Words of Advice


 In the process of exploring and establishing personal trusts, investors identify all sorts of details that need to be addressed. Often these are the types of details that they really don’t want to deal with.


In their investigation of how to proceed, investors often talk to family, friends, attorneys, accountants and corporate trustees to determine the best route to take. Ultimately, they choose whether to let an institutional trustee handle the affairs of the trust, or to effectively do it themselves and become a self-trustee.  Sometimes that role will go to a family member either after the grantor’s death or sometimes while they are still alive.


They always have their reasons for the choice they make, as uncovered in Spectrem’s research study Choosing a Trustee. The research interviewed 50 individuals with trusts.  Twenty-five used corporate trustees (where a bank or other provider acts as trustee) and the remainder acted as their own trustee. These investors eventually got around to telling trust service providers what could have been done differently or better in the process of determining how to deal with their trust.  Some of the reasons clarified the decision about why they chose not to use a corporate trustee but rather to take on the role themselves.


“In the interviews we did with investors, the final question asked what advice they would give to financial service professionals and many of them were vocal in their opinions,’’ said Spectrem President George H. Walper, Jr. “Much of the advice they gave related to communication, but a great deal of it suggested that trust providers made the process more complicated than it needed to be.”


Working with investors on their choices related to their personal trusts, advisors must be wary. Few topics garner more concern over advisor performance than trust management; investors often have the lives of their children and grandchildren in mind, and that can darken perceptions.


These words of advice, then, can go a long way in maintaining a positive relationship with investors who are allowing their advisor or institutional trustee to manage their trust accounts.


One issue that came up among many investors is that trust service providers did a poor job of educating potential clients on the details related to how trusts are set up and handled down the line.  Most investors think that trusts are for someone else. They believe that trusts are for the 1 percent and don’t apply to most households.  In reality, trusts can provide benefits for households even with lower levels of wealth. In short, there is an education issue.


One investor said “My overall comment would be to educate the average consumer. Education to my type of individual would probably be extremely beneficial. Why is the trust a good thing? Why somebody should do it.”


“I think people always make the assumption that we understand more than we do,’’ said another investor. “So talk to the people at their level, putting themselves in your shoes so that they can explain it to you from your perspective.”


The communication issue was paramount for many investors. Whether they were in the process of setting up a trust or already had a trust and were looking for information on its status, investors wanted to have a better sense that trust service providers know and understand what their attitudes and concerns are.


“I know their time is valuable, but our money is valuable too,” said one investor. “Be a little more proactive and not so much just trying to upsell or change our portfolios around all the time selling. Provide more reassurance and more communication.”


With communication in mind, investors speak frequently about wanting the trustee to understand their particular situation, not only when the trust is set up, but as life goes on and events happen. Those investors who employ a corporate trustee want that trustee to pay attention to what is happening in their lives that might affect the trust.


“They need to get a background of the whole picture, and then revisit it,’’ said one investor.


“Maybe not as often as you would revisit personal finances, but you’ve got to see what happens when people go in and out of their lives. Life changes. There are a lot of moving pieces and the moving pieces change.”


Interestingly, one investor who expressed a deep understanding of the industry said the trust industry simply does not market itself properly.


“It’s a very important aspect of financial planning, and I think they could do a better job, rather than the insufferable ads talking about some of the least important things about financial planning and security, they should promote the fact they have a track record of solid performance with great security and the ability to manage assets to the benefit of their clients,’’ said the investor. “I want to be as secure and safe as I can be. I don’t always hear that message on television ads or in the mail I get. I would demonstrate we’ve been around a long time, we provided a qualified service that will make you money and your assets will be protected. I have not gotten a message like that.”


Top Takeaways for Advisors

-It’s always about communication, isn’t it? Investors owning a personal trust are always going to require communication in regards to their holdings. Communication, in this case, also means education. Advisors and trust providers should invite questions and be ready to answer them.

-One other aspect of trust management is that no two trusts are identical in terms of the needs and desires of the investor. It is imperative that an advisor understand all of the details of the investor’s plans for the beneficiaries. The conversations can be sticky, but no detail should be ignored, because it is that detail that may come up later.

-Having a trust is not just about investing.  It’s a critical part of financial planning.  Many investors don’t think about what will happen when they no longer can be the trustee.  Make sure that you discuss all of the implications involved with being a trustee.  The tax issues and estate planning issues are important but the long term challenges also need to be addressed.