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Posts Tagged Christopher Holtby

Wealth Advisors Trust Outshines Money Centers With RIA-Friendly Solution

Industry award confirms what Trust Advisor readers already know: size is no substitute for knowing how to help ground-level advisors integrate trust into their day-to-day business.

wealthThe biggest private banks will probably always have a natural advantage in terms of scale and national brand penetration, so it’s always remarkable when a relative upstart can match them toe to toe.

Wealth Advisors Trust may have only earned a “Highly Commended” rating in the latest Private Asset Management Magazine Awards, but the company’s principals are taking the second-place showing in perspective.

After all, Wealth Advisors Trust was competing against a short list of global private banks, regional wealth management firms and the wirehouses themselves in the category of best trustee services provider.

Brown Brothers Harriman, Citi, First Republic, Northern Trust, Bank of the West and Merrill Lynch all scored lower with the judges.

Only U.S. Trust – which runs well over $200 billion in client wealth compared to Wealth Advisors Trust’s $180 million – did better and took the top prize.

“We are humbled as a company that the judges deemed our trustee services and our innovation
worthy of such a recognition especially in light of the strength of our fellow finalists,” says Christopher Holtby, co-founder and director at the South Dakota firm.

Holtby attributes the good showing among relative giants to Wealth Advisors Trust’s focus on personal trust services that may not necessarily tempt a hundred-billion-dollar institution but sit securely in the sweet spot for most investment advisory clients.

A million-dollar relationship that would get lost amid U.S. Trust’s billions can receive VIP service at an independent trust company like Wealth Advisors Trust, which can keep its fees and account minimums low because it doesn’t have all the overhead of a money center bank dragging it down.

Moreover, the independent model ensures that in-house bankers won’t try to cross-sell credit cards, mutual funds or other proprietary products into your clients’ trust accounts. There are no proprietary products. All Wealth Advisors Trust does is run the trust.

That proposition also means that a firm like Holtby’s isn’t going to fight introducing advisors for control of the assets that pass into a trust.

Wealth Advisors Trust focuses on directed trusts, which keep the advisor in the loop as investment manager and so

But while Wealth Advisors Trust is happy to stick to its core strengths – running the trust itself, not the money in it – the firm is still innovative when it comes to supporting new types of directed trust arrangements.

One of the breakthroughs here is the “Smart IRA,” which essentially hardwires the assets to stay with a directed advisor for generations.

Since 80% of all AUM goes elsewhere when the typical client dies, keeping the wealth on the books even as it passes down the family tree is a huge incentive for a lot of the advisors Holtby’s team works with.

It’s smart innovation like that that helps even a relatively little player compete with behemoths. Maybe it won’t win every round, but Wealth Advisors Trust definitely seems to be hitting above its weight class.

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The Trusteed IRA: Helping to Reverse an 80% Failure Rate

Advisors have been perplexed for years trying to find successful ways to maintain existing business when the current generation of clients dies. In fact, recent studies by TD Ameritrade and Pershing have shown that roughly 80% of individual retirement account (IRA) assets will be lost when a client passes away. Increasingly, investment advisors and custodians are being forced to look for alternative methods to retain IRA assets and accounts.

Click here to continue.

IWM

Source:  Investments & Wealth Monitor

Posted by: Steven Maimes, The Trust Advisor

Permalink:  http://thetrustadvisor.com/news/the-trusteed-ira

 

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Trust Firm Pulls in $70 Million with “Directed Trusts Made Simple” Campaign

In less than 30 days, Wealth Advisors Trust’s new email marketing program has produced millions in new advisor referred accounts. The firm’s business development team says “the phones have been ringing off the hook.”

South Dakota-based Wealth Advisors Trust Company low-risk strategy has paid off in a big way by paving the way to become the new home for $70 million and counting in directed trust account relationships.

The firm’s co-founder Matt Paladidi told us, “We are flooded with new solid leads.”

He expects to see $90 to $100 million or more on their books before the end of the year. All of this became possible by publishing a special report, “Directed Trusts Made Simple,” exclusively distributed by email.

The complimentary report tells advisors everything they need to know about marketing directed trust arrangements. It explains how these vehicles work and why they reduce friction between advisors and traditional trust companies.

Wealth Advisors Trust retained Mass. based Financial Marketing Associates to help produce the report and launch the email marketing campaign to estate planners and advisors.

