The breakdown of trust in any personal relationship is difficult to accept, and both parties are usually left bruised. Despite being less emotional, the parting of a trust company from a client can be equally challenging, certainly in a physical sense.
For example, it may be easier to walk away from a partner with a well-worn music collection and a suitcase than it is to transfer the files and mandates of a complex trust structure.
One of the rarely discussed aspects of effective administration concerns the provision to direct how entities will be transferred between existing and new service providers following the end of a trust relationship. This is not generally embraced during the initial excitement of a new business arrangement, although for the client the method of how a relationship is is ended, is just as important as any other aspect of the arrangement.
After becoming disillusioned with their current trustee (for whatever reason), clients are often slow to react to the need for change, even once they have seen the writing on the wall. This is because of the cost, time and personal input required to facilitate the change to a new trust company. In some cases the client will decide not to make the move at all. While this may seem like a reprieve for the current trustee, this type of situation can fester, creating a bad atmosphere that can spread quickly across the client's peers and business contacts. If the client is influential, this can rapidly spread across the jurisdiction, leading to a far more acrimonious split. If it becomes clear that no reconciliation and reparations can be made, the best course of action for any trust professional is to act decisively and assist in the process of releasing the client - even to the extent of finding a new provider.
LET'S BE ADULTS
The most common time to experience the dark side of administration from an otherwise well-respected service provider is during this type of extended break-up. Although the client relationship has clearly run its course, there can remain an irrational element of defensiveness from the current provider towards the incoming administrator. It can feel personal even though it really isn't.
The symptoms of this breakdown are a predictable form of passive non-cooperation, for example reluctance to share due diligence insight and client intelligence (where legally allowed). As the client is leaving and the revenue channel is about to end, rarely are sufficient resources put in place to depart from the client in an efficient and effective manner. This can lead to delays and errors, which are often compounded by the inexperience of the administrator assigned to handle a fairly delicate task.
Sometimes this is exacerbated by a propensity to treat the process as the last chance to hit the client with maximum time and fees. However, the worst business sin in this situation is failing to point out to the incoming trustee all known (or developing) issues with the client or entity structure that could affect the new relationship, and indeed the structure itself. This includes any indications of a potential problem in the future which the current trust company is aware of. Such a situation demands that both parties are open, frank and honest with each other.
Clients who have gone through this awkward situation often carry the baggage with them post-trauma. The collateral damage and continuing dissatisfaction with the time and cost required to resolve the transfer leads them to be negatively disposed towards all service providers. In some cases this can be so severe that it takes several months to win back the trust and establish a new cooperative working relationship.
Clearly this situation has the potential to reflect badly on the trust profession as a whole, and as such we should all work together to outline professional guidelines and practice principles. The first step in any solution is accepting that a problem exists. In this case, the industry seems to be dragging its heels, possibly from fear that a look under the bonnet may reveal a problem about how we view and deal with our clients on a day-to-day basis. However, we really should be willing to look at ourselves in the mirror from time to time and ask how important trust, professionalism and service are in our own industry.
CAN WE TALK ABOUT IT?
Client transfer provision and practice remains one of those quiet problems in the industry that no one seems to discuss. The outgoing service provider should put personal feelings (including the client rejection) to one side and treat the situation in the same manner as any other professional engagement. This means working towards a smooth and streamlined exit strategy and, if possible, a short review of events leading to the need to transfer. In this way, something positive can be gained: an insight that may avoid a similar situation developing with another client in the future.
Communication is the key, as in any commercial situation: talk to the client and establish the drivers towards their decision to exit. It may be painful, but ask them what they felt had changed or gone wrong from your side. This is important even if internally you feel that the client is at fault or has had a change of circumstances dictating an exit. Relationship breakdowns are useful management tools as they can highlight possible weaknesses in your business, which can then be improved.
Guide the client through the process of transfer so they understand what you are doing for them and what to expect. It is important to give them a realistic time frame for the transfer, which can be detailed in some cases. Talk frankly with the incoming service provider and agree which side will take responsibility for each aspect. Agree the basic process, create a list of tasks and firm up the path and hours within which all parties can reasonably be expected to complete the work. With this preparation, the provision of timely and accurate information and open communication (especially regarding any unexpected delays), the process is more likely to run smoothly.
Key foundations can be laid within your business for transferring an entity structure, including documenting the procedure and installing this as an official practice. Make certain that whoever is assigned to handle the transfer understands the client and business, and has up-to-date knowledge of any current and imminent factors affecting the entities. Combined with your clear procedure, this will help to avoid mistakes or omissions and costly delays.
So you've taken care of your side, but what about the incoming trust company? Despite the temptation to dump responsibility and a cabinet of files into their lap - with a poorly disguised dig thrown in for good measure - it is more effective to be pragmatic and take the professional high ground. In most cases, the new trust company will be in good spirits as they have just gained a client, although they may not necessarily be well-equipped for the transfer or willing to offer an open door to their own communication channels. Bear in mind that the client may also be pulling their strings, so, again, don't take it personally.
LET'S REMAIN FRIENDS
Much is written these days about the benefits of a holistic approach to good customer service and the need for excellence in corporate governance. Why is this courtesy often not extended to outgoing clients in the same way it is towards new or existing ones? It makes obvious business sense that clients and their advisors should always have a positive experience of your company and the industry as a whole, even following a divorce.
We should also consider that we work in a close community - a small world in which bad news travels much quicker than good. The overspill from a difficult break can spread easily from both the client and their advisors, creating a legacy of bad feeling that may hang around your carefully nurtured reputation for years. How you have behaved and, by extension, how your company has been represented during this difficult period can speak volumes in terms of good public relations, so why not take control of this and turn a negative into a positive?
It is up to all fiduciaries to ensure they have an honest, fair and professional attitude towards client provision in all circumstances, including a difficult client exit and trust transfer. It should be an integral part of customer service, aiming to add true value and benefit for a client's wealth management.
HANDLE WITH CARE
Tips for managing an incoming trust transfer. Some of these can be applied to an outgoing process.
- Communication, communication, communication. Speak to the client and their advisors, preferably face-to-face, before beginning the take-on procedure. Get to know them and find out the reason truth) behind why they want to move in the first place.
- Make certain that both sides are clear on the services that you will be providing, for what fees and where control of the entities must lie.
- Speak to the existing service provider and establish a relationship that leaves them in no doubt that you are there to make the process as easy as possible and not to dig out and parade any past failings.
- Conduct your due diligence on a risk-based approach. The scatter-gun, one-size-fitsall way of going about such matters is ineffective and often unworkable in this situation. Do you really need to know the 10 per cent shareholder of the regulated appendix C fiduciary? If you do need this level of detail, lobby your regulators for a more sensible approach.
- Resist the urge to criticise the other service provider. We are all in this industry together and, ultimately, this does not reflect on anyone well. Focus on the positive.
"This article is copyright Society of Trust and Estate Practitioners, and first published in STEP Journal Volume 20/Issue 4 in 2012" – insight into client transfers
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.