Navigating The Role Of Advisor Friendly Trusts In Financial Planning
An advisor-friendly trust company is a national trust company that partners with financial planners and helps them serve clients with a directed trust arrangement. This collaboration simplifies the process and delivers practical solutions for families.
A trusted independent trust company focuses on client service and collaborates with financial advisors, not competing for assets under management. It’s a winning combination.
Unfortunately, most of you are unaware of the crucial role that an advisor friendly trust plays in financial planning. But don’t worry because we have got your back! So, without wasting time, let’s get started.
So, What Are Advisor Friendly Trusts?
Advisor friendly Trusts or AFTs is a term that first made an appearance in the fiduciary community’s lexicon during the early 2000s.
The term basically connotes a sort of arrangement where the advisor-friendly trust partners with financial advisors to allow the same advisor to track trust assets that might get transferred to any corporate trustee who is not willing or able to include the advisor to keep serving the family of the client.
With the help of technological advancements, such companies do not actually possess trust assets for fulfilling their individual responsibilities.
So, AFTCs are basically non-depository trustees. This means that the institutional custodian of the financial advisor will hold the trust assets. Simply put, nothing actually changes in the trust relationship on the investment side of things.
Moreover, the financial advisor of the family usually has a solid relationship with the client. In fact, it is also possible. That financial advisor is possibly a family member of the client.
Additionally, advisor friendly trust companies can prioritize administrating the trust as well as serving the trust’s interests for the beneficiaries. The result? Two distinct and separate professionals choose to do what they are good at in the best interest of the client.
What Role Do Advisor Friendly Trusts Play In Financial Planning? Top Benefits
Now that you have a fair idea about an advisor friendly trust, let’s find out what role these trusts play in financial planning. Scroll down to find out more.
1. Asset Protection:
A commonly used form of asset protection is putting property or financial assets in someone else’s name, such as a trust. However, if the structure is carefully crafted, this could lead to problems with creditors seeking to seize the assets.
To protect against this issue, advisor friendly trust companies offer revocable and irrevocable trusts that can be amended as life’s unforeseen circumstances emerge. In addition, many of these firms provide directed trusts that enable investment managers, insurance professionals, and family offices to retain control over investments while removing fiduciary risk from their clients’ estates.
The best independent corporate trustees work collaboratively with advisors rather than competing for assets under management. These companies prioritize client success and advisor empowerment, offering flat trustee fees, separation of duties, directed trusts, and other flexible estate planning solutions.
2. Flexibility:
Many financial advisors need help managing trust assets for their clients because they need the right tools. Managing a trust department takes time and resources – including onboarding new beneficiaries, distributing funds to clients, mediating beneficiary disputes, and managing fiduciary risk.
A trusted advisor-friendly trust company can help you streamline these tasks and focus on building relationships with your clients. They also provide flexible solutions, such as directed trusts, enabling advisors to manage investable assets transferred into their client’s trusts.
Additionally, these companies can help you retain existing clients by providing ideas on how to move their trust-linked accounts under your management. This is important because it eliminates the risk of those assets moving to a competitor upon the death of the current trustee and ensures asset retention.
3. Reliability:
Financial advisors must have a reliable partner to serve as successor trustees on their clients’ revocable and testamentary trusts. It protects them from potential lawsuits from heirs and offers them more comprehensive services to their affluent clients.
Advisor-friendly trust companies collaborate with advisors to create customized strategies that address clients’ unique needs. This simplified process gives clients a seamless experience and ensures that their assets are protected and estate plans are well-thought-out.
In addition, these providers offer business-building support for advisors through a range of initiatives, such as assisting with account transfers from bank trust departments, and sponsoring industry conferences, luncheons, as well as seminars to help recruit new clients.
They also provide branded marketing materials and client education on trust-related topics and serve as a resource on the advisor’s website.
4. Tax Benefits:
The story of an advisor trying to add high-net-worth clients to their roster often ends with a phone call from a trusted company. But there are alternatives.
Non-custodial, trustee-only trust companies offer a seamless collaboration with financial advisors to create customized strategies for transferring wealth and managing estate plans. This approach increases the value of an advisor’s services, builds credibility, and helps families make better decisions.
Advisors can also use state laws to provide their clients with more value. Directed trust provisions in several states allow a financial advisor to continue directly managing investable assets transferred into the trust, even if a separate corporate trustee holds those assets.
This is a significant competitive edge in winning new business, deepening relationships with existing clients, and ensuring the success of a client’s long-term legacy strategy.
5. Continuity:
There is an old saying that says, “The wealth stays where it belongs.” And we can’t agree more – the wealth does stay where it belongs, with your financial advisor. These financial advisors typically work with clients for years, even decades at times.
As a result, these advisors understand the objectives and goals of their clients. Since advisors typically work with a client’s family in an intergenerational manner, the continuity of investments becomes very important.
Moreover, the increase in focus on different model portfolios needs existing investment portfolios to become liquidated to normal cash before getting reinvested into an entirely new portfolio. The result in terms of capital gains? The resulting gain then creates extra taxes that the trust or beneficiaries have to pay.
Instead, if you choose to partner with an advisor friendly trust company, you can avoid facing such issues.
And It’s A Wrap!
Advisor friendly trust companies and financial advisors specialize in managing your trusts and offering guidance on estate planning, tax planning, and investment management. They play a crucial role in advising their clients on how to minimize taxes and protect their financial assets.
The key advantage? When you work with a financial advisor, you will learn more about customizing solutions and making the most of their expertise. Trust us – it will provide you with great peace of mind.
But then there are multiple challenges towards working with financial trust advisors like costs related to services, establishing trust, and the need for successful communication.
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