The Problem of Wealth AND Tue Trust Co. as TRUSTEE A PAPER PRESENTED TO THE TRUST COMPANY SECTION OF THE AMERICAN BANKERS’ ASSOCIATION AT ITS ANNUAL MEETING IN SAN FRANCISCO OcT. 19, 1903 BY LYMAN J. GAGE COMPLIMENTS OF The United States Trust Co. of WF. W. W. W. WHITE, 49 BROAD STREET, N. Y. 2367 The Problem of Wealth AND The Trust Company as Trustee. E are accustomed to think of the serious problems which beset the poor, and we sympathize, or ought to sym- pathize, with them. The ever-present ques- tion of to-morrow, the possible failure of em- ployment, the cost of living, the drawback of sickness, the calamity of death—these may be briefly summarized as the leading prob- lems of the very poor. These problems do press a painful burden upon the larger mass of society. To secure immunity from them, to find honorable ave- nues for escape, to secure financial independ- ence, in short, to accumulate wealth, is and forever must be a natural and laudable ambi- tion. But no sooner does one pass over from the army of the poor to the relatively smaller company denominated the rich or well-to-do, than he finds that the problems of life, if changed in their nature, are yet vexatious and troublesome. Having become possessed of a competence, he no longer fears the approach of his landlord for rent unprovided, nor is he anxious concerning to-morrow’s bread or as to the wherewithal to clothe his family. Frequently, however, he learns that wealth is a burden and often a heavy one. He discovers an innate tendency in accumu- 4 lated treasure to take unto itself wings. He finds that money flies as well as ‘‘talks.’”’ He is apt to learn how easy it is to lose in an hour the careful savings of months and years, and, in a sense wholly different from the Latin poet, he learns that the descent to the Avernus of financial disaster is easy and swift, and that it is difficult to recover his lost footing and escape to the upper air of financial freedom. He soon learns that when he loans money he is apt to borrow trouble. In this country we have not well learned the lesson of content with reference to an acquired competence. The American business man seldom retires. He prefers to struggle on in the harness, and to carry his financial problems to the inevitable end, not, as a 5 general rule, from considerations of avarice (for in no country are the rich more generous or less avaricious), but from the sheer joy of achievement and the fascination which the conflict of business life has for him. In Eng- land they have learned better than we to be content with a competence, to relieve one’s self of the burden of wealth and to devote one’s energies to other purposes than the mere increase of the burden. In other words, there is in England a pronounced leisure class, men who have not merely withdrawn themselves from business, but who will not even be burdened with the care of their own possessions and who leave it either to family solicitors or to fiduciary corporations. Thus freed from the burden, they find time to devote themselves to the politics of their 6 country, the pursuits of literature, the culti- vation of art, the enjoyment of their landed estates and to the legitimate pleasures which a large cosmopolitan capital like London affords. In America, an ever-increasing number are learning this lesson. Their greatest problem is to find a suitable custodian for their wealth, to whom its cares and responsibili- ties may be safely delegated. If, however, the American man of wealth does not wish to retire from business, but, with his characteristic and inexhaustible energy, prefers, for the mere pleasure of achievement, to continue to add to his accumulated means, he is yet confronted by the possibility of disability through disease or infirmity of age and the certainty of death. 7 Unless he is strongly indifferent, he cannot be unmindful of the question as to the ulti- mate disposition of his inherited or acquired possessions. If blessed by the ties of blood with a family, either lineal or collateral, he finds that he has become a kind of human providence to a dependent group, for the members of which, in varying degrees of duty, it is his pleasure to extend a protecting and helping hand. He must recognize that his children, who have been educated in the schools, cultivated by travel and refined in taste through social customs and manners, have in a sense claims upon him, and there are few greater hardships in life than those sudden reversals of fortune where a child, reared in luxury, is suddenly called upon to face unaccustomed poverty. 8 Sooner or later the obligation must be discharged to make a wise disposition of his fortune, and as nothing is more certain than that he cannot himself continue to admin- ister it, he is inevitably met by the question, “Whom shall I constitute as my executor or trustee? Shall it be my eldest son?” Frequently he is of all the family the least qualified. ‘‘Shall it be one of the juniors?”’ Such preference is apt to excite jealousy and bitterness and lead to unhappy dissensions. “‘A trusted and experienced friend ?’’ He may not survive, and in any event his availability may alter through changed conditions and circumstances when it is too late to recall the trust. “A legal counsellor?’’ His ability and character may both be great, but the uncertainties of life surround him as they do 9 other men, be he ever so competent and faith- ful. If provision is to be made for children and grandchildren, a long tenure of office in the trustee is of great importance; and if any or all of the fund to be transmitted is to be devoted to public charities, a permanent trustee then becomes inevitable. Moreover, there always exists the possibility of mal- feasance and betrayal, the sins of omission and commission, whereby fortunes are too often dissipated and lost. This problem, which to thoughtful and conscientious men is a grave one, the trust company, in its legal capacity as administra- tor, executor or guardian or trustee, is estab- lished to solve. Enjoying perpetuity, it is not subject to the vicissitudes of death. Controlled by the provisions and limitations Io of its charter, it is kept by the strong hand of the law within the limits of conservative operations. Presumably managed by a com- petent board of directors, the beneficiaries of the trust have the advantage of the collective wisdom of experienced men, and in finan- cial matters, “in a multitude of (experienced ) counsellors there is safety.’’ Inspected by independent officers of the State, any wrong- doing by the officers of a trust company cannot long remain undiscovered. Possessed of ample capital, the beneficiary is guaranteed against loss through errors or willful dishon- esty. Moreover, the trust company, in man- aging many estates, can do so with an econ- omy not possible to individual trustees. Undoubtedly there are often advantages in having as trustee an attorney who has it advised the donor in the lifetime, and whose peculiar knowledge of the estate is valuable; but, as has been stated, such management, in the nature of things, cannot be long endur- ing, but its advantages can be secured by uniting the family counsellor with the trust company, as co-trustees. In this manner both the special benefits of corporate man- agement and those of an individual trustee can be secured. I submit, therefore, that the burdens of the rich would be sensibly relieved if due regard were had to the advantages offered by the trust company. This brings me to a closer consideration of what the trust company should be in its character, capital and business methods, to enable it to discharge with zeal and fidelity 12 the high duties imposed upon it in its fiduciary capacity as trustee. Its capital should be adequate to its responsibilities. Its officers and directors should be men of experience, and with a single mind devoted to the institution they serve. Its corporate work, whether exclu- sively relating to its trust business or not, should be of a dignified character and free from hazard. Around the trust company should further be thrown the safeguards of wise legislation. In some of the older States, adequate provisions in this respect have been made, and these beneficent laws could profit- ably be adopted by other States less for- tunate. The Legislature may well give careful con- sideration to this important function of 13 financial corporations. It is true the trust company is comparatively a newcomer. The first of such institutions began business in the United States but little more than fifty years ago. The record of the half-century is, however, upon the whole, an honorable one, and the extent of its services in the manage- ment of property is but imperfectly under- stood by those most requiring its special facilities. In the period im question few, if any losses have occurred to any trust prop- erty by the delinquency of any trust company acting in a fiduciary capacity. There have unquestionably been, in such institutions, occasional acts of misfeasance by employees, but in no case that I can recall has the trust company failed to make good to the bene- ficiary the temporary loss thereby sustained. 14 ll I am firmly of opinion, therefore, that the growing value of such companies in the special work to which I have alluded should be made known to that class which we may justly hope is becoming numerically greater, to whom the problem of the proper manage- ment and ultimate disposition of their prop- erty presents itself as the peculiar problem of the rich.