The trust industry has changed dramatically over the past several decades. Trustees’ roles have changed from the traditional prudent man to a more sophisticated investor who must be familiar with the nuances of international investment and asset management. Trustees must also become familiar with foreign property and tax laws, and stay compliant with Know Your Customer (KYC) laws.
In China, trust companies are regulated and licensed to invest in a wide range of assets. For example, they invested in the debt-ridden real estate giant China Evergrande Group by channeling bank loans into the company. Similarly, they invested in many other property developers. By September, several trust products invested in Evergrande had defaulted.
Today’s trust customers seek clarity and direction, and appreciate personal communication. Increasing productivity is one way trust companies can cater to their needs. In addition, trust departments can leverage their purchasing power by pooling accounts with similar investment goals. This approach can save trust companies a lot of money, while ensuring that employees get the job done.
Although the trust industry has seen a recovery since the financial crisis, trust companies are still facing competition from other investment vehicles. Investment dollars from mutual funds, defined benefit contribution plans, and other asset management vehicles are putting more pressure on the profitability of trust departments. This is despite the fact that the Taxpayer Relief Act of 1997 raised the limit of trust assets to $1 million by 2006.
