Posts Tagged Sterling Trustees
11 Top Trust Firms Make the Winners’ List for Advisor Friendliness in Our New Special Report
Posted by Scott Martin in News on February 6, 2012
Teamwork is key for a whole generation of trust officers who have little motive and less opportunity to cut the advisor out of the game. Unlike football, everybody wins.
After decades of financial advisors and trust companies fighting over client loyalty, a few members of each of faction are realizing that it’s more profitable to work together.
That’s what we found out when we surveyed the industry and learned that the trust companies that actively court long-term relationships with financial advisors are winning big accounts — without stealing them from the advisors themselves.
The most advisor-friendly of all made it into our latest special report. (Download it here.)
They’re an eclectic bunch of organizations, ranging from white-glove institutions to high-tech entrepreneurial upstarts. Pretty much all they have in common is their independence and their eagerness to prove that they’re not a threat to your business.
They don’t have in-house wealth managers hungry for commissions or management fees, so the motive to ingratiate themselves into the lives of your best clients and squeeze you out just isn’t there.
They don’t have proprietary investment products to push into trust portfolios. And they don’t even mind if your preferred custodian hangs onto the money.
Get inside the list
Operationally, the most advisor-friendly trust companies out there emphasize flexibility and service.
Whether they’ve been around for a few years or close to a century, every single one is willing to work with any custodian you care to name: TD Ameritrade, Pershing, Schwab, Fidelity.
Between them, just about all the major accounting platforms are on the table, so if you want plug-and-play integration with Schwab, SunGard or anything else, you’re probably going to find it somewhere on the list.
And big surprise: all of the top trust jurisdictions are well represented.
Advisors have been flocking to trust companies that operate in Alaska, Nevada, South Dakota and Delaware — not to mention New Mexico — in order to get their clients access to the most flexible trust statutes and best tax treatment in the country.
Dynastic trusts, which run for centuries or even forever, are a popular offering. So are asset protection trusts, unitrusts and other specialized vehicles.
On the service side, most have the in-house expertise in place to promise extremely fast turnaround. A trust that could take weeks to set up elsewhere can be up and running in under a day here.
Not willing to hog the ball
The very idea of an “advisor-friendly” trust company might come as a shock to the 85% of advisors worried about losing the assets their clients move move into trust.
For too long, that account “migration” was a painful fact of life for advisors who wanted the best for their clients.
Wealthy clients quite rightly demanded the ability to incorporate trusts into their financial plan to protect their property from taxes, nuisance lawsuits and ultimately mortality itself.
But when advisors located a conventional trust company to serve as corporate trustee, it generally meant handing over about $1 million in assets — roughly half the typical high-net-worth investor’s net worth — as well as the associated management fees.
The clients were happy. The trust company was overjoyed to get the business and active management rights over the portfolio. And the advisor suffered.
Needless to say, a lot of advisors were less than eager to recommend that their best clients take their assets elsewhere, and so the adoption of trusts lagged.
As a result, according to Fidelity, a full 40% of high-net-worth households have yet to set up trust arrangements, even if it’s in their financial interest to do so.
A shot at a shared win
The trust companies on our list saw that natural resistance as an opportunity to offer advisors a better deal and capture that elusive 40% of the market.
Every single one of them supports an arrangement known as directed trust, in which the client assigns the right to manage the assets to an advisor — usually the one he or she is already working with.
The trust company does what it does best: run the trust.
All the bookkeeping, reporting and fiduciary responsibilities remain with the trust company, which earns a nominal fee for the service. If there’s a problem, it’s up to the trust company to deal with.
From the advisor’s point of view, nothing changes. The assets remain on the book of business and keep generating the same fees. With few exceptions, the trust company has no legal right or duty to interfere in the investment choices.
The client is happy to have an advisor looking out for his or her ultimate best interests. The advisor-friendly trust company gets new trust accounts to run. And the advisor doesn’t lose.
Scott Martin, senior editor, The Trust Advisor. Steven Maimes assisted with the research.
Wealthy Say Money Is Safer in the US Than Europe
Posted by Scott Martin in News on October 2, 2011
Between the euro’s malaise and new IRS headaches for holders of foreign accounts, Americans and others are handing their money back to institutions operating on U.S. soil.
As the euro lurches from crisis to crisis and the world’s economic outlook stutters, rich families and institutions have shifted a net $1 trillion into U.S. checking accounts over the last three years.
And with stricter documentation rules on the horizon, the drive to empty out foreign accounts is translating into big business for onshore trust companies.
“We are seeing a big increase in U.S. citizens who have foreign bank accounts moving them onshore,” says Antony Joffe, head of South Dakota-chartered trust company Sterling Trustees. Read the rest of this entry »
Using Influencers to Land New Trust Accounts
Posted by Scott Martin in Practice Management on May 30, 2010
Many trust companies have more success marketing their services to the professionals who already have the ear of wealthy clients. Lawyers, investment advisors, accountants, even art appraisers are all worth adding to your network.
