Issue 11
May 8, 2008
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In this issue:
President's Message
2008 Trust Schools
Protect Your Client's Portfolio with Hybrid Deposit Products
TrustCompare
President's Message In keeping with its mission the association also distributes a newsletter to its members. The newsletter has various articles about services related to the trust industry offering insight into administrative and legal issues facing our industry. Members of the association share information by submitting articles for this newsletter. The mission of the association includes a commitment for education of its members. The Iowa Trust Associations involvement in the MOKAN and state conference are a reflection of the value the association places on education. As trust professionals, we too must be committed to providing educational opportunities for our staff in order to achieve excellence in service to our clients. If you have attended the MOKAN and state conferences in the past we thank you. If you have never attended, we encourage you to give these conferences some consideration. I encourage your involvement in the Iowa Trust Association. This involvement may include the use of the Will and Trust Form Manual, submission of an article for the newsletter, taking advantage of the educational opportunities, or seeking membership on the board. Contact any one of the board members if you have thoughts or ideas that the association should consider! Again, thank you for your membership. The Advanced Trust Operations School will be held September 23-25, 2008, in Omaha and provides a more in-depth course for those attendees who are directly involved in trust operations. The curriculum focuses on compliance and examination issues, policies and procedures, principal and income accounting, trades and settlements, and trust processing systems. This school is appropriate for trust operations personnel, trust officers and those wishing to expand their knowledge of the trust operations function. Over the years I have been associated with the Schools of Banking in various capacities. I attended The School of Trust and Financial Services many years ago; serve as the liaison between the ITA and the Schools of Banking, sit on the Advisory Trust Committee for the Trust Schools; serves as faculty and teach Overview of Fiduciary Income Taxes at the week-long school; and lastly, as Senior Trust Officer at First National Bank, I have sent all of my trust officers through the basic and advanced trust schools. A notable feature of all the Trust Schools is the opportunity for students to develop a peer network within the industry, while receiving the most current information available from instructors who live their subject daily. The attendees and faculty traditionally have come from 10-14 states each year. I firmly believe in the Trust Schools and urge you to check them out on their website at Indexed CDs were initially issued in 1986 by Chase Manhattan Bank. Large banks, including Citi and JP Morgan, have been utilizing indexed CDs in the portfolios of high-net-worth clients. Today many community banks are issuing indexed CDs through traditional channels in the bank as well as issuing brokered indexed CDs. Organizations like Johnston, Iowa's, Banker's Financial Services LLC have made it possible for banks, who typically might not have the capital or manpower to build their own indexed CD structure and program, to issue and offer indexed CDs to their customers. Similar to a traditional fixed rate CD, you can find indexed CDs in variety of terms, though they most commonly have a 3-5 year term. In addition, both fixed rate CDs and indexed CDs offer FDIC insurance, 100% principal protection when held to maturity, and are offered to bank customers without any fees or charges. While the terms and interest calculation vary, indexed CDs typically pay interest at maturity; some guarantee a set rate of interest even if the market does not rise, and others offer only the returns of the linked index, and that performance may be capped. No APY can be stated with indexed CDs until maturity and while there may be no assurance of a return, the 30-year average historical returns are in the 6-8% range. Many indexed CD structures that are available utilize a participation rate to the interest calculation which, simply stated, signifies your client's interest in the appreciation of the index. Indexed CDs are typically offered with a low minimum investment of $1,000 and can be market priced. Unlike fixed rate CDs, indexed CDs pay interest solely at maturity so it is important that clients who are considering the product are buy and hold investors who understand the importance of holding the CD until maturity. Holders of indexed CDs are subject to lost-opportunity risk as well as the risk of bank default (mitigated by FDIC Insurance). It is also important to note that holders of indexed CDs in non-qualified plans will annually be responsible for minimum tax imposed by the IRS (OID) on their CD even though they will not receive any income until maturity. Because of the annual taxation, your client may end up with additional tax dollars due or a tax credit at maturity at ordinary income tax rates. Indexed CDs may not be suitable for all investors so it is important to carefully weigh your customer's needs against the product's risks and rewards. Indexed CDs may play a key role in hedging the exposure of customer's portfolios. Indexed CDs may be appropriate for qualified accounts, commercial or corporate accounts including bank portfolios, foundation or endowment accounts. Consider hybrid deposit products as you evaluate the asset allocation of accounts with a conservative investment policy, reserve requirements, or set minimum rate requirements- they may be just what your customer is looking for. About the Author: Kate Juelfs is the Institutional Sales Manager for Broker Dealer Financial Services. For more information regarding the topics discussed in this article, please contact her at 800-352-5634 or TRUSTCOMPARE is the industry's leading performance comparative solution to help you accurately assess and improve your performance, profitability and productivity. It is the only comparative, comprehensive ratio system for measuring trust performance, allowing you to compare your core metrics to a peer group and to the universe of subscribers. How Does It Work? Trust information is collected from subscribers, then analyzed to provide comparative trend and benchmarking tools and management information reports. Product and service results are measured by asset, income, expense and profit. And, growth in income, fees, expenses and profit are measured at both the departmental and product level. We also offer an advanced business analytics level to provide line of business and product line profitability comparisons. If you'd like to learn more about TRUSTCOMPARE, visit If you have questions, you may contact Loyd Pohl, at
I would like to take this opportunity to thank the members for there continued involvement in the Iowa Trust Association. The mission of the Iowa Trust Association is:
One of the major products which the association makes available is the Will and Trust Form Manual. This widely accepted manual is updated annually and can be found in trust offices and law offices across the state.
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2008 Trust Schools
by Steven J. McLaughlin, Vice President & Senior Trust Officer, First National Bank, Ames
The School of Trust and Financial Services will be held September 22-26, 2008, in Omaha, Nebraska, and provides attendees with a comprehensive overview of the complexities associated with operating a successful trust organization. This week-long school covers trust department operations to administration and is appropriate for new trust personnel, internal auditors, bank attorneys and officers entering trust, and experienced or specialized trust personnel seeking to update or broaden their knowledge.
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Protect Your Client's Portfolio with Hybrid Deposit Products
With the marked increase of volatility in the markets and uncertainty about the condition of the U.S. economy, many customers are on the lookout for investments that limit downside risk or limit the overall exposure of their portfolio. Indexed CDs, a hybrid deposit product offering principal protection features and a history of producing solid rates of return, are rapidly gaining customer interest. Many trust departments are finding that indexed CDs appeal to customers who may feel uncertain about the markets, customers with large equity positions, customers looking to diversify a portfolio of CDs, and to customers who are interested in keeping up with inflation.
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TrustCompare
If you were asked to demonstrate how your organization's Trust Department is performing, how would you answer? In addition to the broad "assets under management number," how are you measuring the growth, profitability, resource efficiency, and success of your Trust Services?
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