More than 80 per cent of bank trust departments expect to
use more third-party funds over the next two years, according to research by
Cerulli Associates, the global analytics firm.  

The October 2013 issue of The Cerulli Edge-US Asset Management Edition examines bank trust
officers and their high-net-worth clients, wholesalers targeting high net worth
advisors, and young investors' use of direct providers and financial
advisors.  

"For a number of years, individual investors, families,
and businesses have opted for bank trust organizations to provide and implement
wealth management advice," Donnie Ethier, senior analyst at Cerulli, said.

"Conventionally, high net worth and ultra high net worth households have
elected bank trusts as a way to minimize taxes, enrich philanthropy efforts,
and enhance estate planning. Bank trusts have always been a top destination for
asset managers, but the focus has intensified in recent years," Ethier said.  

"While trust officers often serve as the
decision-makers by evaluating managers and composing portfolios, many banks
have transferred these responsibilities to other centers of influence,"
Ethier added. "Banks' most frequent tactic is to empower a centralized
research team with the authority to make all decisions on external
managers."

Asset managers find national banks, "super-regionals," and
local bank trusts similarly attractive, regardless of their history of using
external managers. This overall optimism may cloud distribution efforts,
specifically when constructing sales forces. In addition, the long sales process
will most likely reflect an institutional-like transaction, Cerulli said.

"Asset managers should be aware of concerns among trust
companies," Ethier said.  "While the majority of bank trusts
anticipate assets shifting to third-party managers in the next two years,
another three-quarters of bank trusts identify the acts of researching external
managers, and building a research group to do so, as their greatest challenge
in moving the needle," Ethier added.