Investing in Advisor Directed Trusts


Investing in a trust is smart because you are assured that your money is being managed by an experienced financial advisor who focuses on your economic well-being and your family’s future. Investing in a trust is also ideal for protecting your wealth and ensuring you are not left in the lurch if anything goes wrong.

Fiduciary roles

Choosing the right trustee for your trust is a daunting task. You have several options, including working with an existing investment manager, appointing a third-party investment advisor Friendly Trust, or choosing a family member to serve in this capacity.

Many families want to maintain a long-standing relationship with a trusted investment advisor. In these cases, it is essential to understand the advisor’s fiduciary role concerning the trust. An advisor’s role in a directed trust may include serving as a grantor, a trustee, or a distribution advisor. In addition, the advisor may be a registered investment advisor, a third party, a family member, or a corporation. A corporate trustee may have a more direct role than a family member. The corporate trustee is responsible for diversifying investments and ensuring current income and remainder beneficiaries are considered. The corporate trustee must also consider future income and remainder beneficiaries.

Cross-border advisors

Whether you’re new to the industry or you’ve been in the business for decades, working with cross-border clients presents unique challenges. A successful cross-border practice requires particular skills and resources for a financial advisor. When working with international clients, you must understand the legal and financial systems of the countries they’re moving to. You must also be aware of each country’s tax laws and how those laws affect your clients’ tax obligations. You also need to be familiar with the protocols for foreign investment reporting. Lastly, you need to be aware of the account transfers that will occur. Unlike domestic clients, cross-border clients require different strategies to achieve financial goals. They may also need more specialized advice. For example, a client moving from the United States to Canada may be subject to more tax obligations. This can occur when a client renounces their citizenship. There may also be non-tax considerations, such as family issues.

Due diligence requirements

Whether you are new to the trust industry or have been practicing for years, you should know the due diligence requirements for advisor-directed trusts. In addition, you should be able to describe what they are, how they are used, and how to work with a directed trust company. There are two main types of directed trusts. They are the “delegated” model and the “directed” model. Both are used for non-institutional clients. However, for clients who are more interested in gaining more control over their trust assets, the directed model can help. Directed trust companies may be independent, stand-alone trust companies or they may be direct subsidiaries of FDIC-supervised banks. Depending on the trust size, their fee schedules maybe 0.15% to 0.50%.

An investment manager in a direct trust company will manage investment assets. The investment manager may or may not be supervised by a trustee. However, the trustee’s fiduciary duties are minimal compared to other trusts.