Most wealth management professionals are well aware of the benefits of transferring family money into trusts, but when your clients connect the dots it’s critical that you’re already central to the conversation.
One of the great squandered service opportunities in our industry boils down to a conversation that rarely happens until it’s too late.
While affluent investors know that trusts have been an essential part of long-term financial planning for generations, they figure their advisors will speak up if and when it makes sense to push the button.
The advisors, on the other hand, don’t speak up when the time comes because they don’t want to push. The conversation never happens.
But our interviews with wealthy families make one thing crystal clear. Even if advisors never raise the topic of trusts, sooner or later clients will act on their own.
And when they have to move on their own, odds are good that they’ll take your silence as a cue that you don’t want to have anything to do with the trust.
By the time your clients approach you about setting up a trust, the conversation is generally about taking the assets out of your management. Like it or not, it’s better for you to make the first move.
We offer a short guide you can give your clients to boost the odds that you stay in the loop either way. Think of it as an automated conversation starter encouraging them to associate you — as their primary advisor — with trust planning. It will be available soon.
Advisor-initiated trust
Trusts aren’t exotic to the hundreds of affluent investors we interviewed. A full 63% of them are already familiar with their benefits as beneficiaries, trust creators or both.
But there’s a sharp distinction between the trusts that emerge when the advisor makes the first move and the ones that don’t happen until the client steps up.
In the advisor-initiated scenario, it’s clear from the start that you’re comfortable making the investment decisions. You remain integral to the relationship. There’s rarely any question that you wouldn’t remain involved with the trust, so we found that 94% of the time, the assets remain under your management.
Otherwise, your clients are really operating in the dark. They hear from other professionals — attorneys, accountants, bankers and your direct competitors — that it may make sense to move some of their money into a trust. Because you weren’t at the table in the beginning, our data show that you end up with only a 46% probability of holding onto the AUM after the trust is created.
This is not a matter of pushy clients deliberately working to cut you out of the loop. It’s really a procedural challenge: when someone else plants the idea, it’s often the primary attorney or another professional in the family network.
The attorney is rarely set up to manage trust assets, so will tend to refer that facet of the relationship to a partner or let the trust company itself fill the role. Unless you’ve already raised your hand, you’re not going to be the first name in the discussion.
Other professionals are more likely to have developed their own capacity to manage the money and it’s in their financial interest to do so — after all, they’re happy to capture the associated fees, steer the account to proprietary products or both. In these scenarios, you’ll have to work especially hard to stay at the table if they start pushing the trust conversation before you do.
And in a strategic paradox, financial advisors tend to get shut out of the discussion most often with their richest and most important clients. The wealthiest investors we interviewed are overwhelmingly likely to take their trusts away from the advisor, even though there’s no intrinsic imperative to do so and many even concede that the advisor handles the money better.
Again, I suspect it’s really a factor of awareness and opportunity. The clients aren’t aware that the advisor is willing or even able to go on managing the assets even though they’re held in a trust. The people recommending the trust decision almost certainly don’t know, and for them, this is often an opportunity to prospect the best accounts at a natural transition point.
Communicating the benefits
When the advisor participates in the discussion from the beginning, our data demonstrate that events play out very differently.
Your clients already respect your ability to manage their money. If they didn’t, they’d already be gone.
But relatively few investors — even sophisticated ones — realize that there’s nothing stopping you from continuing that relationship once the assets shift. Under the right circumstances, you can even take over the investments in an existing family trust.
It’s up to you to communicate this to them. Even if someone else were willing to do it, nobody will do it better.
You can start by making sure your clients know you’re willing to be part of the conversation. Feel free to use the informational guide we’ve put together to break the ice.
Naturally we have an ulterior motive here. We’re an advisor-driven trust administrator. Whenever advisors guide their clients to name us as the trustee, we benefit. That’s why we work so hard to help advisors build their trust relationships.
We don’t manage the money. We need you for that. And we aren’t set up to initiate the conversation with your clients.
But in our experience working with a lot of trusts, we find that the advisors who are eager and motivated to stay engaged with the assets across their clients’ generational life cycle tend to get what they wanted.
They stay engaged with the assets. Older clients appreciate your forethought and your initiative. The heirs grow up relying on you as a go-to source of knowledge and support.
And once you’re one of those advisors who regularly initiates the trust conversation and holds 94% of the assets through the process, we’re happy to help you turn trusts into a competitive edge.
You should be the money manager attorneys suggest when they have their own trust conversations with their own clients. You should be the person carving trust assets away from the people managing them now.
It starts by signaling that you’re willing to talk about it. Then, even if you leave it up to your clients to call the next play, they’ll know to keep you on the team.
