement, he notes "we had more officers with but with less collective experience."

This confirms finding by studies from Boston College's Center on Aging and Work that even though most institutions recognize the looming brain drain, many are not making plans for the impact it will have on their operations.

Based on findings by Fiduciary Earnings & Expenses, either trust institutions feel confident in their knowledge transfer programs or many may find themselves with an under-experienced staff.

For a more detailed review of this topic, see Trust Regulatory News and the upcoming edition of Fiduciary Earnings & Expenses 2014.

No statement in this issue is offered as or should be construed as legal opinion or advice or as an indicator of future performance.
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