One of the most troubling statistics in the financial advice industry is how rarely advisors retain assets when a client passes away, as clients’ heirs switch to another advisor 66 percent of the time.
What many advisors do not realize is that the trust services provider you select might play an outsized role in the success—or failure of intergenerational asset retention. Not all trust service providers are created equal, and independent advisors need to carefully review the trust services firms they work with to ensure their approach aligns well with the advisor’s business model.
First, some basic context: The traditional, “one-size-fits-all” trust services model tended to take advisors out of the picture when a client passed away. But with the largest generational wealth transfer in the nation’s history now underway, many trust companies are positioning themselves with an “advisor-friendly” approach, which focuses on driving mutual growth by building lasting relationships with advisors and helping them strengthen their connections with clients and heirs, rather than disintermediating them.
For advisors seeking the right trust services partner, the challenge is to identify providers who not only offer an advisor-friendly model, but who can effectively help them build the long-term relationships they will need with both clients and their heirs in order to retain assets from one generation to the next.
Here are the top four characteristics advisors should consider:
1. Commitment to fostering advisors’ growth by helping to expand their skill sets and providing value-added marketing materials and resources. Maintaining strong relationships with aging clients and their heirs requires a strong understanding of estate planning strategies. This knowledge base, however, can be difficult for advisors to develop on their own. Trust companies that are most effective in driving long-term growth both for themselves and their advisor partners are those offering comprehensive, formal education programs to help advisors expand their knowledge of estate planning.
The best trust service partners also use their extensive resources to provide advisors with client marketing materials and support, while leveraging their knowledge of various regional markets to put advisors in contact with local estate planning attorneys, who may be able to serve as centers of influence.
2. Demonstrated skill in ‘looking around corners’ and taking proactive steps to reinforce the advisor’s central role with client assets and relationships. When it comes to retaining assets across generations, advisors often stumble over unforeseen pitfalls. This is where a true partner on trust services can demonstrate their value and commitment to serving advisors’ best interests. As one important example, advisor-friendly providers should be sure to tell their advisor partners to take steps to remove any banks as their clients’ successor trustees. This protects the advisor from being displaced by the bank successor trustee when the assets transfer to the next generation.
Trust service providers can also proactively work to help strengthen advisors’ relationships with their clients by being a resource to assist in estate planning for clients and their heirs. Advisors should feel comfortable that their trust services partner is providing the right level of client support, without threatening to disintermediate them.
3. Flexible business model that can adapt to advisors’ and clients’ needs. Advisors’ businesses are carefully built to provide the mix of service offerings, expertise and responsiveness that best suits their clients. Advisor-friendly trust services partners should, ideally, offer a flexible platform that respects each advisor’s unique approach and business model. This means, for example, offering the ability to work with multiple custodians depending on advisors’ and their clients’ preferences—rather than demanding advisors change where client assets are custodied.