Why More Financial Advisors Are Adding Trust Services to Their Businesses
Trusts are becoming more common, especially as younger Americans begin planning out their estates. More than 20% of Gen Z and roughly 18% of Millennials now have a trust. For financial advisors serving this demographic or anyone else with complex estate or multigenerational planning needs, offering trust services becomes essential to staying competitive.
While supporting trusts can quickly become time-consuming and costly for your advisory firm, there is no need to handle everything in-house. By partnering with a trust services provider, you can extend support for trusts to your clients without directly taking on the fiduciary or administrative responsibilities. In this article, we'll take a look at how trust services for financial advisors work and how they can strengthen your relationship with your clients.
What Are Trust Services for Financial Advisors?
Trust services for financial advisors include 3rd party support for the formation and management of your client’s trust. While you focus on the investment and wealth management side, the trust services provider will work on trust administration and corporate trustee support.
A trust company does not replace a financial advisor. Instead, they will work with you to ensure comprehensive and personalized service for your clients.
How Corporate Trustees Support Trust Administration
A trust company serves as the corporate trustee for the management of your client's trust. This means they handle all aspects of the trust, including administering trust assets, coordinating distributions, and maintaining detailed records. A corporate trustee is also bound by fiduciary duty, which ensures all estate management decisions are impartial and align with your client's best interests.
Why Client Needs Are Driving Greater Demand for Trust Services
As a financial advisor, fulfilling your client's needs is the core of your business model. When it comes to estates and trusts, these needs can become quite complex. For example, you may need to navigate blended families, business succession planning, and multigenerational wealth transfers. These situations often result in clients requesting the creation of complex trusts to successfully manage their legacies.
Another reason clients may seek help with their trust is when they lack someone to serve as trustee. As a fiduciary, you will likely be the first person they turn to. This need for complex estate management and a dependable trustee is why, as a business, you need to be able to offer trust services.
When an Individual Trustee May Not Be the Best Fit
Most of the time, the person creating the trust (called the grantor) chooses a friend or family member as the trustee. However, doing this may not be the best route for clients seeking impartiality, continuity, and expert service.
The alternative to an individual trustee is a corporate trustee. With a corporate trustee, a client will receive experienced and knowledgeable guidance in managing their trust. In particular, a corporate trustee can help manage the tax and legal implications of a complex trust, navigate the trials of a large or blended family, and provide trust administration across generations.
How Trust Services Can Strengthen Advisor-Client Relationships
As your clients' needs change, so should the support you provide them. When you offer trust services as a part of your advisory package, you have a better chance of retaining your clients long-term.
Beyond that, navigating the wealth transfer conversation can help you strengthen your existing relationship. For example, you can build asset allocation models to help your client decide how to fund the trust or decipher trust performance documents they've received. This assistance can help you build a solid foundation for long-term client relationships.
Offering trust services may also allow you to work with other professionals who are a part of your client's financial team, like CPAs, attorneys, and trustees. Being able to coordinate and communicate with these professionals can offer you greater insight into your client's situation, allowing you to provide a more personalized level of service.
Building Relationships With the Next Generation of Clients
The creation of an estate plan involves more than just your client; it also impacts their family. As you work through the planning and execution of their will, trust, and broader estate, you'll have a chance to meet and work with the beneficiaries. This lets you begin building a relationship with the next generation. The more you can help beneficiaries retain client assets across generations, the more confidence you can build, and the better the chance they will stick with you as their financial advisor for the long term.
How Trust Services Can Differentiate an Advisory Practice
As a client's plans for the future become more complex, they begin needing services beyond basic investment and wealth management. Offering advanced estate planning and trust services can help your firm stand out from the crowd and support your client even when their net worth grows.
When you partner with a trust services provider, you can offer complex estate planning without needing to develop a specialized trust administration infrastructure. This can allow you to offer valuable estate and trust planning services without incurring excess costs.
Expanding Capabilities Without Building Them In-House
The role of professional trust officers can require a specialized skill set. Beyond the fiduciary duty needed to make investment and distribution decisions, there are legal, compliance, and tax implications as well. For example, as a client moves their assets and income into a trust, the tax burden shifts to the trust, requiring detailed IRS reporting.
This need for administrative expertise is why it may be best to expand your services into the world of trusts with a dedicated partner by your side. Instead of gathering the personnel and resources needed yourself, you can shift the work to your trust services partner. This allows you to focus on the day-to-day tasks of helping your client grow and protect their wealth long-term.
What Financial Advisors Should Look for in a Trust Services Partner
Once you've decided that the value a trust services company brings to your advisory firm is beneficial, it's time to select the best fit. Here are some key questions to consider:
- Does the provider have the capability to make decisions that are in your client's best interest?
- Can the provider respond to your client’s inquiries in a timely manner?
- Will the trust services company work to include you in estate planning conversations?
- Does the provider have the resources and experience needed for handling the complex issues associated with your client’s trust?
- How does the company provide and bill services, and does this mesh well with your existing structure?
Can the provider adjust their service and structure as both you and your client's needs change over time?
The goal in answering these questions is to find a company that supports and deepens the existing relationship you have with your clients.
Expanding Your Practice With the Right Trust Services Partner
With the right trust services partner, you can help your clients navigate complex estate issues while providing personalized support. Not only will trust services for financial advisors help differentiate your firm, but the move could also help you build multigenerational relationships.
When you partner with a provider like Arden Trust Company, the result is improved client confidence, opportunities to grow your business, and support without a high price tag. With extensive corporate trustee experience, a collaborative team, and a commitment to transparency, we will assist you, not replace you, as you work to deliver quality service to your clients. Contact our business development team to learn more about how Arden Trust Company can help you grow your advisory firm.