 “Directed Trusts is the first in a series to come,” says Paladini.

The report offers an overview of how traditional trust accounts work and how directed trusts are different, authors Christopher Holtby and Chuck Sharpe (now the president of Wealth Advisors Trust) focus most of the discussion on the nuts and bolts of bringing trust services into an investment-based practice.

Holtby and Sharpe have good, actionable advice on everything from how to pick a trust company for your client to how to integrate trust into your prospecting activities.

While they probably wouldn’t mind if readers used Wealth Advisors Trust exclusively, they recognize that there are a lot of directed trust companies out there and that the important thing is finding the right client-trustee-advisor fit.

In fact, some of the best advice in the white paper is on how to interview prospective trust companies to make sure an individual client gets the best possible service.

No need to compete with advisors

Directed trusts formally split the duties of running the trust from the responsibility for managing the assets in it.

The trustee handles the complex paperwork and earns an administration fee. The investment manager — usually the advisor who suggested that a client open the trust in the first place — keeps control of the investment account.

Because the advisor isn’t losing the assets, this arrangement eliminates a lot of the internal conflict that putting client assets into trust used to entail.

On the one hand, wealthy clients can reap big benefits from shielding their money from estate and income tax or from creditors.

But on the other side of the coin, advisors were understandably reluctant to refer their best accounts to full-service trust companies that have built up aggressive in-house wealth management teams of their own.

However, directed trust companies like Wealth Advisors Trust are happy to handle the trust side of the business and leave the investing to the specialists. In fact, very few even have the ability to manage the investment side even if they wanted to do so.

To receive a copy of the report, click link belowhttp://www.thetrustadvisor.com/email/scripts/watc_sr_requests_subscribe.html

Jerry Cooper, senior editor, The Trust Advisor Blog.

Permalink: http://thetrustadvisor.com/news/watc-success

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Trust Firm Launches “Directed Trusts Made Simple” Campaign

Wealth Advisors Trust Company gives advisors a crash course in how to provide a full range of trust services without losing their best clients to the competition.

In the past, trust companies and independent investment advisors have had an uneasy relationship at best. But now, with about $41 trillion at stake as the Baby Boom retires, the stakes have never been higher — and directed trusts are emerging as a way to let everyone win.

South Dakota-based Wealth Advisors Trust Company is one of a new generation of independent trust companies that cater exclusively to the investment advisors themselves.

But as the firm’s co-founder Christopher Holtby told us, “We are finding that advisors and clients alike simply don’t understand how trusts work.”

He added, “In order for us to do our job right, we need to make sure that our client’s and the advisors we work with understand the basics of how trusts work.”

Wealth Advisors published a new special report, “Directed Trusts Made Simple,” that tells advisors everything they need to know about how these vehicles work and why they reduce friction between advisors and traditional trust companies.

You can receive a complimentary copy here, click here.

Wealth Advisors Trust retained Mass. based, Financial Marketing Associates to help produce the report and launch an email marketing campaign to estate planners and advisors. “Directed Trusts is the first in a series to come,” Holtby promises.

After an overview of how traditional trust accounts work and how directed trusts are different, authors Christopher Holtby and Chuck Sharpe (now the president of Wealth Advisors Trust) focus most of the discussion on the nuts and bolts of bringing trust services into an investment-based practice.

Holtby and Sharpe have good, actionable advice on everything from how to pick a trust company for your client to how to integrate trust into your prospecting activities.

While they probably wouldn’t mind if readers used Wealth Advisors Trust exclusively, they recognize that there are a lot of directed trust companies out there and that the important thing is finding the right client-trustee-advisor fit.

In fact, some of the best advice in the white paper is on how to interview prospective trust companies to make sure an individual client gets the best possible service.

No need to compete with advisors

Directed trusts formally split the duties of running the trust from the responsibility for managing the assets in it.

The trustee handles the complex paperwork and earns an administration fee. The investment manager — usually the advisor who suggested that a client open the trust in the first place — keeps control of the investment account.

Because the advisor isn’t losing the assets, this arrangement eliminates a lot of the internal conflict that putting client assets into trust used to entail.

On the one hand, wealthy clients can reap big benefits from shielding their money from estate and income tax or from creditors.

But on the other side of the coin, advisors were understandably reluctant to refer their best accounts to full-service trust companies that have built up aggressive in-house wealth management teams of their own.

