Registered investment advisors may serve clients who need trust administration or corporate trustee services in addition to financial planning and investment management. In these situations, a trust company that works with RIAs may provide a separate fiduciary relationship while the advisor continues serving the client within the scope of the advisory agreement.
Understanding how these relationships are structured can help advisors explain responsibilities to clients and coordinate with other professionals.
What Does a Trust Company Do for an RIA Client?
A trust company may serve as trustee or provide other fiduciary and administrative services, depending on the trust documents and engagement.
Responsibilities may include administering trust provisions, processing distributions, maintaining records, communicating with beneficiaries, and coordinating with attorneys, tax professionals, and financial advisors.
The trust company's responsibilities should be distinguished from the RIA's investment advisory responsibilities.
Several firms like Members Trust Company provide trust and estate services and works with RIAs and other financial professionals in connection with client trust needs.
How Can the RIA and Trust Company Work Together?
The RIA may continue providing investment advice or financial planning services while the trust company handles fiduciary responsibilities assigned to it.
For example, an advisor may provide investment recommendations within the advisory relationship, while the trustee administers distributions according to the trust documents.
Coordination may also be necessary when changes to the client's circumstances affect trust administration or investment planning.
The roles of the advisor, trustee, attorney, and tax professional should be clearly established so the client understands who is responsible for each function.
What Should RIAs Look For?
When evaluating a trust company that works with RIAs, advisors may consider:
Fiduciary structure and responsibilities
Scope of trust administration services
Communication procedures
Reporting and recordkeeping
Technology and account administration
Coordination with outside professionals
Fee structure
Client onboarding procedures
The trust company's responsibilities should be consistent with the governing documents and applicable agreements.
Why Is Role Definition Important?
Trust administration can involve decisions and responsibilities that differ from investment management. A clearly defined relationship can establish which organization handles distributions, beneficiary communications, trust records, investment responsibilities, and other administrative matters.
The client should also understand that the trust company and RIA may have separate agreements, responsibilities, and fee arrangements.
When Might an RIA Consider a Trust Company?
A trust company may be considered when a client has an existing trust, needs a corporate trustee, requires ongoing trust administration, or has estate planning arrangements that involve fiduciary responsibilities.
The appropriate structure depends on the client's documents and circumstances. Legal and tax questions should be addressed by qualified professionals.
Conclusion
A trust company that works with RIAs may provide trustee and trust administration services within a defined fiduciary relationship. For advisors, evaluating responsibilities, communication procedures, reporting, and coordination can help establish an arrangement that is clearly understood by all parties.
Firms such as Members Trust Company provide trust and estate services for relationships involving RIAs and other financial professionals.
FAQ
Can an RIA work with a separate trust company?
Yes. An RIA may work with a separate trust company when a client needs trustee or trust administration services, subject to the applicable structure and requirements.
Can the RIA continue managing investments?
Depending on the arrangement, the RIA may continue providing investment advisory services while the trust company performs its assigned fiduciary duties.
What does the trust company typically administer?
Responsibilities may include trust records, distributions, beneficiary matters, and other duties established by the trust documents.
What should an RIA ask a trust company?
Questions may cover fiduciary responsibilities, services, reporting, communication, fees, technology, and coordination with the advisory firm.
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. Investment products and services are not deposits or obligations of, and are not guaranteed or endorsed 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.
