Trust and estate business was once a major part of the banking industry. Over the years, brokers, investment advisers and lawyers, all wanting part of the lucrative market, have eroded this business. One of the reasons for the decline has been in the poor handling of sales. In the past, banks generated new business by relying heavily on personal contacts. However, with increasing competition business cannot be handled that way any more. Trend statistics within financial services over the last few decades highlight this:

   the number of firms managing money for individuals has increased more than six-fold

   employment and the number of firms managing money and registered with the Securities and Exchange Commission have more than tripled

   mutual funds have grown more than 10-fold

   banks, insurance companies and trust companies account for less than 30 per cent market share of investment accounts, down from 70 per cent in 1969

   nearly every major brokerage house is now in the trust business.

Internal marketing

According to William F. Ottinger, senior vice president marketing at Boatmen's Trust Company, St Louis, USA, success in the trusts markets isn't a mystery, but the sum of many small things done well. To compete in this market requires delivering very high quality, and trust service levels thrive externally when they are successfully promoted internally. ‘It sounds simple enough’ says Ottinger. ‘But actually accomplishing it is another story. At Boatmen's we're always looking internally at ways we can make the trust company and the bank work together. Otherwise, you forget where the customer is in the process.’

Internal selling

The essential first step in any trust marketing effort is selling internally. Senior management needs to buy into and give priority to the importance of non-interest income to all areas of the bank in order to make the internal marketing programme work. This helps remove many internal barriers.

Senior management need to agree on the need to stimulate trust business within a banking organization, and make an unswerving commitment to remove any territorial disputes.

Prospecting internally means getting retail and corporate bankers to be encouraged to refer, without reservation, customers to the trust department. The Boatmen's Trust Company generally seeks prospects with $200 000 plus in liquid assets. Of the bank's 2.5 million customers, 5 per cent fall into this category, creating a pool of opportunity for the trust company in its own backyard.

To prospect effectively within the bank, a substantial percentage of funds earmarked for external marketing needs to be shifted to the internal marketing programme. In the first 1 or 2 years, it is not unusual to spend more marketing money internally than externally, especially if the sales programme is being revamped to take advantage of the bank's customer base.

Internal education

After winning support from senior management, the next step is internal education of trust capabilities by the ‘marketing’ of trust capabilities and trust service priorities to other areas of the corporation, including the bank and investment subsidiaries. The best trust prospects are already customers of the bank, but reaching them can prove to be very difficult, especially if an organization embraces a territorial mindset or is productdriven rather than client-driven.

According to Ottinger: ‘Trust offices must constantly educate their peers in other areas of the company about the customer desired by trust... By education, I don't mean a lengthy manual about a trustee's duties product features and benefits. Provide profiles of customer service needs and problems. Then educate other areas about how some of these situations may be solved by a trust service relationship.’

In this internal education part of the internal marketing initiative, banks need to promote the distinct advantages they have over non-bank competitors. For instance, only banks can offer a wide array of trust arrangements. While brokerage houses and other financial institutions may offer similar products, only full-service trust departments have the resources and expertise (specialists) to advise clients in complex areas of trusts and investments. Moreover, because their fees are not based on sales, their advice tends to be much more objective.

One way to develop trust business is by first selling current fee business – investments that clients pay to have managed and getting adjunct sales later. This strategy is quite contrary to the traditional way the industry has operated: banks were so intent on selling their estate services that the non-bank competition weaned the more liquid customers to mutual funds, cash management accounts, annuities and traditional brokerage accounts. As a result, current fee accounts became not only more difficult to locate, but more difficult to sell.

Strong internal communications have helped Boatmen's executives to educate and boost the trust business.

‘You can spin your wheels conducting numerous seminars and producing newsletters which may prove fruitless in generating leads... It's important for trust bankers to take the initiative in educating others – not just the retail side of the bank, but commercial lenders, investment officers and others, as well.’

Apparently, the strategy is working. The trust company's total assets are $51 billion and assets under management total $30 billion. According to Ottinger, Boatmen Trust receives more than 100 referrals a month from bankers.

Internal network and relationships

Selling current fee services is, by itself, insufficient to kick-start the trust business. It takes an active internal referral network. In fact, when searching for the bank's best customers, all areas of the bank must be included. Too often, the trust salesperson calls on the same branch bankers repeatedly, ignoring other referral sources. Instead, salespeople must talk with corporate bankers, the brokerage department, and private banking, correspondent bankers and any area of the bank in contact with affluent customers.

While the concept of internal ‘networking’ sounds great, how does the trust officer get the attention of other busy, goal-driven bank officers? A network is no good if it is not going to be tapped. Moreover, while it may be possible to accomplish a great deal working from a referral system, the key to success is to provide incentives for other areas to provide referrals. This means that incentives and referrals must be a two-way street.

‘Internal territoriality is one of the most destructive forces to providing a high level of service – when you start putting fences around customers, then the whole sales, marketing and service process breaks down,’ Ottinger stresses. ‘Therefore, it's important that the referral process works both ways.’

Since the best trust prospects are already customers of the bank, adding them as trust department customers can be a challenge. This means that some parameters need to be set up before prospecting within the bank. The trust department's positioning on bank deposits must be perfectly clear. For example, the trust department cannot afford to appear as if it is trying to poach deposits into its domain. The trust sales force must emphasize that it is targeting non-deposit assets, including assets held in S&Ls, in brokerage accounts, at competitive banks and in mutual funds. If, at some point, it is necessary for a customer to shift deposits to a trust account, the banker must be notified first to clarify the reason and how the customer benefits. The advice is simple: if you can avoid giving surprises to your banking colleagues then collaboration increases and conflicts are minimized. Boatmen approach this challenge by concentrating on the following key areas:

   Avoid territoriality. Cultivates personal relationships that cut across organizational lines to encourage retail and corporate bankers to refer high net worth prospects to the trust company.

   Profile trust prospects. Educates employees by focusing on the needs of the customer. For example, rather than providing trust manuals or long-winded presentations summarizing a trustee's duties or the responsibility of an executor, Boatmen provide profiles of a typical customer problem, how it could be solved by a trust service and how a banker benefits financially from a referral.

   Maintain contact with internal sources. Boatmen have found that there is no substitute for keeping the ‘Trust Story’ in front of bankers. Periodic seminars, quarterly mailings, lengthy technical product descriptions and casual contact often do not produce a volume of leads. Trust bankers must constantly educate peers about the types of customers desired by the Trust, not features and benefits of trust and investment services.

   Create a strong incentive compensation programme. In a well-designed programme, the selling efforts of the sales staff, administrators and portfolio managers, plus the bankers and their profit centres, need to be interlocked, ultimately rewarding everyone involved. At Boatmen, the compensation programme is based on the first year's fees. The banker who refers the account receives 20 per cent of the first year's fees and his department receives 40 per cent. This is in addition to bonuses paid to the trust sales staff and/or the trust administrators and trust investment managers.

   Repeatedly sell the incentive programme to employees. Repetition is a key part of the referral bonus programme. It is critical to continually ‘advertise’ the referral programme to bankers and reinforce the dollar amounts paid to specific bankers.

   Internal referrals are a two-way street. Remind other employees that the trust department is a good source of referrals. It is risky to always seek a handout without returning the favour. Boatmen developed a programme to refer qualified, new trust customers to its private banking function. Because trust customers have a large amount of money to invest, they are often good private banking candidates. Additionally, Boatmen track the amount of direct deposits from the trust company back into the bank as a result of trust relationships.

Recruiting the right people

Boatmen also place a high emphasis on getting the right people. Marketing trust services effectively means the right person must be in the salesman's seat. For Boatmen, sales ability is a key sought-after trait, with technical knowledge second.

Boatmen hold clear thoughts on the type of people they want. They want a staff of closers, not counsellors. When hiring trust sales staff, Boatmen's advice is:

   Hire only high-activity, high-energy-level individuals. There is no substitute for the willingness to work. Persistence is the greatest sales attribute in the world.

   Hire proven closers with a financial background. Ex-brokers can be good prospects; many have received excellent sales training, but are looking to work in an industry offering good compensation.

   Hire salespeople who are primarily motivated by money. Such people want to sell quality and want to be substantially rewarded when they are very successful. Give them the chance to earn six-figure compensation.

   Provide salespeople with a lucrative incentive programme that rewards success. Monitor the progress and performance of these salespeople closely.

   Allow 12–18 months for a new salesperson to prove him or herself. Each salesperson should be able to produce a minimum of twice his salary in current fees. If there are doubts after this period, the wrong person has probably been hired and an immediate change should be made.

   Avoid protecting sales positions because of seniority or office politics. Each position should be quantitatively judged based on current fee results.

   Set sales goals based on the individual, territory, sales experience and management expectations.

   Train salespeople, either in-house or using a qualified outside training programme, to sell trust services. In addition, expect the sales manager to assume much of the responsibility for training sales people.

   Provide sales staff, administrators and investment managers with as much information as possible on trust services, investment performance and pricing. In addition, circulate information about the competition, including an analysis of fees related to mutual funds, brokerage accounts, wrap accounts and annuities.

   Encourage salespeople to innovate and differentiate themselves from the competition. Without innovation and differentiation, trust departments are in danger of becoming just another option in the financial services arena. They need to leverage their strengths in order to gain new business and increase profitability.

External marketing to supplement internal marketing effort

All the trust department's time clearly cannot be focused internally. Internal effort must be complemented with external effort to cultivate external referrals. Many banks use public seminars to sell trust department services. However, while public seminars are an acceptable marketing tool to use every few years, alternative ways such as educating attorneys and CPA firms about investment performance, competitive fees and quality staff of your trust department may yield better results. Most of the professional community is aware of trust department capabilities as executor and trustee. However, answering questions about investment return, the costs of trust services and the turnover ratio among staff may increase referrals from these groups.

Sources: Ottinger, W. F. (1991). Making the case for Trust. Bank Management, 67 (11), November, 37–40. Anonymous (1992). Internal incentives boost trust referrals. Bank Marketing, 24 (4), April, 42–4.