RECORD AND   GUIDB





vember iS, 1905





1





Real Estate and Trust Companies.

THE enormous development of the Trust companies in the
United States during the past thirty years is as startling
as it is impressive. In 1875 there were 35 companies with total
resources of $122,000,000. In the present year there are 1,115
companies with liabilities and corresponding resources amount¬
ing to $3,802,000,000. Rhode Island with 9, has the fewest com¬
panies while Pennsylvania has the most, 237 with $621,000,000 re¬
sources, though New York's 78 companies have a total of re¬
sources of $1,510,000,000. New Jersey has 60, Illinois 49, Ohio 47,
Massachusetts 42, and Missouri 27, the resources of lUinois's 49
being $353,000,000 as against the $220,000,000 of New Jersey's
60 companies.

The phenomenal growth of Trust companies and the demand
for their fiduciary services are caused by business conditions
creating a necessity for new facilities in banking which ordinary
institutions did not afford, owing to the limitations of charters
and otherwise conventional methods.

But while the Trust conipany is causing great changes in
American banking, it cannot be said that there has been any
radical departure from the sound principles on which banking
is based. As has been well said, "The banks sell credits; the
trust companies sell services." These facilities and services are
as truly merchandise commodities as are corn, coal or dry
goods and the Trust company is on the same plane as the mer¬
chant in his warehouse.

The flgures given above, marvellous as they are, do not indi¬
cate in the smallest degree that there has been any decline
of confldence in the management of National banks, growth of
the trust company as pointed out, being a natural outcome of
a demand caused by business and economic conditions. This is
an age of great industrial combinations as well as of specialists.
Industry is being specialized to the highest degree. Depart¬
ments have been combined in such a way as to give to each the
strength of the entire aggregation.

First to realize that the expanding character of business
necessitate monetary institutions that combine, under one roof,
many departments, under expert and specialized management,
the Trust company offers to its customers a banking depart¬
ment, a trust department and others, all of which it conducts in
an equally efficient manner.

Comparatively few of these companies have made a specialty
of Real Estate which offers boundless possibilities for an in¬
crease of business. Real estate from time immemorial has to a
large extent been the foundation of all values. Very few 'tran¬
sactions of magnitude are negotiated without real estate being
an important factor. In the management of estates for widows
and orphans it frequently happens that the largest portion of
such estate consists of realty. Then it is that the real estate
department with its well-equipped staff is of inestimable value
to the Trust company, as it thus avoids the necessity of seek¬
ing outside assistance in the management of real property be¬
longing to such an estate. There is no division of a Trust com¬
pany that will not be benefited by a careful organizing of a
real estate branch. The financial department of the Trust com¬
pany profits especially. When money is easy and there is a surplus
of cash in the department the real estate department can be
called on to procure for it investments in the form of real estate
loans. Numbers of depositors can likewise be secured through
the real estate department owing to the cash or notes in settle¬
ment passing through the Trust company's hands.

In many instances the seller is extremely likely to open an
account with the company with the proceeds of the transaction
and thus new customers are readily made.

In short, a real estate department is now absolutely indis¬
pensable to every Trust company. Investment in realty is
sought for by many Who have made money in other channels,
who desire to safeguard their funds in a way that they know to
be substantial and is likely to net them a good return.

A real estate department, it wili thus be seen, is not only high¬
ly advantageous to its other departments but is in itself highly

profitable.

----------•----------

—No credence need be given to the statements that there is
the likelihood of large importations of British structural steel
during the coming year, inasmuch as the iron and steel masters
of England, Scotland and Germany are sold up to the limits of
their productive capacity for at least a year. Not only is the
market for structural steel advancing in Europe, but the buyers
for Australian, East India and South Africa account report in
London, Glasgow and Germany that they flnd it difflcult to get
their orders filled. A San Francisco flrm which lately made a
large importation of German pig iron, solicited some orders for
German structural steel, only to flnd on booking the orders that
their German correspondents reported that a sudden rise in
^ha market prevented them from filling orders except at prices





which netted two per centum higher than the American market
on the Pacific Coast. There has recently been formed In
London a "community of interest" syndicate that has taken in
most of the large makers of structural steel in Great Britain, .
Belgium. France and Germany, with the prospect that foreign
prices will be largely advanced, ^and thereby making Great
Britain for a time a larger customer for American structural
steel manufactures than she has been for some time.





