CHAPTER XV

THE TRUST COMPANY QUESTIONNAIRE OF 1925.

The principal single source of information for the discussion of current problems of trust company development contained in the following chapters is a compilation of the trust company questionnaire of 1925. Other sources are: a personal investment experience questionnaire sent to representative groups of 3,500 residents of one of the largest cities in the United States in the fall of 1925; statistical data contained in the annual reports of the banking commissioners of the various states; voluminous discussions in the aggregate on most of the current problems contained in the Proceedings of the Trust Company Division, in articles published by the Trust Companies Magazine, and general financial and banking statistics.

In the fall of 1925, a comprehensive questionnaire was sent to 2,200 trust companies and to 300 national banks which have been granted fiduciary powers under the provisions of the Federal Reserve Act. The following are the subjects of the questions contained in this questionnaire:

Question I

Question II

Question III

Question IV

Question V

Question VI
Question VII

Size of the smallest acceptable and of the smallest desirable trust fund.

Investment policies with reference to the investment of trust funds-discretionary trusts and legal trusts.

Origin and development of trust company services-attempting to obtain historical material and also the relative profitableness of the various types of service.

Methods preferred for obtaining new business; corporate trust, personal trust, bond department, and banking.

Request for suggestions as to the best way to classify trust company services.

Policy as to the giving of investment advice. Special services offered, peculiar to the particular institution.

Question VIII

Question IX

Question X

Question XI

State of incorporation and date, purpose of and conditions surrounding the founding of the trust company.

Names of the trust companies.

General public's understanding of the nature of trust company service.

Factors responsible for rapid growth of trust company business in the last decade.

Question III, asking for information concerning the origin and development of trust company services, was intended to furnish the basis for the second part of this study on the history of trust companies in the United States, but very little information was gained as to the earliest dates of specified services. As a matter of fact, the question was asking too much; still a considerable number did give leading information which has made possible a better treatment of the history of the trust company. In Part II of the book a number of references have been made to this part of the questionnaire. Question V, requesting suggestions as to the best way to classify trust company services brought only three or four replies and these, together with a study of the various classifications which have been made in the past, finally led to the classification which was presented in Chapter II of Part I of this book. Question VII was expected to give supplementary material to Question III, and a number of interesting replies to this question will be noted later. Questions VIII and IX were not intended for publication, but were required in order to be able to test out the replies as to their representativeness of the trust companies of the country as a whole. The problems covered by the questionnaire, then, narrow down to the following:

1.-Expansion of trust company services.

(a) Question on size of smallest trust funds.

(b) Questions on historical background.

(c) Special services question.

(d) Factors responsible for the rapid growth of trust companies. 2.-The investment of trust funds.

(a) Question on investment of trust funds.

(b) Question on size of smallest trust funds.

3.-The education of the public.

(a) Question on publicity methods.

(b) Question as to extent public has an understanding of trust company service.

4.-The Bond Department.

(a) Question as to policy in giving investment advice.

There are other pressing current issues facing the trust company as an institution, such as the relationship between trust companies and lawyers, the relationship between trust companies and insurance companies, the problem of the competition of the individual fiduciary, the problem of competition of the trust departments of national banks and the problem of proper fees for trust company services; but these issues have been actively studied for a number of years now by the Trust Company Division of the American Bankers' Association, and furthermore the questionnaire was already too long, without including questions on additional subjects. The bond department problem would naturally call for questions of a more specific nature than the one included in the questionnaire, but it was feared that too pointed a question as to this subject would have sent many of the questionnaires to the waste basket which otherwise might stand a chance to be answered.

In spite of the formidable appearance of the schedule, the response of trust company officials was so generous that the returns are quite representative of the country as a whole; and the careful attention given to the details of each question by many of the individual trust company officers is most gratifying. It is believed that the compilations of the returns throws considerable light upon certain of the current problems facing trust companies at the present time, and the following chapters will be devoted to a discussion of those subjects, accompanied by illustrations from the data collected by means of this questionnaire, by means of the "Personal Investment Experience Questionnaire of 1925" and other pertinent data.

The first question to be answered with reference to such an investigation is, "Do the results give a picture which is representative of the country as a whole?" No confidence can be had in the figures until it is known that replies have been received from a sufficient number of institutions and that those

institutions replying are sufficiently diverse to represent the country as a whole. Obviously there were not as many returns as there were questionnaires sent out.

Of the 2,200 schedules sent to trust companies, 334 were returned with replies made to most of the questions. Of these 334 trust companies, there were seventy-nine which reported that they do no fiduciary business. This leaves a net of 255 trust companies actively engaged in fiduciary services which made replies to the questionnaire. Every state in the Union is represented with the exception of Nevada, New Mexico, and North Dakota; and in those states trust company business can hardly be said to have started. A return was received from a national bank doing a fiduciary business in North Dakota, so that Nevada and New Mexico are really the only states not represented. A larger number of returns were received from states in which trust companies have been more highly developed, such as California, Connecticut, Indiana, Massachusetts, Illinois, Missouri, New Jersey, New York, Ohio, and Pennsylvania. Replies were received from fifty-seven of the national banks, of which thirty-nine indicated that they are actively engaged in fiduciary business. These replies are representative of over half the states of the United States, including California, Delaware, Illinois, Michigan, Missouri, New York, New Jersey, Ohio, Pennsylvania, Virginia, and Washington. So it may be concluded that the replies received constitute a representative sample of the corporate fiduciary institutions of the country as a whole; that is, it is representative geographically.

Another way to test the representativeness of the sample is by the test of age of trust companies making replies. An objection might conceivably be made that only new institutions would reply, their interest naturally being great, due to the fact that they would like to profit by the experience of some of the older institutions as it would be portrayed in the results of the questionnaire. (Copies of the compilation of replies were promised in the letter transmitting the schedule of questions.) The old established institutions might be presumed to consider that they are already firmly established in the trade and do not care to be bothered either with filling out a tiresome questionnaire or with reading about the results.

But the nature of the returns completely expels this assumption as to the attitude of the older institutions. The following table indicates the distribution of trust companies heard from, according to date of establishment of the trust company:

The total number is less than the total number of returns because some of the trust companies failed to turn in a birth certificate; but there are sufficient to indicate that the returns are from a representative group of trust companies so far as age is concerned.

Again, it might be objected that only the smaller trust companies would reply, because the larger institutions would not display as much interest in such a piece of research work as the questionnaire represents. Another person might argue the opposite contention, making a different set of assumptions. This objection may be successfully met in this case, and the argument fairly well established that both small and large institutions were quite equally interested, and institutions large and small took great pains to give as complete replies as possible. The following table shows the distribution of the replying trust companies as to total assets: