Trust Us to Make Money Grow, Department Managers Promise

If you want to make a small fortune, the old saying goes, give your money to the bank trust department.

Trust department managers blanch at the implication that larger fortunes await those who turn elsewhere for investment advice. Consequently, financial institutions with trust departments are going out of their way to combat what trust officers have described as the “myth of mediocrity.”

Bank trust officers have armed themselves with copies of recent studies that show trusts equaling or outperforming mutual funds and investment advisers on annualized rates of return.

According to the most recent study completed for the asset management committee of the American Bankers Assn., trusts “compared favorably and exhibited greater consistency among (money) managers than did mutual funds and investment advisers.”

Trust department managers argue that they can remain competitive despite an obvious need to anchor many trust accounts to relatively low-risk investments.

That doesn’t mean trust departments generate bottom-line profits in the same fashion.

“I’d say the important thing to remember is that every trust department has its own personality,” suggested James Slingsby, a vice president and manager of trust operations for La Jolla Bank & Trust.

The trust department at La Jolla Bank & Trust, which was formed in 1973 when the bank opened, since has grown to $230 million in assets. About 80% of its assets are linked to more traditional trust activities, including revocable living trusts and estate planning.

Bank of San Diego, however, is almost totally immersed in pension plans and employee benefit plans, which, even during the ongoing stock market boom, have been the fastest growing segment of the trust business.

San Diego Trust & Savings Bank’s trust assets are almost evenly divided between personal trust business and rapidly growing pension and profit-sharing plans.

Home Federal Savings & Loan’s Home Fed Trust has grown from $500 million in 1983 to $925 million as of June 30. Home Fed Trust President L. Mark Fingerlin anticipates that the operation can “grow to $2 billion in assets well before the year 2000.”

Home Fed Trust, which next month will open a trust office in Santa Barbara, eventually will have offices in four or five major market areas, Fingerlin said.

There are some things that financial institutions can’t do with trust funds: One is to commingle them with the bank’s other deposits. By law, trust assets must be physically separated from an institution’s other assets.

Trust departments also are bound by law to keep their client lists secret.

However, savvy trust officers find ways around that limitation. Home Fed Trust’s Fingerlin reported that his department handles trust duties for “several sports figures that are household names in San Diego.”

Trust officers generally know which accounts are held by which trusts. One jealous trust officer sniffed that a good chunk of Home Fed Trust’s business is the wealth accumulated by the family of Home Federal Chairman Kim Fletcher.

Still another trust officer acknowledged a seemingly universal desire to steal away the multimillion-dollar Joan B. Kroc Foundation trust that is generally acknowledged to be held by San Diego Trust & Savings Bank.