When a client's financial plan includes a trust, an RIA may need to coordinate with a trustee while continuing to provide investment advisory services. The right arrangement depends on the trust documents, the client's circumstances, and the responsibilities assigned to each professional.
For an RIA evaluating a trust company that works with RIAs, asking practical questions early can clarify how the relationship would function.
What Role Will the Trust Company Have?
The first question is whether the trust company will serve as trustee, co-trustee, successor trustee, or provide administrative services in another capacity.
The distinction matters because fiduciary authority and administrative responsibilities depend on the trust documents and applicable agreements.
A prospective trust company should be able to explain the responsibilities it would assume and those that would remain with the RIA or other professionals.
How Will the RIA and Trustee Divide Responsibilities?
An RIA may continue providing investment advice or financial planning while the trust company handles its assigned fiduciary duties.
Depending on the arrangement, the trustee may administer distributions, maintain trust records, communicate with beneficiaries, and carry out other duties established by the governing documents.
The RIA may remain involved in investment management and client communication within the scope of its advisory relationship.
Several firms including Members Trust Company provide trust and fiduciary services to RIAs and other financial professionals, including corporate trustee and successor trustee services.
What Questions Should an RIA Ask?
Before referring a client to a trust company that works with RIAs, an advisor may ask:
What fiduciary capacity will the trust company assume?
Which trust administration services are included?
Who handles beneficiary communications?
How are distributions administered?
What reporting and recordkeeping are provided?
How does the trust company communicate with the RIA?
What investment responsibilities belong to each party?
What fees and administrative costs apply?
These questions can help the advisor understand the proposed relationship before presenting it to the client.
How Will Existing Professional Relationships Work?
A client may already have an attorney, tax professional, financial advisor, and other professionals involved in planning. Adding a trustee creates another professional relationship.
The parties should establish appropriate communication procedures and determine which matters should be directed to the attorney, tax professional, RIA, or trustee.
Legal and tax questions should remain with qualified professionals who provide those services.
What Should Advisors Review Before a Referral?
Advisors may review the trust company's fiduciary structure, service scope, administration procedures, reporting practices, technology, onboarding process, and communication standards.
It may also be useful to understand how the trust company handles relationships in which the RIA remains involved in investment management.
Members Trust Company is an example of a firm that operates as a federal thrift regulated by the Office of the Comptroller of the Currency and states that it works with RIAs, financial advisors, and other professional partners.
Conclusion
Selecting a trust company that works with RIAs involves more than reviewing available services. Advisors should understand the trustee's fiduciary capacity, administrative responsibilities, communication process, fees, and relationship with the existing advisory team.
Members Trust Company provides trust and fiduciary services for relationships involving RIAs and financial professionals. The appropriate arrangement should be evaluated based on the client's trust documents, circumstances, and applicable requirements.
FAQ
Can an RIA continue working with a client after a trust company is appointed?
Depending on the arrangement, an RIA may continue providing investment or financial planning services while the trust company performs its assigned fiduciary responsibilities.
What can a trust company handle?
Depending on its appointment, responsibilities may include trustee services, trust administration, distributions, recordkeeping, beneficiary communications, and estate-related administration.
What should an RIA ask about fees?
The advisor may ask about trustee fees, administrative charges, investment-related fees where applicable, and how each fee is disclosed to the client.
Should the client's attorney be involved?
Legal questions regarding the trust documents, trustee appointment, or amendments should be reviewed with a qualified attorney.
This article is provided for educational purposes only and does not constitute legal, tax, accounting, or investment advice. Trust, estate, retirement, and tax considerations vary based on individual circumstances and applicable law. Trust and fiduciary services are subject to review, acceptance, applicable law, governing documents, and Members Trust Company's policies and procedures. Investment products and services are not deposits or obligations of, and are not guaranteed by Members Trust Company, any credit union or government agency. They are not federally insured and are subject to investment risk, including possible loss of principal. Readers should consult qualified professionals regarding their specific circumstances.
Trust services provided by Members Trust Company, a federal thrift regulated by the Office of the Comptroller of the Currency. Trust and Investment products are not NCUA/NCUSIF/FDIC insured. May lose value including the possible loss of principal. No financial institution guarantee. Not a deposit of any financial institution. This is for informational purposes only and is not intended to provide legal or tax advice regarding your situation. For legal or tax advice, please consult your attorney and/or accountant.
