America's Most Advisor-Friendly Trust Companies 2024 - 11

2024 AMERICA'S MOST ADVISOR-FRIENDLY TRUST COMPANIES
decisions. For example, a trust may
indicate that the trustee can make
principal payments " after considering
other sources of income available to
the beneficiary, " in which case the
trustee should demand extensive
documentation from the beneficiary
before making a decision.
Even if certain tasks are not explicitly
mandated in the trust itself, many trust
officers will perform miscellaneous
activities on behalf of the beneficiaries
as part of their overall ethic of service.
THE BEST PARTNERS
IN THE BUSINESS
With the right partner, your core role
in introducing the trust concept to
your clients is as a center of influence.
You don't have to be the expert on a
technical level. The trust company will
handle all the details anyway. All you
need to do is start the conversation:
" Are you familiar with what a trust can
do for you? "
Keep things simple. Get copies of
potential trust partners' marketing
materials when you start talking about
a relationship, and lean on those
materials to feed the discussion.
These potential partners should have
PowerPoint or the ability to construct a
presentation for you.
Remember to remind your client
that most other advisors are skittish
about suggesting a trust, even when
it's obviously in an investor's best
long-term interest. That's because a
trust represents a sacrifice in terms
of assets under management and
possibly lost revenue. Barely 10% of
advisors work with trusts. It should
impress any client to know that you're
in that top decile right away, provided
of course that you let them know.
Remember, the more trusts you
direct toward a trust company, the
more fee income they generate. A
truly serious partner will feed every
affiliate with plenty of training materials,
consultation and even branding
support to help you establish yourself
in the trust field.
In most cases, this material will keep
you at the center. The trust company
functions behind the scenes, so far
back in the back office that they might
actually be working several states
away. Reports and communications
can route through you and carry your
logo and letterhead. Your clients may
not even know the trust officer doesn't
work for you.
Either way, top-tier trust companies
are seeing advisors step up their
cooperative efforts with other
professionals who have a voice in
wealthy families' finances. Attorneys
and accountants play critical roles in
the trust creation process and need
to bring in advisors to manage the
investments. You can play quarterback
on the accounts you bring to the
game, but having a team on your
side goes a long way toward mutual
success.
DIRECTED AND
DELEGATED TRUSTS
Thanks to innovations in the trust
code in many states, truly advisorfriendly
companies are happy to let the
advisor keep investing the assets and
collecting management fees. From the
advisor's perspective, only the client's
satisfaction level changes.
Back in the 1990s, some states
altered the rules to allow the creators
of a trust to direct the trust company
to follow the investment choices of an
outside advisor. Trusts set up under
these terms are generally classified as
" directed " trusts.
Similar arrangements leave control
over the investments with the trustee,
but allow that function to be delegated
to an outside advisor. Naturally, these
are considered " delegated " trusts.
Whether it's delegated or directed,
as far as the portfolio is concerned,
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the advisor (you) is boss. The advisor
earns the management fees. The
trust company earns its own fee for
handling everything else: accounting,
custody (if required), reporting and
payments to the beneficiaries.
If the IRS needs to inspect the books,
the trust company handles it. If one
of the people named in the trust
documents has a special request, the
trust company handles it.
This frees up both trustee and
investment advisor to do what they
do best, aligning the interests of all
service providers with the grantors and
beneficiaries themselves.
DIVIDING UP RESPONSIBILITY
A true directed trust arrangement
is created when the person who is
initially transferring the assets decides
to require or " direct " the trustee to
delegate the investment responsibilities
to a registered investment advisor,
stockbroker, financial planner or other
family advisor.
In these cases, the trustee's fiduciary
responsibility for the investments is
formally reduced to the point where
he or she is exonerated from all liability
except in circumstances involving
willful misconduct. Some states have
slightly stricter requirements that force
directed trustees to double-check
that the advisor's decisions are truly
suitable, while others take a more
laissez-faire approach.
For most practical purposes, while
the trustee retains some continuing
liability for investment performance,
in a directed trust arrangement, it is
close to zero. Directed trust statutes
formally define the separate duties and
responsibilities of trustee and advisor.
Both are appointed as fiduciaries, even
if the advisor is not normally engaged
in a fiduciary role. This separation of
duties is called " bifurcation " in industry
marketing jargon.
America's Most Advisor-Friendly Trust Companies 2024

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