The rich are getting richer. Is your practice poised to benefit?
Today, high net worth households account for roughly a quarter of U.S. investable assets – nearly $8 trillion in 2015. This market — including both high net worth and ultra-high net worth households — is growing faster than any other, including the mass affluent category that many advisors serve.
This strong growth means that, as an advisor, if you are not tapping into the high net worth and ultra-high net worth marketplace, you are running hard just to stand still. Still, how do you increase the number of these very valuable individuals and families that you serve? The high net worth market requires customized capabilities and high-touch service. But perhaps most significantly it demands sophisticated strategies to preserve and transfer wealth. If you are not offering trust capabilities to this market segment, you are not even in the game.
Seven reasons to add trust services to your practice
Offering trust services give you a streamlined way to attract new and wealthier clients. Here are seven reasons to develop trust capabilities:
Reason #1: Attract higher end clients
The wealthier your clients and/or prospects, the more likely they are to demand trust capabilities. If you do not offer trust services, you will be at a disadvantage when competing for their business. One survey found that only 22% of advisors serving clients with less than a $1 million offered trust services. On the other hand, 70% of advisors serving accounts over $5 million offered trust services. If you want ultra-high net worth clients, trust capabilities are the price of admission.
Reason #2: Service multigenerational relationships
Your relationships with your existing clients are rock solid, but how well do you know their spouses, children, grandchildren, and other heirs? Dynasty trusts can give your clients a way to pass wealth from generation to generation without being subject to estate taxes and creditors. More importantly though, they connect you with the next generation of wealthy family members.
Reason #3: Increase asset stickiness
Financial advisors in the past have struggled with ways to hold on to business when their client dies. Typically, the next generation does not use their parents’ financial advisor. How do you make client accounts stick into the next generation? One effective way is to discover who the successor trustee is on your client’s trusts. If they have a friend, family member, or bank listed as successor trustee, you will most likely lose that account. You can increase asset stickiness by partnering with an advisor-friendly trust company that focuses strictly on trust administration, leaving the investment management to you.
Reason #4: Protect against creditors
Wealthy families’ assets are a prime target for litigation. Unprotected portfolios can be decimated by successful judgments in favor of creditors including business partners, disgruntled staff or, in the event of divorce, an ex-spouse. Asset protection trusts may shield your clients’ assets from legal judgments — and protect your book of business.
Reason #5: Deepen your value to clients by helping them express their values
Trust structures including charitable remainder trusts and charitable lead trusts enable your clients to give to charities in a tax-efficient way. Charitable lead trusts allow your clients to continue to own assets while the charity receives an income stream from them for a period of years. Charitable remainder trusts provide income to your client for a period of years with the charity taking ownership of the assets. Helping your clients support causes that are important to them through trust services can give you insight into their most deeply held values and increase the strength of your relationship.
Reason #6: Plan ahead for business succession
If your client has a family held business, an ILIT can be a valuable tool for business succession. Many clients’ largest asset is the family business. It is not uncommon for one or more of the children to want to participate in the business while others may not be interested. If your clients’ plan is to treat each one of their children equally there must be liquidity to buy out the children’s shares that do not want to participate in the business. A properly structure ILIT can eliminate the possibility of a forced sale of the family business.
Reason #7: Differentiate yourself from other advisors
Not all financial advisors are confident offering trust services alongside more traditional services like investment management and retirement planning. However, your ability to meet clients most complex challenges – like intergenerational planning, asset protection, charitable planning, and business succession planning — can set you ahead of the competition.
One way to build trusts into your practice is to partner with an advisor-friendly trust company like Premier Trust. For more information about how to super-charge your marketing with trusts, download this free white paper, click here.
Gino Pascucci heads the business development and marketing department for Premier Trust. He is an advisor liaison, assisting the estate planning community with advisory friendly trust services. Gino received his B.A. in English from the University of Nevada and is working towards obtaining his CFP designation.
