This total is less than the total from which replies were received because some of the trust companies did not give their names and it was therefore impossible, of course, to look up their total assets.

The average size of the trust company for the United States taken as a whole is about $6,250,000.1 The average size of trust companies replying is about $10,000,000. It would be expected that the average in the sample would be somewhat larger than the average size trust company of all trust companies, because of the method of selecting those to which the questionnaires were sent questionnaires were not sent to the very small trust companies, nor to some of the smaller trust companies in large financial centers. The significant thing is that the frequency distribution shows a wide variation and therefore a representative group of trust companies.

In the discussion and interpretation of the data compiled from the returns, a greater confidence may now be felt due to these tests of the representativeness of the sample.

1 Calculated from data in Trust Companies of the United States, 1925, U. S. Mortgage and Trust Company of New York.

CHAPTER XVI

EXPANSION OF TRUST COMPANY SERVICES

Some idea of the rapidity of the development of trust companies in this country during the first quarter of the present century has been gained from the history of trust companies contained in Part II. During the earlier portion of that period the most rapid expansion was in the corporate trust services of the trust companies, and the rapid expansion was met by the adjustment of the organization and administration of trust companies; for example, the great volume of service involved in a single undertaking and the nature of the service required largescale organization, and there has been a period of manifold trust company consolidations. The problem of organization for corporate trust service expansion is an old one, and at least partially solved. It is in connection with the expansion of the personal trust services that lie the elusive and difficult problems, because the present is a period of expansion of personal trust services. At the same time the assumption is not made that growth has ceased in corporate trust work; on the contrary the indications are that the development of this branch of trust company service will continue to be rapid. But most of the problems of handling this increasing volume of corporate trust service are solved and future expansion may readily be accommodated by existing types of organization.

The nature of personal trust service is such as to demand first of all an institution of unquestioned financial strength. Hence the ideal trust company engaged in the performance of such service is one with extensive financial connections and powerful in capital resources. On the other hand, as has been pointed out in another connection, the service is one which requires or seems to require that each fiduciary, individual or corporate, shall not undertake personal trust service on such a large scale as to lose touch with the individual trust account and particularly with the human and very personal problems peculiar to each trust.

Thus the dilemma presents itself in this way: whereas a large financial institution is needed to gain the necessary confidence for obtaining personal trust business, an organization must be created which will operate with all of the advantages of a small institution in so far as those advantages have to do with the personal relationships between the officers of the trust department and the customer. In the past this difficulty has been solved by reason of the fact that the other related services of the trust company require large-scale organization for their most economic performance; such as the corporate trust services, the savings bank services, the various insurance services, and the bond trading and other banking services. From this fact, the trust companies have grown into powerful financial institutions, with resources adequate to win the confidence of possible customers for personal trusts. During this time, for the most part, the trust companies have cultivated merely the cream of the business in the field of personal trusts, the estates being relatively small in number and relatively large in size. To handle these the organization of the personal trust departments has not been put under an unreasonable strain. But during the past decade or more the trust companies have launched a campaign for general personal trust business, advertising for small as well as large estates. By reason of the fact that the institutions are well established and financially powerful, the confidence of the public is rapidly being won and the personal trust business is expanding. When the large amount of business representing the great number of smaller estates begins to increase the demands for the personal trust service of trust companies, then the strain upon present systems of organization will begin to be felt.1

The personal trust service of the trust company is a service for accumulated property, whereas the service of such institutions as savings banks and insurance companies is for the accumula

1 "One of the larger problems of the immediate future will probably be in connection with organizing for the handling of greatly increased volume of business." Sisson, Francis H., "New Avenues and Objectives for Developing Trust Company Service during 1926," Trust Companies, Vol. 42 (Jan., 1926), pp. 15–7.

tion of property. Some idea of the future for personal trust work may be gained by an examination of the amount of life insurance which has been written and the rate of increase of life insurance business. In 1900 the total amount of life insurance in force in the United States was $8,560,000,000; and by 1925 this had increased to approximately $63,780,000,000.1 In 1925, the new insurance written amounted to more than $15,000,000,000.2 It is to the creation of personal trusts that trust companies are turning their attention at the present time in seeking new business under the head of "insurance trusts."

The aggregate of savings deposits of the United States is equally imposing. Savings deposits in savings banks have increased from $2,389,720,000 in 1900 to $9,065,181,000 in 1925. The aggregate of savings deposits in 1925 in all state banks, trust companies, national banks, and mutual savings banks amounted to $23,134,052,000. The assets of building and loan associations aggregated nearly five billion dollars. The extent to which trust companies can profitably cultivate this vast aggregate of cumulated and cumulating property for personal trust service depends upon the range of size of the units of ownership. Just at what point an accumulation of individual property is large enough to come within the realm of the field of personal trust service depends upon two conditions:

1. The potential demand for the personal trust services of trust companies will consist of the aggregate of those individual estates, where the individual estate is large enough so that the owner can afford to pay a fiduciary (as trustee or agent) a fee to handle the investment of the estate. This will be at that point where the earnings per $100 of investment is greater than savings bank interest (by reason of the fact that the fund is handled by a fiduciary), by a large enough margin to pay the fiduciary's fee, and enough more to induce the owner of the funds to make the change.

1 Statistical Abstract of the United States, 1925, pp. 296–7.

2 Sisson, Francis H., "New Avenues and Objectives for Development of Trust Company Service During 1926," Trust Companies, Vol. 42 (Jan., 1926), pp. 15-7.

* Statistical Abstract of the United States, 1925, pp. 255-71, 276.

2. The potential supply of personal trust services which will be offered by trust companies will be measured by the aggregate of those individual estates, where the individual estate is large enough so that the fiduciary can charge sufficient to make the operation profitable to itself.

The field of service thus ranges from personal trust services for very large estates on down to personal trust services for the smaller estates, and the question presented is: How far down the range, as the estates are smaller and smaller, can the trust company afford to seek business? It is obvious that if the number of smaller estates is large enough, the aggregate of funds handled may be very great. A large enough number of small estates may aggregate a far greater sum than a small number of very large estates.

There have been two outstanding efforts to study the actual distribution of capital in the United States by the use of probate statistics. The first of these is the collection of data on the value of estates probated in Massachusetts during four different three-year periods, viz., 1829-31, 1859-61, 1879-81, and 1889-91, the years in each case being inclusive.2 The second study has but recently been published and was made by the Federal Trade Commission. This commission made an analysis of the distribution of capital in the United States by making a study of probate records in selected counties in various states of the United States. The agents of the commission secured data for a total of 43,512 estates from county probate court records in Massachusetts, New Hampshire, Maryland, District of Columbia, North Carolina, Georgia, Texas, Oklahoma, Kansas, Idaho, Iowa, Wisconsin, and North Dakota. The counties visited were selected with a view not only to their geographical distribution but also in such a way as to be fairly representative of three general population types, viz., rural, town, and city. For each county taken a report on every estate

1 But see Hodopp, H. G., "Trust Company Advertising," Trust Companies, Vol. 34 (April, 1922), pp. 393-5, for a study of size of estates in Minneapolis.

2 Twenty-fifth Annual Report of the Massachusetts Bureau of Labor, pp. 265-7. Cf. King, Willford I., Wealth and Income of the People of the United States, pp. 65-100.