However, directed trust companies like Wealth Advisors Trust are happy to handle the trust side of the business and leave the investing to the specialists. In fact, very few even have the ability to manage the investment side even if they wanted to do so.

Scott Martin, contributing editor, The Trust Advisor Blog.

To receive a copy of the report, click link belowhttp://www.thetrustadvisor.com/email/scripts/watc_sr_requests_subscribe.html

Permalink: http://thetrustadvisor.com/news/watc

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Who’s Charging What for Trust Services?

Trust fees are headed higher according to our pricing survey completed this week. Some firms work strictly from a rate card. Others decide what your client will pay when the business is placed on the table. Either way, it’s good to know what the “market value” of trust services.

There’s still a fair amount of mystery surrounding exactly what’s baked into each of those basis points.

“It’s never as simple as just lining up the fees,” says Mike Flinn, a Phoenix-based trust consultant at Advisory Trust Company. “Once you start drilling down into the basis points, it becomes pretty clear that different firms really do different things,” he added.

To find out where the sizzle hits the steak for various types of trust company, The Trust Advisor Blog conducted a survey below of what they’re charging.

Who’s Charging What for Trust Services

Trust Company

State

Trust account minimum

Minimum annual fee

First $1 million

Next $2 to $3 million

$3 to $5 million

Above $5 million

“"

DE

$500,000

$3,000

0.50%

0.40%

0.30%

0.25%

“"

DE

$1 million

$6,000

0.60%

*

0.45%

Neg.

“"

NH

None

$3,000

0.90%

0.55%

0.45%

0.35%

“"

IL &
DE

$5 million

$20,000

0.40%

0.40%

0.40%

0.20%

“"

GA

None

$3,000

0.60%

0.35%

0.35%

0.35%

“"

NM

None

$4,000

0.75%

0.75%

0.50%

0.35%

“"

NV

None

$1,000

0.50%

0.50%

0.50%

0.40%

“"

NV

$100

$100

1.00%

0.80%

0.70%

Neg.

“"

SD

None

$4,000

0.50%

0.50%

0.42%

0.35%

“"

DE

$1 million

$8,000

0.60%

0.40%

0.40%

0.25%

* Breakpoint is $2 million.

NOTE:Accuracy is not guaranteed. Please consult the institution directly to confirm costs. The Trust Advisor Blog realizes that this is not a comprehensive list of all firms. To make sure your institution is included or excluded in the July 2nd edition of this survey please let us know. We will be expanding coverage; please also include any other services offered such as investment management, special purpose trusts, HSAs, etc. Advisors and estate planners may reproduce this survey upon request. To contact us, click here.

Source: Websites and telephone interviews. ©2010 TheTrustAdvisor.com

The Basic Account

One thing we discovered: if you just want a no-frills account, Flinn adds, it’s probably going to cost at least $3,000 a year. “That’s really the minimum anyone can comfortably charge.”

“Maybe $2,500,” he conceded. “But at that level, it’s going to be very difficult to stay in the business.”

While $3,000 happens to be what Advisory Trust charges on the low end, it does seem to be an informal sweet spot within the trust industry. Other companies that start at that level include New Hampshire Trust and Georgia-based Reliance Trust.

There are companies that charge small accounts less (Nevada’s Summit Trust will go as low as $100 a year), but plenty start their fees at $4,000 and up. It all depends on the size of account they’re courting and what makes economic sense, Christopher Holtby, president of Wealth Advisors Trust Company, told me.

“Hitting the sweet spot is part art, part science,” he explains. “There are very specific things that every trust has to do, and everything else is extra.”

Good scale for big fish

Northern Trust doesn’t publish its fee scale, but president Dan Lindley was kind enough to give The Trust Advisor a peek.

Although the $20,000 minimum fee looks steep at first, it makes a lot more sense when you consider that Northern Trust isn’t really interested in personal directed trust accounts with less than $5 million in assets. For a client with that kind of wealth, the $20,000 translates into at most 40 basis points a year—pretty low by industry standards.

(Really big clients get institutional-strength discounts. Once a Northern Trust account grows beyond $30 million, the company will only charge 5 basis points: $500 a year per $1 million.)

The upshot is that by concentrating on high-end clients, a white-glove firm like Northern Trust can build a lot of sizzle into its steak, even though the cost per dollar of AUM is comparable to what bare-bones vendors charge.

