Times are tough. Volatility is up and client confidence is down. For many advisors, assets under management are down, too. In this environment, where can you look for opportunity? One word: trusts.
In the next 20 years , 76 million baby boomers will retire, and they'll have to decide what to do with an estimated $41 trillion to $100 trillion in assets.
If you're already managing trust accounts, you know how well they can transfer wealth through lifetime gifts or estate distributions, protect against taxes and preserve assets for generations.
Trusts are also great for retirees. As retirements stretch to 30 years or more, baby boomers without pensions will need to make their money last-especially if they intend to leave a legacy. With a living trust, you can manage the assets so they last throughout retirement, and be the advisor that guides the next generation when the time comes.
So what's the catch? The estate tax laws will change at the end of 2009, and many advisors and trust companies are waiting to see what happens before they start new trusts or revise existing ones. But that may be the wrong approach. Now is the ideal time to get all the documentation for existing trusts up to date and set up new trusts for success.
Clearly, this is a big opportunity. And despite trusts' reputation for complexity, many advisors we work with are able to expand their trust business without expanding their back office or becoming estate attorneys and CPAs.
Intangible Benefits With Tangible Business Results
Trusts don't just bring in more assets. They also deliver intangible benefits that few other services can match.
For one thing, they deepen your client relationships. The more you know about a client's finances, the better advice you can provide. By managing both trust and non-trust assets, you not only gather more assets, you can also deliver the kind of fully integrated, comprehensive advice that keeps clients for the long term.
Trusts can also help you attract new high-net-worth clients. Research from the Spectrem Group found in 2007 that more than half of the affluent with a trust had more than 76% of their assets in trust, and nearly 25% of the respondents had 100% of their assets in trust. So if you want to gather most of a high-net-worth client's assets, managing trusts is a must.
Furthermore, trusts help you strengthen your relationships with different generations of the client's family. If one of your clients dies or becomes incapacitated, what will happen to those assets? There's really nothing stopping the heirs from taking them to another advisor. With trust arrangements, however, you will have the opportunity to keep ongoing contact with younger family members as you help them determine successor trustees, and they may even name your firm in the trust document as having investment powers.