The Advantages of a Trust Company as Trustee
A trust company is preferable to individual trustees, because it possesses every quality of desirability which the individual lacks, to wit:—
(1) Its permanency: it does not die.
(2) It does not go abroad.
(3) It does not become insane.
(4) It does not imperil the trust by failure or dishonesty.
(5) Its experience and judgment in trust matters are beyond dispute.
(6) It never neglects its work or hands it over to untrustworthy people.
(7) It does not refuse to act from caprice or on the ground of inexperience.
(8) It is invariably on hand during business hours and can be consulted at all times.
(9) Its wide experience of trust business and trust securities is invaluable to the estate.
(10) It is absolutely confidential.
(11) It has no sympathies or antipathies and no politics.
(12) It can be relied upon to act up to its instructions.
(13) It does not resign.
(14) All new investments of value suitable for trust estates are offered in the first instance to trust companies, and in that way it has a choice of valuable security; and as its purchases are on a scale of magnitude, it can usually buy at a rate which is lower than that at which the individual trustee can purchase.
The most common objection to the appointment of corporate trustees is thus stated by Augustus Peabody Loring, Esq.:
The trust companies, which have of late years become so numerous, to a considerable extent do away with the element of personal risk attaching to an individual trustee; but they lack the advantages of personal management. These companies sometimes fail from improper management as utterly as individuals do, and as a rule the lack of personal management results in securing the minimum return only on the amount invested, and lacks the great advantages often secured by the able personal oversight of individual trustees.
The question, after all, comes back to the personal qualifications of corporate officers and individuals. If the former are less capable than the latter, the fault is with the particular company—not the system, and if interest returns are sometimes less under corporate management, this fact is more than equalized by the added safety to the corpus of the estate.
A "Trustee Company" has been suggested as a proper title for the company doing a legitimate trust business, and is the name used in Australia and in New Zealand. In some states the use of the word "trust" in corporate titles is now regulated by law. Confusion has arisen in the popular mind between the trust company and the trusts or industrial combinations.
The usual functions of a trust company are: banking in a more or less limited form, execution of corporate trusts, execution of individual trusts, care of securities and valuables. In addition, other functions are sometimes exercised, such as life, title, and fidelity insurance, and the business of becoming surety. The earlier companies in the United States were chartered to manage individual estates only and to act in certain fiduciary capacities; the recent development of the trust company has been in the direction of banking functions and corporate trust business.
It is worthy to note that the life insurance companies which originally secured trust powers have, with but few exceptions, given up their life insurance business, and that most of the fidelity insurance and surety business is given over to companies which now make a specialty of such risks. The fact is being recognized that the assumption of vast risks contingent on future occurrences is not compatible with the absolute security which is essential in the transaction of legitimate trust business.