“Northern Trust in Delaware charges a reasonable, competitive fee and in return provides comprehensive services to our directed trust clients backed by more than 120 years of experience as a fiduciary,” Lindley told me.

Other high-end trust companies argue that at this level, it’s pointless to advertise your fees because high-net-worth clients and their advisors are happy to pay for the service.

Some vendors refused to participate in the survey because they either work on an a la carte basis (Alaska Trust) or figure out what to charge once they see the trust paperwork (Commonwealth Trust). As Alaska Trust founder Douglas Blattmachr told me, it’s pointless to advertise how much a generic offering would cost when the fact is that at this level, one size fits none.

“It really does depend on what the client wants us to provide,” he says.

When asked to present a benchmark, he estimated that a relatively bare-bones Alaska Trust account might charge 50 basis points a year or an annual minimum of $3,500. That’s about where vanilla Commonwealth trusts start, Jim McMackin, who runs the company’s marketing, told me.

Splitting smaller pies

Naturally, it’s going to cost extra if the trust company also manages the underlying assets. But there are a lot of vendors out there that are happy to offload the investment responsibilities and knock a bit off their fees in return.

Companies like Wealth Advisors Trust, Advisory Trust and Santa Fe Trust, cater exclusively to investment advisors looking for a place to refer their clients who need to open a trust.

Account minimums tend to be relatively low—Wealth Advisors Trust and Santa Fe Trust can theoretically start a trust with as little as $1—but expenses can be a little higher to cover the fixed cost of administering these tiny trusts.

For example, Santa Fe Trust accepts very small accounts, but according to its published fee scale it will still charge them at least $4,000 a year. At an annual fee of 75 basis points, this suggests that a trust really needs to have more than around $533,000 in it to “earn out” that $4,000 minimum fee.

By comparison, Wealth Advisors Trust’s scale “earns out” at a slightly higher level ($800,000 in the account), which indicates that its platform is built to support a somewhat more affluent clientele. Others on our list (Advisory Trust, Reliance, Saturna, New Hampshire Trust) justify their minimums at lower levels.

Whatever happens, says Kathy Roberts, the CEO of Santa Fe Trust, small accounts shouldn’t be loss leaders.

“We don’t take a trust that isn’t going to be profitable,” she told me.  While she’ll take on a tiny trust if the grantor insists, she warns that advisors should recognize that the trust company will pass on the cost of running it and sometimes it just doesn’t make sense.

Where we go from here

Most of the people I talked to say the cost of running a trust has already gone about as low as it can go.

Mike Flinn from Advisory Trust and Douglas Blattmachr of Alaska Trust agree that the cost of fiduciary compliance and routine service probably isn’t going any lower than around $3,000 per trust any time soon, especially given the current trend toward higher regulation.

“It’s expensive to be a fiduciary,” Blattmachr acknowledged in our conversation. “So that provides a floor on what people can offer.”

But beyond that level, technology keeps improving and letting efficient trust companies bring down their overall cost proposition. Blattmachr says low-end players can use technology to better serve the mass market. Kathy Roberts of Santa Fe Trust agrees.

Either way, Christopher Holtby of Wealth Advisors Trust told me that there’s always room for enthusiastic competitors.

“Wherever fees go,” he says, “there are going to be a lot more entrants in the trust service business.”

Scott Martin, contributing editor, The Trust Advisor Blog. Steven Maimes contributed to the research and the editing.

Permalink: http://thetrustadvisor.com/news/fees

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Do You Own an Apple iPad?

The Trust Advisor will be publishing an upcoming article on wealth management applications for the new Apple iPad device.

I have seen the device and its amazing. Forbes reported that Apple sold between 600,000 and 700,000 iPads today alone.

We would like to include any comments our readers have about their experience with the device, either good or bad and what applications they may be using.

Click this link to submit your iPad comments

Thank you — Jerry Cooper, Sr. Editor, the Trust Advisor

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New SEC Custody Rule Boon for Directed Trust Providers

Audit and compliance fees are sending RIA trustees to independent trust companies. Providers welcome the new business.

A new SEC rule that took effect last Friday leaves thousands of RIAs facing annual surprise audits and has triggered a surge of new business for trust companies that specialize in lightening the load.

