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EFFICIENT ADMINISTRATION THE KEY TO TRUST

COMPANY SUCCESS

TRANSLATING IDEALS INTO PRACTICE

F. H. FRIES

President, Wachovia Bank and Trust Company, Winston-Salem, North Carolina

(EDITOR'S NOTE: The importance which Col. Fries attaches, in the following article, tx efficiency of administration and observance of the highest ideals in fiduciary management cannot be too strongly impressed upon the trust company fraternity, and upon banks which exercise trust powers. The responsibilities and possibilities inherent in trust business calls for qualifications of exceptional type and for a spirit that acknowledges the superior claim of service rather than profit.)

To the Editor of TRUST COMPANIES:

HAVE seen Monticello today, the famous home of Thomas Jefferson, and have visited the great university which he was instrumental in founding. My thoughts linger upon these evidences of President Jefferson's superior culture and remarkable foresight. Thorough and higher education was to his mind the safeguard of the new republic's future and it must be the source and inspiration for the development of the many higher ideals that have become a part of the nation's development since his day.

As I ponder over these things I am reminded of my promise to write for you an article on "The Trust Company." In the light of present day conditions and the knowledge of the many developments that have taken place under our Constitution, which Mr. Jefferson wrote, declaring the inalienable rights of man, the trust company occupies a unique and important place. It is the instrument through which is perpetuated to others the rights he refers to and our forefathers secured for us. Through it the individual can work on after he has passed away and by will or created trust can direct how the fruits of his efforts can be made a blessing to those who may follow after him, building perhaps upon the very foundations laid by Mr. Jefferson in adding to the endowment of the University, which stands as a lasting monument to his memory.

In contemplation of law the trust company is a legal person or entity clothed with special powers to act for persons or corporations in matters where they cannot or do not wish to act for themselves. Through bequests or trusts, carefully or specifically

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change has been most satisfactory and beneficial.

Exacting Qualifications

The executor or trustee must be qualified in every way to fulfill the responsible positions that may be contemplated; few individuals are but every trust company should measure up to the most exacting requirements. The trust company is designed especially to meet these demands and should be qualified in every way for the service which is growing in importance and exactitude each year. The highest type of service is essential, in ability, legal knowledge, in business acumen and experience, in character above reproach, in financial responsibility to meet every need and in devotion to the best interest of the trust down to the smallest detail.

These ideals are not too high, they are attainable and should be reached. What troubles the mind of conscientious trust company officials is the consciousness that so few take these ideals seriously. The difficulties lie largely in the efforts of trust companies and banks to obtain profits and growth rather than superior service, when service is the real thing, in fact almost the only thing the trust company has to offer its patrons.

Measuring Up to Requirements

It is difficult to understand how National banks can expect to fulfill these ideals with simply a Trust Department as an adjunct to their banking business. It is equally difficult to imagine how a small institution of any kind can hope to successfully handle the large and rapidly growing estates and trusts of the present day, to say nothing of the future. The larger trust companies are conscious of the fact that they cannot do all lines of fiduciary business under one and the same charter; they are dividing their business into separate companies, the trust business is left with the trust company pure and simple, a bank is organized to do banking and a security company created for the purpose of handling investments and securitie, all closely allied, yet distinctly separated.

Keal Trust Company of the Future The real trust company of the future will be an institution of this character, and when properly functioning will be sought after by thoughtful business men for the administration of their affairs, and with its development will disappear the often discussed questions of commissions and legal service. The thoughtful business man creating an impor

tant trust wants able, efficient and unselfisn service in the administration of his affairs and is willing to pay for such service, he is even suspicious of those who cut their fees for the sake of securing business.

The testator and the trust company both want a legal will or instrument ably conceived and carefully drawn, so that both will know and appreciate what is wanted and so safeguarded that no subsequent legal questions can arise. Neither the testator nor the trust company should draw the actual paper, but after full consideration and agreement as to what is wanted or necessary each should submit it to counsel for proper preparation. If the real interests are appreciated there will be no question as to the ethics about writing the will, for both parties will need and require the services of a lawyer.

Capable Administration the Essence of
Success

The administration of an estate or trust is quite a different matter from the settlement of an estate. Any one, even an inexperienced wife, can settle an estate, but to properly administer an estate requires skill and ability. To conserve the best interests of heirs and beneficiaries a trust company is almost a necessity; one large enough to protect the estate by needful advances or payments, with a correct accounting department, under a trust officer of known ability and experience, and carefully supervised to assure safe investments.

How can such a trust company be found? "By their fruit shall ye know them."

