ference, the field of operations will be narrowed considerably more than if the corporate fiduciary assumes the initiative to obtain such a conference, seeking to accommodate itself to the client's convenience. 1 Personal solicitation is frowned upon by the ethics of the legal profession in the case of testamentary trusts, and one of the criticisms of corporate fiduciaries by certain members of the legal profession is that corporate fiduciaries "drum" for business, that they are like "ambulance lawyers." But the accusation goes on to say that they are even worse because they go to the extent even of going after the business "before the man dies." But nowadays the well-informed lawyer does not criticize the solicitation of testamentary trusts, provided the trust company does not hold itself out to do, or actually render the legal service incident to drawing wills. So long as the trust company confines itself to the business of settling estates and handling trusts, the lawyer has no cause for complaint. Partly due to the hint of a taint thus involved in the solicitation of testamentary trusts, a new note is being struck in the advertising and solicitation work of trust companies for personal trust business which looks upon the task of the corporate fiduciary as one of building up a group of services which will enable it to coöperate with individuals in working out the financial plan of their future, whether living or dead. The emphasis in solicitation and advertising is thus on living trusts on the theory that "the best foundation for post-mortem administration of estates is the confidential relationships that come about through living trusts, custodianships, agency and investment service."3 1A. K. Montrose, "Some Defects in Trust Companies," Virginia Law Register, Jan., 1911, pp. 641-7. 2 Cf. supra, pp. 53-5 and 365-70. Blodgett, Harvey A., “Co-ordinated Publicity Plan for Building Trust Business," Trust Companies, Vol. 36 (Jan., 1923), p. 73. CHAPTER XIX OTHER PROBLEMS OF THE CORPORATE FIDUCIARY BRIEFLY CONSIDERED To enumerate all the problems which confront the corporate fiduciary in the course of the operation of its business would be to enumerate nearly all the problems of investment by individuals, as well as practically every conceivable problem which is met in the course of business enterprise in general. This is because the corporate fiduciary is a sort of partner to enterprise and its services to corporations entwines it in the general conduct of the business as well as in the specific tasks which it performs. There are a number of problems, however, which are outstanding in the sense that they are common to all corporate fiduciaries and in the sense that they are peculiar to corporate fiduciaries as an institution. The problem of expansion as related to corporate fiduciaries has been considered, as have also the problem of investment of trust funds and the problem of selling fiduciary services. There remain five other major problems: (1) the offering of free investment advice, (2) the relationship with lawyers, (3) the competition of individuals as fiduciaries, (4) the bond department, and (5) fees for corporate fiduciary services which is intimately related to the profits in fiduciary service. Some of these problems have been considered in other connections. The offering of free investment advice, fees for corporate fiduciary services or profits from fiduciary services, and the competition of individuals as fiduciaries, will now be discussed. Investment Advice. In the personal investment experience and opinions questionnaire there was included a question on the analysis of personal investments. The question is reproduced below as it appeared in the questionnaire: Question V-(a) Do you personally, or through an agent, periodically analyze your list of investments? (b) How frequently? (c) Do you make this check i-As to values? ii-As to proper distribution or diversification?- iv-As to marketability? (d) Do you think such a service should be performed by a responsible financial institution, say a trust company? (e) If such a service were offered would you be willing to pay a fee for it? (f) Would you prefer to have this advice come from a special organization for that purpose alone, rather than from a trust company? Why? Of 50 replies to the question "Do you personally, or through an agent, periodically analyze your list of investments?" 13 said that they made no periodical analysis of their portfolios, 35 replied that they made such analysis personally, while 2 replied that they made such analysis through agents. The frequency of such attention varied from a weekly one to an annual one. The majority are quarterly, semiannually, or annually. Some said "constantly"; some said "no definite time"; while one said "when I buy them," and one said "The price of safety is eternal vigilance and constant change." More of them made checks as to values and yields than as to proper distribution or diversification and marketability. In reply to the question "Do you think such a service should be performed by a responsible financial institution, say a trust company?" 34 individuals said "Yes," and 11 said "No, such service is not needed." When asked "If such a service were offered would you be willing to pay for it?" 24 answered "Yes" and 19 said "No." In reply to the question "Would you prefer to have this advice come from a special organization for that purpose alone, rather than from a trust company?" 14 said they would prefer a special organization, and 19 said they would prefer the trust company. Following are the comments made on this question: 1.-Comments favoring the special organization rather than the trust company as a source of investment advice, A trust company is not in as close touch with changing conditions as a responsible broker or bond house is. Specialized service is better than general. As a rule trust company officials are only salaried men and I have found my judgment better than theirs on numerous occasions. Believe organization gives results-would prefer special organization for the purpose. Believe trust companies are too conservative to see things in their true light. A specialist should be better than a general practitioner. Believe in specialization. I find that the average employee of a trust company or financial institution does not know how to analyze a statement, nor have they the time. Trust company officials have neither the time nor ability in 98% of the cases I have seen. A specialist is more apt to know all conditions. I don't believe that a trust company should make a specialty of such a service. Special organization because of the more specialized personnel. Special organization would be better able to handle it-specialization is a good thing. Trust companies are pretty good on bonds and real estate, but not on stocks. 2. Comments favoring the trust company rather than the special organization as a source of investment advice,— I think trust companies are more reliable. There would be a greater possibility of securing practical tested advice from an organization as a trust company which is actually engaged in investments concerning the whole field. The average person is a poor judge of investments-good trust company officials are dumb but safe. Special organizations start out well but end by grinding their own axes. Trust company better qualified. Would rather have an organization which is interested in me, like a trust company-they can get special service. If the trust company has a proper department, prefer the trust company to a special organization. Object to special organization for the following reasons: a.-Responsibility less than if it were a trust company of standing. b. Advice might be to operate for their own interest if not a very responsible institution. c.-Trust company of high standing would be more dependable in these respects. Trust company is the logical advisor for the people equipped to perform that service and well organized. A properly functioning trust company is a valuable institution in the community. Rather have it come from a trust company-always a skepticism for special organizations. Policies of Corporate Fiduciaries in Giving Investment Advice. The trust company questionnaire included a group of questions with reference to policies of giving investment advice. The questions were: (1) Do you have a separate department for giving investment advice? (2) If not, what officer or officers give such advice? (3) Is advisory service on investment matters free? (4) If not, what charge is made? Of 230 corporate fiduciaries replying to the first question (27 national banks and 203 trust companies), 192 replied that no special department for giving investment advice is maintained, while 38 said that such a separate department is maintained. Two of these separate departments are described as "subsidiary," and several are described as "bond department." There were 267 replies from corporate fiduciaries on the question "Is advisory service on investment matters free?" and of these, there were only 5 which replied that a charge is made. Following are some of the comments with reference to this question: Charge made for cost of investigation when expense is incurred in checking. Actual cost of securing data charged. No charge made-we usually sell our bonds. No charge made, if we sell our bonds, but 14% charge on bonds purchased outside or a minimum of $5. Only charge made is as we make profit on securities we sell. The following is a summary of replies to the question "If not, what officer or officers give such advice?" |