Recent political and economic tensions have increased the demand for trust companies, and the security and financial advantages they provide. The looming COVID-19 regulations also fueled an increased urgency to ensure estates were in order. In addition, the election of Joe Biden and the Democrats in Congress have preserved many of the Trump-era tax policies.
Although many of the nation’s banks provide trust services, most of the industry is dominated by small, independent trust companies. In fact, 94 percent of the 4,283 trust companies in the U.S. employed fewer than 20 people. Only five firms had more than 250 employees. The largest trust company, Continental Auxiliary Company in San Francisco, employed fewer than 100 people and managed more than $90 million in assets.
Many other countries require trust companies to report to a central registry. However, federal regulations are relatively weak. Trust companies must meet certain requirements outlined by the Treasury Department’s financial crime watchdog, FinCEN. These requirements require trust companies to better identify their clients and decide whether to report certain information to the government. In addition, the 1986 Money Laundering Control Act allows the government to pursue money-laundering cases against foreigners, but only six crimes are covered by this law.
Another challenge facing the trust industry is the need to differentiate between simple trust structures and complex trust structures. Complex trusts require a strong and well-funded trustee. In addition, many families only select a trustee once and do not recognize the disadvantages of choosing the cheapest provider. For this reason, corporate trustees need to explain their value proposition and provide a value proposition.