The trust company that handled successfully the difficulties that are present in most estates and shows by its able administration of estates that it can meet all requirements naturally reveals to thoughtful men the kind of service it can render and that character of executor, administrator, trustee or agent it will be for others.

Ethics of Publicity and Advertising

The question still remains as to proper advertising and the ethics of setting forth in cold type the appeal for patronage. Truthful advertising is in keeping with good service and no institution should be barred from stating facts or calling public attention to the character of their business, or referring to what has been done by them. The question is doubtful only when the nature of the advertisement makes it so extravagant statements, unfair and untrue comparisons or reflections, offering to write wills without charge or consultations of a legal character without consideration.

Satisfied patrons become the best advertisement possible.

Many questions now being agitated by trust company officials or banks trying to build trust departments would be minimized if the trust company idea permeated the work or dominated their policy.

Public Enlightenment

Seeing the conditions and appreciating the difficulties and dangers we naturally turn to the cultivation of higher ideals as the remedy. Like Mr. Jefferson we think that better education is the safeguard of the future. The trust company was formed for a purpose and has developed marvelously in recent years and has a high destiny to fulfill. Institutions of higher education can do a most excellent work by teaching the true functions of each class of financial institution and presenting the lofty ideals that surround the trust company and its peculiar field.

In some States the differentiation is a matter of legal enactment and this in a measure controls the respective business done by each class of fiduciary institution. It may be necessary ultimately to handle this question by legislation, but if it can come about by gradually inculcating higher ideals and better service it would be better, for in this way the springs are made pure and the waters flowing from them must be sweet.

Referring again to the University of Virginia the thought persists, that if the trust company, and what it does and should do, were made a part of the course of study there and in the other universities, it would be a great thing for the institutions themselves, and it would be a blessing to the States in which they are located and in which they are destined to do such noble and necessary work.

SUCCESSFUL RECORD OF TRUST COMPANIES OF CANADA

A compilation of the individual statements of forty-three trust companies operating in the various provinces of Canada shows aggregate assets of $576,869,000 at the close of the last year. This total is exclusive of the assets of the Montreal Trust Company which includes in its total estates and trust assets the amount of bond issues under which it acts as trustee. The statements reveal marked growth during the past year, particularly of the senior trust companies which have built up a reputation for efficient administration of estates and execution of trusts.

The following table gives a comparison of capital and guaranteed accounts of all trust companies for 1920 and 1921:

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Royal Trust
Stan. Trust
Tor. Gen'l
Tr. & Guar.
Union Trust
Western Trust

Totals

172,949,581 189,671,802 12,244,615 13,134,100 100,248,237 107,596,746 16,383,751 17,734,258

6,432,505 6,430,324

7,862,390 7,168,094

$448,104,000 $489,522,000

It will be seen from the above table that the largest volume of estates and trusts is reported by the Royal Trust Company of Montreal with a total of $189,671,000. Next comes the Toronto General Trusts Corporation with $107,596,000. Then follows the National Trust Company of Toronto with $93,400,000; then the Eastern Trust Company of Halifax with $27,919,000; the Northern Trusts Company of Winnipeg with $17,067,000; the Trusts and Guarantee Company of Toronto with $17,734,000 and the Standard Trusts Company of Winnipeg with $13,134,000. Most of the trust companies also report larger net profits during 1921 as compared with the previous year.

GUARANTY TRUST CO. OF NEW YORK The condensed statement of the Guaranty Trust Company of New York as of June 1921 30th, shows deposits of $517,642,055.12, as $2,786,612 compared with $479,148,463.76 on March 6,613,613 10th, the date of the last published state27,919,146 ment. Total resources of the company show 93,400,117 an increase from $575,513,679.39 to $630,351,17,067,100 351.92 over the same period.

16

WRITING OF WILLS AND THE LEGAL PROFESSION

HEALING THE BREACH BETWEEN TRUST COMPANIES AND LAWYERS

SAMUEL WITTING

New Business Department, Continental and Commercial Trust and Savings Bank of Chicago

(EDITOR'S NOTE: The following is an address delivered recently before the Financial Advertisers' Association convention in Milwaukee, and discusses the subject of cultivating sound and harmonious relations between trust companies and lawyers in regard to "legal practice" from the standpoint of the publicity manager.)

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ECAUSE trust companies think. that lawyers control and can direct more trust business than any other single agency, they regard the lawyers' attitude toward them of vast importance, It seems that trust companies have always approached this subject of "Wills and Lawyers" in an attitude of mind as though the lawyer had them licked at the very outset. They have assumed that it is the lawyers' inalienable right to draw wills. They have invested the legal profession with rights, privileges and powers to such a degree that the lawyers in turn have given trust companies consider. able trouble and worry. The problem, therefore, is to that extent a problem of the trust companies' own creation.