The audits are part of a package of new rules adopted by the SEC last year in response to the Ponzi scheme perpetrated by Bernard L. Madoff. Under the new system, an advisory firm the SEC considers to have custody over client assets has to pay for an annual audit to properly account for all funds and trades.

According to SEC records, the new rule affects 10 percent of the 25,000 RIAs, including those who handle trust accounts for families, charities and retirement plans such as 401(k)s and ESOPS.

With few exceptions, trustees are now deemed to have custody, but advisors who let a corporate trustee handle the trustee work are off the hook.

Christopher Holtby, president of Wealth Advisors Trust Company, tells me that the new rule is a boon for companies like his, which specialize in doing just this.

“It lets us do your heavy lifting.” he said. Dan Ehrmentraut, JD is Wealth Advisors’ Director of Business Development, comes to Wealth Advisors Trust Company with over 20 years experience in the directed trust advisory business. 

By partnering with a separate trust administrator, advisors can go on managing their clients’ assets without being considered the custody provider. The arrangement is known as a directed trust.

The decade-old trust feature that splits trustee and advisor into separate operations has become accepted practice for banks and trust companies nationwide.  Trust Advisor Blog wrote a story several weeks ago that explained how they work.

I spoke to several accounting firms recently to determine how expensive the compliance audits will be. Estimates range from a low of $16,000 all the way to $100,000, largely depending on the stature of the firm.

The expensive part of the engagement involves an internal control report similar to a SAS‑70 audit, which must be received by the SEC within six months of becoming subject to the requirement. In addition, advisors must respond to new questions on a revised Form ADV.

Given these headaches, Christopher Holtby at Wealth Advisors Trust tells me that directed trust is a “win-win situation” because there aren’t any conflicts of interest and “if you work the math out, our fee is substantially lower than the compliance cost.”

Holtby’s firm is based in South Dakota, where trust rules are most favorable to advisors. His firm can also support dynasty and asset protection trusts, which are most desirable with high-net-worth investors to complement their estate plans.

MULTIFAMILY OFFICE PROVIDERS AFFECTED

Many advisors are still trying to work through compliance problems, says Valerie Baruch, assistant general counsel of the Investment Adviser Association, a Washington, D.C.-based trade group that has been on top of this issue since the beginning.

Over the last few months, advisors have wrestled with serious confusion as to who needed to comply. The SEC eventually posted clarifications on its website that dealt squarely with the central question:“If an employee of an advisory firm serves as a trustee to a firm, does the advisory firm have custody?”

The answer to the question, according to the SEC, is “yes.” However, the clarification, released only a week before the new rule went into effect, did not give advisors much time to shop for accountants or deal with the issue properly. While the Trust Advisor Blog received many questions from advisors over the last several weeks concerning this, the matter seems to have been laid to rest—for the time being.

In addition to advisors who serve as trustees, those who provide multifamily office services also come under scrutiny of the new SEC custody rules.

I spoke to Mari-Anne Pirsarri, a Washington, D.C.-based lawyer, who told me that any time an advisory firm has the ability to direct the custodian to pay a third party, the SEC says the advisor has custody.

David Newkirk, a managing director with Schwab Institutional, told me that when advisory firms serves as trustees or have the ability to tell us to send money to third parties, they effectively have trust custody. He added “We beat this question up pretty well,” he told me.

I also spoke to Steve Austin at Fidelity and that firm’s position is identical to Schwab’s. “It’s cut and dry,” he said. “The advisor has custody when they tell us what to do with the money.”

Mari-Anne Pirsarri told me the SEC has made additional clarifications (and a few exceptions) for multifamily office providers. For example, she says when a client calls up an advisor who is also a multifamily office provider and says, “Pay my taxes for $50,000,” that involves custody. However, if the client calls up the advisor and says, “Move my money from Schwab to Fidelity,” custody isn’t an issue.

She notes that there is so much confusion because, after awhile, the arguments start circling back on themselves.  But the SEC means business, she says. “The SEC is not backing off on this one.”

Despite this, the SEC has made a few concessions. When the audits were first proposed last year, the SEC took the position that even deducting fees from client accounts represented custody. The SEC received over 1,000 letters and wound up agreeing that advisors who are simply authorized to collect their fees did not have true custody over their accounts.

Jerry Cooper, senior editor, The Trust Advisor Blog. Scott Martin contributed to the editing.

Permalink: http://thetrustadvisor.com/news/custody

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