Points in Fire Insurance





By R. O, HAUBOLD*





Not long ago I was asked the question by a friend of mine:
"Haubold, which do you consider the more advisable from the
assured's point of view, the eighty per cent or the 100% clause?
I answered his question by asking him another. "If an insur¬
ance company can afford to give you a cheaper rate because of
the 100% clause, would it not stand to reason that it was more
profltable to the company than to the assured?" An eighty per
cent clause on a $10,000 risk requires an $S,000 policy and a
100% clause requires a JLO,000 policy; consequently, while you
are reducing your rate ten per cent you are increasing your in¬
surance twenty-flve per cent and the net result is that your pro¬
tection is actually costing you twelve and one-half per cent more
than with the eighty per cent clause. Of course you have addi¬
tional protection if you comply with the conditions of the con¬
tract, but at a considerable increase of expense. So few owners
of insurable property, be it building or contents, understand this
clause that it is the duty of all brokers to become thoroughly
familiar with this matter, so that they can explain the same
to their clients.

Upon building insurance it can very often be arranged that
foundations below the level of the ground are excluded from the
form of policy and the consequent reduction in valuation will
offset the required increase of insured amount and the 100%
clause can be applied; but on contents it is a dangerous clause
because of the fluctuation of values and of the amount of stock
on hand. The 100% clause may be a good thing for the broker
in securing business as long as there is no fire, but when there
is a loss it is a bad thing for the assured, and, naturally, an as¬
sured wbo has had occasion to flnd this out will not again em¬
ploy a broker who has taken advantage of the situation and he
certainly will not recommend him to any one else.

Small things must be taken advantage of by an insurance
broker. One of these may be this. The rates of insurance are
almost invariably lower on buildings than on contents and It ia
advisable to include in the valuation of the building all perma¬
nent improvements including stationary machinery thus reduc¬
ing the valuation of contents and a consequent reduction In
the total cost of insurance.

In insuring contents of manufacturing establishments be very
careful to see that patterns, moulds and designs are mentioned
in your form, or they will not be covered; and if so mentioned
only ten per cent of the amount of the item in which they are
included can be applied to this clause, unless a considerable in¬
crease of rate upon the entire item be paid. In this connection
I might call your attention to the fact that in very many cases
the valuation of the patterns, moulds and designs far exceed the
amount that can be applied in this manner. In such cases I
have found it advisable to invariably eliminate the words from
the regular item and cover them under a specific item, which
will better protect your assured and at the same time avoid the
necessity of paying a higher rate.

In accepting an order for inaurance which is to take effect Im¬
mediately, it is advisable to do so with the proviso that you will
cover it at the earliest possible moment, as your failure to pro¬
cure the insurance wi'hoit advising your client to that effect
might very easily ren-l.'t ynu personally liable for any damage
resulting from your faV ■•>.■ ' ■ do so. In insuring household fur¬
niture it is a wise precaution to have your form read to cover on
the property of the assured or any member of his or her family
as the property of any of the adult children would not otherwise
be insured and it is the usual intention in placing policies of this
nature to include all the property of the entire family.

In addition to the usual class of fire insurance which is on
specific or tangible property a broker can considerably increase
his source of income by convincing his client or prospective
clients of the desirability of insuring profits or prospective prof¬
its. Whenever a monetary loss would be sustained as the result
of a fire, it is fair to assume that an Insurable Interest exists.
For instance, a direct loss of rentals as a result of fire is cer¬
tainly an insurable interest, and no owner should be without
this class of insurance, and no broker should fail to suggest It ;
to his client. When property is held on lease the profits accru¬
ing from said lease are Insurable and should be protected. When
business is conducted at a profit and a fire would prevent a real-

»From 3 lecture  before  tie Wast Sifle T.  M. O. A.