Chapter Bank Trust Services, Nondeposit Investment Products, and the Selling of Information Services 14 This chapter is designed to explore several of the most important nondeposit financial services bankers have offered to the public in recent years, including trust services, investments in stocks, bonds, and mutual funds, insurance policies, and annuities and examine their possible benefits for banks.

Trust Services These Services are Centered on the Management of Property Owned By a Bank’s Customers, Such as Land, Buildings and Other Investments

Product-Line Diversification Effect Offering More Than One Product or Service Through the Same Company in Order to Reduce the Overall Risk of the Revenues Flows Through the Individual Firm

Risk and Return With Traditional and Nontraditional Services Where: NT is Nontraditional Services and T is Traditional Services and r is the Correlation Between Them

Economies of Scope Employing the Same Management, Staff and Facilities to Offer Multiple Products or Services, Thereby Helping to Reduce the Per Unit Cost of Production and Delivery of Goods or Services

Nondeposit Investment Products in Banking Stocks Bonds Proprietary Mutual Funds Nonproprietary Mutual Funds Fixed Annuities Variable Annuities

Mutual Funds Companies that Offer Shares in a Pool of Securities and Flow Through Any Earnings Generated to Shareholding Customers

Annuities A Savings Instrument in Which the Customer Makes Cash Payments to an Investment Manager Who Places Them Into Earning Assets and Where Later the Purchaser Receives a Stream of Income From Those Assets

Convergence The Bringing Together of Firms from Different Industries in Order to Create Conglomerate Companies Offering Multiple Services

Bank Offerings of Insurance Related Products Life Insurance Policies Life Insurance Underwriters Property-Casualty Insurance Products Underwriting Property-Casualty Insurance Risks

Customer Privacy Protecting the Personal Information That Customers Supply to Their Financial-Service Providers So That Customers are Not Damaged By the Release of Their Private Data to Outside Parties