Now it is bad policy to antagonize the lawyers. It is bad policy to have them as active enemies and only less bad to have them as passive enemies. It is good policy to bring about, if possible, a feeling of friendliness and co-operation between them and the trust companies.

The advertising manager is a "repairer of the breach." It is his job to prevent new outbreaks of war and mitigate their severity. He must be instigator and peacemaker, diplomat and harmony promoter. But he must not surrender one jot or tittle of his company's position. Hence a discussion of "Wills and Lawyers."

Regarded as a Divine Right

Lawyers of some kind and in some form, have existed for a long, long time. They have been accustomed to doing the legal work in regard to wills and trusts. They haye also been accustomed to doing the administrative work connected therewith-so long that they have come to look upon it as their divine right.

Trust companies have existed for about

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lawyers is freely admitted, but this is not the first invasion into what the lawyers have regarded as their private territory.

Fifty years ago we had the complicated fields of substantive law, such as negotiable instruments, sales of personal property, bills of lading, etc. Most of these complexities have now all be ironed out and simplified by the codifier for the layman. Fifty years ago the examination of titles to real estate was almost exclusively done by lawyers. Today it is largely performed by title and trust companies.

Corporations which have sprung up, developed and expanded during the past 50 years, have installed their own legal departments, which do practically all the legal work and draft all papers incidental to the corporation's business.

Economic and Social Changes

Due to the development of the trust companies in the last half century, the settlement of estates has emerged from an expensive and unbusinesslike situation to something approaching at least a well ordered method. All of these changes and many others have diminished the income of the lawyer from these sources; hence his hostility. But progress in business demands improved business methods and the lawyer has proven himself to be a notoriously poor busi

ness man.

Almost every labor-saving invention and improved method of distribution has met with opposition, but society has soon settled and adapted itself to new conditions, and in each of the foregoing cases, the lawyers have been compelled to have recourse to more profitable and specialized services of their profession.

As society is developing toward higher standards of service in all lines, the lawyers are discovering that originally they took in too much territory. They have claimed too much ground for the legitimate field of their professional services, and the develop. ment of almost every institution during the past 50 years has lopped off some of the territory which they originally claimed, and in this way, the Bar also is being helped to become a specialized profession.

All of these economic and social changes, or inroads into, the field of professional services, as the lawyer regards them, evoked, as much hostility from the Bar as trust companies do at the present time.

Before we had trust companies, the individual title examiner or trustee was usually a lawyer, and it logically follows that the title and trust companies are today doing

certain things which in the past were generally considered to be wholly within the province of the lawyer. This state of facts led to the prosecution and acquittal of a New York corporation. In this case, "People 18. Title Guarantee and Trust Company,” the facts are typical of what is being done by most title and trust companies today. In the ordinary course of business, the company drew a bill of sale and a chattel mortgage.

New York has a penal statute which inhibits corporations from practicing law or rendering legal services of any kind. One of the arguments of the prosecution was that the drafting of a bill of sale and a chattel mortgage, together with the advice which necessarily had to be given as to the filing of these instruments, was practicing law because it was work usually done by the lawyers. Custom ruled in the Trial Court and in the Supreme Court, but not in the Court of Appeals. The Title and Trust Company was acquitted.

Chief Justice Hiscock, of the Court of Appeals in rendering his decision, said, "In this inquiry, I do not regard it as decisive that an act is one which is commonly performed by an attorney. That might be a matter of habit or convenience. The inquiry is rather, whether it is one which might be lawfully performed by a layman. This is to be decided by the nature of the act and not the identity of the individual who most frequently performs it."

Broad Interpretation of Legal Service

Legal history shows that the notary public in England, who never was admitted to the Bar, was allowed to prepare deeds, draw wills and other papers relating to real and personal property. In fact, during the early days of the legal profession the advocate never did the work of the conveyancer. The preparation and execution of instruments to alienate land was not open to attorneys and solicitors in London until 1760. The Scriveners Company had a strict monopoly on all this business, and not until that year were the members of the legal profession given the right also to draw such instruments.

Stronger than this historical proof that the drafting of these instruments is not the exclusive privilege of the legal profession is the fact that in the New York case just cited, which, by the way, was decided in 1919, the court took judicial notice of the practice by laymen who had been accustomed to draw such instruments for their friends and neighbors, not only as a matter of accommodation, but for pay.

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