60 and beyond: Continuing TOAP milestones
By Gina D. Lumauig, Contributor
The Trust Officers Association of the Philippines (TOAP), a professional organization that aims to professionalize and promote the trust and investment industry in the Philippines, has been at the helm for six decades this year.
Bestowed with the highest fiduciary mandate, TOAP continues to actively contribute to the development of capital markets, promoting the interest of its clients and the investing public, while thriving as part of a dynamic sector in the Philippine financial system.
From evolution to innovation
Established in 1964 by a group of trust practitioners with the objective of uniting and growing the Philippine trust and investment management industry through professionalization and promotion, the industry was, by then, preparing to offer new and innovative trust products.
Ensuring that the trust officers and leaders were ready with the necessary skills and knowledge, formal training was provided for the enhancement and growth of the industry in the coming years.
The early 1980’s until 1991 saw remarkable growth in the industry, with trust assets doubling and reaching the P100-billion mark in 1991, as public awareness on the more sophisticated asset and trust management services increased.
By the year 2000, however, the global foreign exchange and financial markets saw challenges brought about by several crises. This led to the General Banking Act of 1948 being replaced by Philippine Congress into the General Banking Law of 2000. This new law, which effectively strengthens the banking sector and effectiveness of the supervision of the Bangko Sentral ng Pilipinas over local banks, now contains a chapter on trust operations, amending laws from the previous act.
Within ten years, the Philippines saw an economic exponential growth, beginning with Overseas Filipino Workers (OFWs) remittances, and increase in consumer spending. By 2010, GDP ended at 7.3%, growing more than twice after a decade, according to Asian Development Bank’s Key Indicators. This period likewise saw the trust industry breaching the trillion mark in 2007 with P1.176 trillion assets under management and 34% higher than the previous year. By 2012, the trust industry had doubled this figure to P3.1 trillion. The investment grade ratings secured during this period until 2013 set the stage for the industry’s further growth the next decade.
Recognizing the importance of good corporate governance, effective risk management and strong consumer protection, reforms were implemented, which included comprehensive investment guidelines for trust entities and guidance to better align the management of trust assets with international standards.
Steven C. Te, first vice-president and institutional sales head of BDO Unibank’s Trust and Investments Group and current TOAP president, shares that with the entry of foreign players into the Philippine financial community through the ASEAN integration and the AEC Blueprint, the trust industry has been positively impacted and strengthened. This has led to increased competition, which drives local trust companies to enhance their services, improve efficiency, and offer more competitive products to attract and retain clients.
Access to expertise and technologies has benefited the local trust industry, with foreign players bringing their know-how, best practices and advanced technologies. This transfer of knowledge and technology helped strengthen the capabilities of local trust companies and enhanced their service offerings.
Furthermore, the participation of foreign players has expanded the range of investment options available to clients of Philippine trust companies. This diversification of investment options means better risk management, higher returns, and increased investor confidence in the trust industry.
The entry of foreign players has prompted local regulators to align standards and regulations with international best practices. This alignment has led to a more robust regulatory framework, improved governance practices, and enhanced transparency within the trust industry, as well as increased awareness and trust from clients and investors.
While the integration of foreign players into the Philippine financial community through the ASEAN and AEC Blueprint may have brought about various opportunities and benefits for the industry, Mr. Te adds that “ongoing monitoring and assessment are essential to ensure that these developments indeed add to the strengthening and sustainable growth of the industry over time.”
Another key contribution during this decade worthy of note is the expansion of Unit Investment Trust Funds (UITF). This product line provided the greater public an investment opportunity that has significantly impacted the trust industry.
In August 2021, then-BSP Governor Benjamin Diokno said that “the BSP recognizes the importance of UITFs as an avenue for small retail investors to participate in the securities markets. Certainly, the online accessibility of UITFs contributed to their growth.”
Mr. Te further expounds that the introduction of a broader range of UITF products increased investment options for investors, giving them a wider range of preferences according to their risk tolerance. It has also contributed to the growth of assets under management (AUM) for trust companies, as it has become a popular choice for both individual and institutional investors. In fact, by end of 3rd quarter 2023, UITF’s AUM was reported to be at P815 billion.
Additionally, UITFs have expanded to include regular income paying funds, hence investors appreciate this as part of the inclusive growth process offered by the trust industry. There were also investment structures under UITF that include feeder funds, multi-class funds, and fund of funds, with the same objective of bringing in more investors and presenting them a diverse menu of choices for their financial investments.
Regulatory compliance and investor protection were also implemented, adhering to regulatory guidelines set by governing bodies, to safeguard investors’ interest and maintain trust in the industry. Access to professional fund management expertise allowed retail investors to benefit from the skills and knowledge of seasoned portfolio managers. Overall, the expansion of UITFs as an investment opportunity has brought about positive changes in the trust industry in the last decade, resulting in increased market participation, enhanced competitiveness, and a broader array of investment options for investors seeking to grow their wealth and achieve their financial goals. More information can be found on www.uitf.com.ph.
By the third quarter of 2023, just several months after the declaration of the end of the COVID-19 pandemic, the banking system’s trust and investment management business reached the P6.0 trillion mark, a milestone achievement equivalent to a 10-year compounded annual growth rate (CAGR) of 8.8%. The trust industry’s resiliency even during the height of the pandemic in 2020, with a growth of 16%, proved TOAP’s continued and unrelenting efforts to push forward and rise above the global health challenges.
TOAP: Leading the trust industry
Since its inception in 1964, TOAP has seen key leaders and strategists at its helm, introducing landmark innovations and growth, supporting inclusivity, transparency and active regulation, adapting to challenges and changes, thereby strengthening the Philippine financial industry through trust.