Plenty of trust companies are gathering assets by targeting the professional advisors who steer high-net-worth clients toward trusts in the first place.
Accountants, lawyers and other advisors rarely have the power to decide where a client opens a trust account, but they do have an enormous influence on the choice, says analyst Robert Testa, who covers the private wealth management industry for Cerulli Associates.
“Especially for trust companies, we’ve found these reciprocal relationships with other professionals are the most effective way to gain clients,” he told me.
Think of these professionals as the Oprah Winfreys of the wealth management world. Oprah doesn’t actually sell books, but one plug from her helps millions of potential book buyers make up their minds.
The relationship between estate planner and client works a lot like this, Testa says. When a lawyer or financial planner realizes that it’s time to move assets into a trust, the client rarely has a strong opinion on which trust company to go with. Instead, what the planner usually hears is, “What do you suggest?”
Being the answer to that magic question has translated into new business for 68% of the bank trust departments that Testa’s team polled last year, and independent trust service providers would be well served to follow suit.
It’s all about relationships
Estate planners are an obvious fit because they are at ground zero whenever a wealthy family decides to set up a new trust or modify an old one.
However, if you want to get the real inside track on how potential clients’ financial situations are changing, get friendly with their accountants, Testa says.
“You would think people would be more honest with the trust officer or the asset manager, but the CPA knows everything,” he explains. “Once you get a close relationship with the CPA, you can gather the assets.”
Corporate entitities can wield influence too. Millennium Trust got a substantial profile boost this spring when Schwab Advisor Services pointed it out to its 6,000 advisors as a custodian for alternative assets that were no longer welcome on the Schwab platform.
“What we’re able to do is go after the advisor market,” Mary Hackbarth, who heads up Millennium’s marketing, told me. “In terms of business strategy, working with advisors as centers of influence has worked out.”
Even an influential brand goes a long way. When the Dow Jones news service wrote up trust consulting firm Advisors Institutional Services, its marketing team was quick to license reprints that paired the story with the venerable Wall Street Journal logo. While it isn’t an endorsement, the logo still has a positive influence on prospective clients.
Anyone in a position to weigh in on the decision-making process is a potential referral source. Real estate brokers and insurance agents are worth adding to your professional network because they’re often on the scene when people make pivotal life decisions or come into significant wealth.
Robert Testa also recommends cultivating more esoteric professionals on the off chance that they’ll have the right ear at the right time.
“We’ve even heard that the art valuation experts at UBS have referred their clients toward trust companies,” he tells me.
Double-edged sword
Naturally, financial planners and other registered investment advisors are a time-honored center of influence. Jocelyn Schwartz, who ran Fidelity’s estate planning business and is now a financial planner at Pillar Financial Advisors, is often in a position to direct new business to trust companies and the lawyers who write up trust agreements.
She’s also used her influence to move accounts from legacy providers.
“We do spend a lot of time reviewing existing trusts,” she told me. “Disrupting the apple cart is not our first goal, but sometimes we get a client who just isn’t happy no matter what the trustee does, and then that money has to move.”
While Schwartz is happy to work with trust companies that won’t let Pillar manage the underlying assets, other wealth managers are wary of referring their clients to a potential competitor.
“They’re afraid that giving a Wilmington or a Glenmede custody of the assets means the next call their clients get will be from a Wilmington or Glenmede investment advisor,” says Antony Joffe, whose new public trust company Sterling Trustees plans to aggressively market to lawyers and accountants as well as RIAs.
Some trust companies get around this potential conflict of interest by only working with directed trusts and other arrangements that kick the investment responsibilities (and fees) back to the referring advisor. Sterling doesn’t quite do this—Joffe reserves the fiduciary right to fire managers even if they brought in the account in the first place—but plenty of other direct-trust-only providers do.
“We don’t compete with the intermediaries,” Reggie Karas, who runs Millennium Trust’s alternative asset business, told me. “We’re a very plain vanilla service provider by design so we can better build our business in partnership with them,” she added.
In fact, a really successful influencing relationship is always going to be a two-way street, Robert Testa says. Trust companies get the accounts, while influencers get the opportunity to prove their value as a one-stop source for all their clients’ needs—and sometimes even get prospects of their own passed back along the chain.
“Reciprocity is crucial,” he told me. “A trust company with a preferred relationship with an estate planner can suggest that person when trust documents need to be modified,” he added.
“A lot of clients who are missing a piece of their own professional advice network are at a loss. A suggestion goes a long way to getting the best outcome for everyone.”
Scott Martin, contributing editor, The Trust Advisor Blog. Steven Maimes contributed to the research and the editing
Permalink: http://thetrustadvisor.com/news/influencers
South Dakota Sets Record for New Trust Companies
Posted by Scott Martin in News on May 15, 2010
South Dakota is becoming the top choice for trust providers. With ten new launches this year and a roster of 50 institutions shortly, it’s easy to see why banks and advisors alike are flocking to the wealth-friendly state. But despite the welcome mat, screening for new players “isn’t easy.”
