Question: Why should an investment advisory, accounting or law firm offer trust services?
Answer: An estimated $30 trillion in assets is and will be passing from the baby boom generation to succeeding generations and charitable organizations. Wealthy clients are harnessing trusts in their estate planning to control how the assets are distributed to their beneficiaries. Advisors risk losing their most important clients to large financial organizations if they don’t have the ability to serve as a corporate trustee.
Question: What are ‘directed’ trust services?
Answer: Most trust companies and bank trust departments offer only full trust services – a package deal, including investment management, trust administration, custody, operations, accounting and tax reporting. Chartered in the state of Tennessee, a ‘directed trust’ state, and with today’s advanced technology, Counsel Trust has bifurcated these trust functions to offer just trust administration and accounting-particular ‘directed’ trust services as determined by the trust grantor.
Question: Who is custodian of the trust assets?
Answer: Counsel can work with any major asset custodian, including banks and primary broker dealer firms. An electronic link is established enabling Counsel to provide full trust accounting and administrative services.
Question: Who manages the trust account?
Answer: In a Tennessee situs trust, the trust grantor, another individual, or any asset advisory firm, designated by the trust grantor can manage (and is responsible for) the trust assets on a discretionary basis. Counsel Trust as trustee fulfills the administrative duties of the trust and conducts due diligence reviews of the investment manager, however does not have the power to dismiss or re-appoint the investment advisor designated by the trust grantor. This is a key attribute of a directed trust state such as Tennessee vs. in delegated trust states (most others) where the trustee has the ability to dismiss and retain outside investment managers.
Question: Why should investment advisors be interested in directed trust services?
Answer: Advisors’ best ‘high net worth’ clients are establishing estate plans containing trusts. With a directed trust capability, advisors can continue managing the assets inside a trust with no interruption in asset custody or tax reporting. Thus, the risk of losing the client to a bank trust department is avoided. Also, importantly, in a directed trust state such as Tennessee, advisors are protected from being dismissed as the trust investment advisor by the trustee who may have a conflict of interest.
Question: What are the advisor’s responsibilities in offering trust services? Are there potential liabilities?
Answer: The advisor often becomes the ‘quarterback’ of the client / trust relationship – the liaison between the client and Counsel Trust. The advisor assumes fiduciary responsibility for investment management, while all administrative fiduciary liability is assumed by Counsel Trust, in fulfilling its administrative, accounting and regulatory compliance duties as trustee.
Question: What is a private label trust company?
Answer: A private label trust company enables an advisory, accounting or law firm the ability to market trust services using its own, distinct branding.
Question: How is a private label trust company set up?
Answer: Following an initial ‘due diligence’ screening and formal acceptance by Counsel Trust, the new entity is established. You determine the name, branding and marketing direction of the new firm (typically complimenting your advisory firm).
A data link with your firm’s preferred custodian is set up with SEI, Counsel’s trust company back office operations partner. Counsel Trust Company becomes the underlying legal fiduciary, assuming all regulatory functions, responsibilities and liabilities. The advisor manages trust assets and controls the client relationships.