The story has become a common one: A financial advisor seeking to add high-net-worth clients to her roster enters into a partnership with a trust company. The advisor works hard developing relationships with those clients, then, somewhere down the line, those same clients receive a phone call from the trust company offering its wealth management services.

Enter the advisor-friendly trust. These are companies that cater specifically to financial advisors, or claim to, by offering complementary but not competing services. In other words, you handle the investment of your client’s trust; they serve only in the official trustee administration role and take care of as much of the tedious back office stuff you want to throw at them. Finding such a partner may not be quick and easy, but it is important. Most trust service organizations are affiliated with banks or asset management firms that want nothing more than to squeeze the advisor out and take over the assets.

The best way to ensure that doesn’t happen? Choose a trust specialist that couldn’t steal your clients if it wanted to.

“We don’t have proprietary products. We’re here to be a resource for advisors; that’s our niche,” says Brian Simmons, senior vice president and trust officer at Premier Trust, a Las Vegas-based firm with more than 3,000 advisor relationships. Simmons encourages FAs to do significant due diligence and seek out referrals, because sometimes competitors come dressed in advisor-friendly clothing. “Some firms will hold themselves out to be advisor friendly, but then you find out the president or owner has a money management firm on the side.”

What an Advisor-Friendly Trust Partner Can Do for You
Finding the right trust relationship is worth the time it might take. If the relationship works as it should, the advisor is the boss and earns the management fees, while the trust company earns its own fee for handling everything else, such as accounting, custody (if necessary), reporting and payments to the beneficiaries.

Most clients prefer a holistic approach, all-in-one firms that can give them tax advice, insurance, estate planning, philanthropy and wealth transfers to future generations, so a wealth manager’s ability to offer trust services is a priority. Trust companies can help advisors land new accounts by assisting in account transfers from bank trust departments to RIA custodians; by providing education to family members; by co-producing luncheons, seminars and other events to help recruit new business; by providing marketing support materials to prospective clients; by providing integrated technology that shows clients the value of their accounts using the trust company’s system; by offering a hotline for clients with trust questions; and by adding trust education to advisors’ other services.

In the 2016 edition of its “America’s Most Advisor-Friendly Trust Companies,” the Trust Advisor reported that more than 80% of its readers said finding a trust company they can recommend to their best clients had translated into new relationships, enhanced account retention or both.

“If one of our advisors’ clients passes away, if we’re written in as successor trustee then we get the phone call,” and it’s a smooth transition of service to the next generation, says John Abbuhl, chief client officer at National Advisors Trust Company in Kansas City, Mo. “But let’s say an advisor’s client passes away, and we’re not written in, U.S. Trust is written in. U.S. Trust gets the phone call, and that advisor is pretty much out of the equation. They’ll call the advisor and say thank you for taking care of this client all this time, we’ve got it from here, because U.S. Trust has its own portfolio managers and investment advisors and they do that all themselves.”

National Advisors has relationships with 555 wealth management firms and more than 4,770 advisors.

The type of trust an FA wants to work with is called a directed trust, which gives trust participants, including financial advisors, the control over the assets while the trustee simply does as it’s ordered. Directed trusts typically separate the investment advisory fee from the corporate trustee fee, giving clients clearer insight into what they are paying as well as a lower total fee more often than not. In general, fee schedules for directed trust companies fall in a range from 0.50% to 0.75% on the first $1 million and then drop according to varying break points. Minimum annual fees typically range from $4,000 regardless of asset level.

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