This week, the South Dakota Division of Banking announced that Pittsburgh-based Mid Atlantic Capital Group, a $19 billion wealth manager and trust technology provider, applied to receive a charter. Approval is expected before July 1.
Mid Atlantic’s not the only Pennsylvania trust operation to set up shop in South Dakota. Earlier this year, Consohocken, PA-based multi-family office Sterling Trustees decided too that South Dakota’s compelling trust benefits made it better than the other no-tax dynasty trust states.
Sterling’s president Antony Joffe told me, “We picked South Dakota because we wanted the best trust law environment and thought they had what we needed.”
They just received official approval this week and are now ramping up ambitious plans to offer trust services to registered investment advisors, as well as more effectively run the roughly $500 million in high-net-worth trust accounts they already have.
Sterling is one of seven public trust company going through South Dakota’s approval process this year. Denver-based United Western Bancorp’s UW Trust Company, with $2.6 billion in assets, received its approval at the end of March.
Counting Mid Atlantic, three other applications in the pipeline, and private trust companies, and a record 10 companies have entered the South Dakota system so far this year.
One of them, Kingsbridge Trust Company, was launched by Kingsbridge Private Wealth Management of Las Vegas to complete its suite of family office services. CEO David Dunn told the Trust Advisor Blog that the process “isn’t easy,” with hours of meeting with regulators and answering tough questions. “It required a great deal of background work just to file the application,” he says.
“We’re okay with startups”
What’s driving the flood? Five months ago, Les Revzon, president of trust consulting firm Advisors Institutional, who assisted Mid Atlantic with its trust charter application, attended a meeting in Pittsburgh with Mid Atlantic VIP’s to lay out the case for why South Dakota might be the best place to host its new trust company operations.
It didn’t take more than 10 minutes for the honchos at the table to overwhelmingly agree that South Dakota would be their new home. With the benefits adding up—no taxes, dynasty trusts, asset protection trusts, directed trusts, low capital requirements and affordable on-the-ground services—they were sold. All of that sounded a lot better than posting $1 million in regulatory capital in Nevada or Delaware, big staffing costs and waiting over a year for a trust charter.
The interest in the state’s trust environment isn’t too surprising, says Bret Afdahl, counsel for the South Dakota Division of Banking.
“We’re business-friendly, which means that we want our trust companies to succeed,” he told me. “Profit is not a swear word in our state.”
Afdahl likes to discuss the advantages of his state’s trust jurisdiction, and with good reason: According to state statistics, the Division of Banking booked a record $262,651 in trust-oriented revenue last year in the form of examination and supervision fees.
To attract new institutions that measure up, capital requirements are low. A trust company needs to post $200,000 to set up shop in the state. Other centers of the trust industry like Delaware and Nevada require $1 million or more to obtain a trust charter.
New legislation kicks in July 1 to tighten the capital requirements at regulators’ discretion, but this is aimed at established institutions that might run into trouble, Afdahl told me. “We’ll keep it low on the front end to allow for startups,” he says.
Although the new rules also mandate additional background checks for principals and key employees, the South Dakota approval process is streamlined compared to other jurisdictions.
Antony Joffe got the green light in about five weeks, compared to an estimated year to move an application through the Delaware system or up to two years of dealing with the FDIC for a federal trust charter.
Nevada’s quest for modernization
By sheer number of operating trust companies, South Dakota has leapt ahead of Nevada and even Delaware.
Nevada’s lack of appeal for new trust institutions seems odd when you consider that the state went through a great show of modernizing its trust statutes late last year in order to attract new business.
State regulators wouldn’t comment on success or failure. However, a source familiar with local politics says “updating” the rules was less about making the state friendlier to public trust companies and more about setting up barriers to entry.
“You can probably read behind the lines and see that the number of public trust companies in the state hasn’t budged this year,” my source told me. “The new capital requirements make it more difficult for public companies to be formed.”
We were unable to interview officials from Delaware, but according to Bret Afdahl, the issue for that state’s regulators is “quality,” or at least exclusivity. Delaware is legendary for enforcing extremely stringent audit and residence standards that can be too expensive for smaller players to consider.
“Delaware’s rules only really allow for big companies,” he told me. “You need X square feet and Y full-time employees, of whom Z must be trust officers. It doesn’t disallow startups, but you need to be pretty big to cover the initial expenses.”
When it comes to operating on the ground in South Dakota, Sterling Trustees’ Antony Joffe is excited. He plans to set up an office and move all his existing fiduciary activities there.
“We’ll still manage some trusts here in Philadelphia on an individual basis, but we’re going to try to run as much as we can out of South Dakota,” he told me.
Scott Martin, contributing editor, The Trust Advisor Blog. Steven Maimes and senior editor Jerry Cooper contributed.
Permalink: http://thetrustadvisor.com/news/sd-record
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