First to lead TOAP was Graelan C. Yarisantos in 1964 who had the big task of gathering trust officers to steer the trust industry into something the public will fully understand, accept, and embrace.
The subsequent TOAP presidents and board of directors stayed true to TOAP’s mission “to grow the trust and asset management industry to a level at par with international standards,” ensuring that the organization lives its values of Integrity, Fidelity to Client, Innovation, Teamwork, Leadership, Professionalism, and Excellence.
Rafael G. Ayuste, Jr., who served as TOAP president four times between 2005 and 2018, believes that ”assuming an industry leadership role is inherently personal and time-intensive, involving a wide array of responsibilities. This includes regulatory engagements across various trust products and services with regulatory bodies, notably the Bangko Sentral ng Pilipinas, and maintaining ongoing communication with industry stakeholders, such as industry players, clients, and financial associations. The personal reward for this level of involvement is significant, as it reflects active participation and contribution towards the industry’s growth.”
Meanwhile Mr. Te, who is wrapping up his second consecutive term as TOAP president, emphasized that “the TOAP leaders and board members can further solidify the trust industry’s position as a dynamic and forward-looking sector that caters to a diverse range of clients, organizations, and partners while driving sustainable growth and development.”
Through its thought leadership and advocacy, TOAP has led industry discussions on emerging trends, best practices, and regulatory updates. Its active advocacy efforts and promotion of industry standards drive positive change and influences policy decisions that benefit stakeholders.
Its innovation and technology adoption enhances operational efficiency, improves customer experience, and develops cutting-edge services. By staying ahead of technological advancements, TOAP positions itself as a forward-looking organization that drives industry innovation. Additionally, establishing collaboration and strategic partnerships with industry stakeholders, fintech firms, academic institutions, and regulatory bodies foster knowledge-sharing. By working together with diverse partners, TOAP is able to create synergies, explore new opportunities, and drive collective industry growth.
As of this year, 30 institutions consisting of banks and trust corporations are active members of TOAP.
Road Map: TOAP moving forward
TOAP’s position as the authority for trust, fiduciary, and asset management in the Asia Pacific region is reinforced by its proactive approach in maintaining proper safeguards, fostering an effective relationship with regulatory bodies like the Bangko Sentral ng Pilipinas (BSP), and enforcing stringent measures to ensure investor protection and transparency.
Raul C. Diaz, TOAP president from 2008 to 2009, said that “being part of the trust industry for the last 40 years that actively promoted and nurtured the industry to what it is today, it certainly has been a huge leap from when TOAP started 60 years ago. It remains in good hands, with the younger generation now carrying the torch of leadership.”
What then, is in the pipeline?
As it celebrates six decades of actively steering the Philippine financial management industry, TOAP commits to focus on and strengthen the following:
Digital Transformation. Continuing to embrace technology to enhance efficiency, improve customer experience, and streamline processes involves digitizing operations, implementing online platforms for client interactions, and leveraging data analytics to drive informed decision-making. These new digital trust solutions give clients easier access to their accounts, enabling them to make more knowledgeable investment decisions in the process.
Comprising 70% of the Philippine population are the Generation Z and millennials, who contribute to the e-commerce boom. Their financial habits contribute to the growth of all things online, so the creation of easy customer experience and digital capabilities is essential.
Last year, TOAP embarked on a six-month digital marketing ad campaign aimed at reintroducing UITFs in the market. The campaign’s objective was to attract the younger generation to this product through a series of regular social media posts featuring art cards, explainer videos, and album posts. The attractive design, theme, and feel of all materials used were tailored to appeal to the millennial and Gen Z markets.
Sustainable and Responsible Investing. Promoting sustainable and responsible investing practices to align investments with environmental, social, and governance (ESG) criteria.
In 2008, the Personal Equity and Retirement Account (PERA) Act of 2008 was signed into law. PERA helps Filipinos invest in a more comfortable retirement. TOAP has been actively promoting this as part of their financial literacy campaign as it helps strengthen and identify small, medium and long-term financial goals. To demonstrate its commitment in supporting this government initiative, TOAP collaborated with the Bangko Sentral ng Pilipinas last year to conduct a PERA webinar for the families of overseas contract workers and to launch an information campaign on social media.
The annual Trust Consciousness Week, celebrated every March, advocates for financial literacy and consciousness. Aware of the vast market of young professionals and other sectors who remain unengaged in financial wellness, TOAP aims to help the next generation of trust investors attain financial growth through simplified financial opportunities.
The coming years may well see TOAP focusing on aggressively offering ESG-integrated investment products and educating clients on the benefits of sustainable investing.
Enhanced Customer Engagement. Implementing personalized and tailored services to meet the diverse needs of clients, involves deploying customer relationship management (CRM) systems, conducting client feedback surveys, and offering educational resources to empower clients in making informed financial decisions.
The trust industry is in constant exploration for alternative investment products amidst the evolving market demands. Customizing wealth management solutions, launching thematic investment funds, and forming strategic partnerships with fintech companies, industry partners and regulatory bodies help leverage collective expertise and resources to create value for stakeholders.
With 60 years of driving the trust industry into exponential growth in an inclusive financial market, TOAP remains a testament of its enduring commitment with its role as a catalyst of change in the trust, fiduciary, and asset management industry. The innovation, best practices, and sustainable, stable growth of the trust industry have greatly contributed to the continued confidence of investors, upholding the highest global standards of professionalism and integrity.
This article is in the special edition of BusinessWorld In-Depth digital magazine, in celebration of Trust Consciousness Week. Get the full issue for FREE via BWorldX. Visit www.bworld-x.com.
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